Many business model innovations in India are a product of two socio-economic aspects of the country- Aspirations and the Need for inclusive growth. On one hand India is a developing country still grappling with poverty alleviation while on the other hand it is also one of the world’s fastest growing economies increasingly attracting global investments. Wealth creation in the economy has led to rising aspirations among the people. Simultaneously the call for making this growth and wealth creation, a more inclusive process is gaining ground. India being a democracy and free market economy, neither the aspirations nor the agenda of growth in India is determined by the state regulations. Therefore what shape this growth shall take is largely determined by market. Whether social inclusion will be a natural outcome of this growth process in India is not a question I would address here. However in order to sustain the growth, create more markets, social inclusion would be required. A fact that is not lost upon the entrepreneurs in India.

‘Financial inclusion’ has been on the agenda of the Indian state for a long time now, yet this has not translated into significant ground action. Financial inclusion refers to providing banking services to the people not covered by banks either due to geographical or economic barriers. Against such a backdrop the innovative microfinance models like those of the Nobel laureate Yunus Khan stand out in their ability to bring banking services to the unbanked.

The challenges of addressing financial inclusion continue to fire up the entrepreneurs in India. One such innovative model aiming at financial inclusion is being run by Eko Financial Services India. I had first met its founder, Abhishek Sinha during the course of a lecture series from entrepreneurs we had organized at our university. Way back then the most pertinent challenges being faced by the firm, as described by Mr. Sinha, was to sustain the liquidity in the company. While the long term value that this business model might create was important, the ability to remain liquid in the short term was also necessary to keep the startup alive. In context of the difficult business environment for startups in India, the focus of the company was to build a business model that conserves maximum possible cash. In order to conserve cash, a firm must build an operating structure at as low cost as possible. Over time it is easy to see how this has led the firm to have an incessant focus on low cost practices being built within its business model. Since then the firm has moved ahead in implementing the business model in collaboration with two leading banks of India, State Bank and ICICI.

The basic challenges of ‘financial inclusion’ or ‘providing banking services to the poor’ are that the amounts and transactions involved in the segment are very small in value. The operational structure prevalent in major banks is not designed to cater to these segments at such low costs. Often migrant labor face problem of lack of access to banking services. E.g. laborers working in one state might want to send back money to their home in another state. First the sum involved is small, so normal banks cant process it. Secondly these people do not have the official records as required by the banks in order to open a bank account. Eko’s business model is addressing such gaps.

The whole business model allows the banking service from major banks being administered to common people through business correspondents (BC) using the platform developed by Eko at low cost. Using low cost BCs banks avoid using their higher paid, costlier staff to deal with users on Eko’s platform. The Eko’s platform feeds all transaction directly into the computerized banking platform of major banks, where the automated system can process all transactions at negligible costs. Therefore Eko’s platform in essence replaces the bank’s high cost manual processes with its low cost processes.
 
In order to keep its cost low, Eko has tapped the neighborhood retailers, more widely known as ‘Kirana Stores’ in India as the business correspondents. These retailers are conveniently located in the communities where they sell a myriad of services/products to local people- from general groceries to cellphone recharges. These retailers also have information about the various residents of the communities to whom these people sell goods. Many of these retailers also sell goods at credit to the residents and therefore have quite an understanding of the ‘credit’ history of the residents. The lack of official records pertaining to the customer is often replaced by the insights that this retailer has about the customer. Therefore these retailers are ideal for doing the due diligence of the customer at a very low cost. These BCs collect the information of the customers and receive deposits and disburse money.

Eko has provided these retailers and customers a mobile based platform. Again the mobile based platform allows a low cost system to serve as the communication/interaction device between various players in the business model. Customers can transfer money across the accounts using their mobiles only. The retailers can receive deposits and acknowledge the payments through mobile also.

Together it is interesting to see how a business model built around the available infrastructure in the society to achieve goals of financial inclusion and entrepreneurship. Increasing aspirations of the Indians to avail financial services and the need for inclusive growth are two forces that are shaping many enterprises. The Reserve Bank of India is increasingly focusing on financial inclusion of the unbanked segment and it has passed several directives/recommendations to major banks in India to increase financial inclusion. The Eko model is also in part made viable due to such facilitations though more is required to be done.

Just like Hollr and Oronjo, this service is looking for a way to help people create their own micro-revenue model. If executed well this system could even replace the outdated business model of ancient royalty and copyright organizations. Without the need for complex distribution algorithms consumers can now pay creative creators directly for the work they consume online. You, and not a centralized monitoring organization, decides where your money goes to. I can’t wait for that day to come.

* update Feb 10: Andy Baio (CTO Kickstarter) points out in the comments that Amazon takes care of the payments. Thereby nobody is charged upfront so Kickstarter won’t earn on the few month of cash as mentioned above. It’s worth noting that some other companies that focus on selling voucher do strongly rely on these upfront payments. The Belgian company Bongo is such an example.

Charity Upgrading – upgrading your product or service by systematic donation to charity – is applied outside the telecom sector as well, for example in gambling and waste handling. Bet2Give is a real-money prediction market where participants invest in predictions about the future, and give their winnings away to non-profit organizations of their choice. College Hunks Hauling Junk donates a portion of its revenue to College Bound, a non-profit scholarship program. Do you know other examples? Can you upgrade your product or service by supporting charity? Or can you link your good cause to a “no hassle” product or service offer?

‘Experiences’ as we use it in our business model framework are characterized by the emotional impact on a user. Contrary to other ‘experience’ sellers Nexicons tries to offer such a negative experience (fear) that will convince a user to pay a small amount of money. An example of the opposite would be a pay-what-you-want restaurant that tries to offer such a pleasant experience in order to receive a reasonable payment from each client. In the end this shows that you as company should take control over the experience of your customer, even when this is a negative one.

A lot of free products and services go with a freemium or advertising strategy, but advertising is not sustainable for a number of reasons. In-app commerce, or broader, in-product selling is there to challenge advertising. Micro-payments will be a crucial facilitator in getting consumers to actually paying for content again, in times where people are used to free and ad-supported. Like Timebridge, in-game selling, blogs with jobs/widgets/affiliate programs… can your product or service offer a channel to sell and buy things? Sales people earn more than advertisers, don’t they?

Blyk’s free business model is based on an advertisement revenue model generically similar to free newspapers, Google, and free online games. Where traditionally customers pay with ‘money’ for a mobile service, they can now pay with ‘attention’ to an advertising company, which in its turn pays the mobile service provider. Although FREE has been quoted as the most misleading business concept in the world by some, the speed and magnitude of new FREE initiatives should focus our attention on the following questions: which free start-ups are entering my industry? What if I made my current primary transaction free, on what other offerings could I earn money (services, ads, premium offer…)? Even if free is not sustainable at this moment in your business, it is an excellent brainstorming method to generate ideas about new value propositions and revenue streams in your industry. Just remember… the best way to avoid a war is to be prepared!

Mendeley.com: Last.fm for research

The overall winner was Mendeley.com (congratulations!). Mendeley positions itself as a “Last.fm for research”. They offer a free social application for managing and sharing research papers, in combination with a web 2.0 site for discovering research trends and connecting to like-minded academics. Mendeley is a typical example of a free business model (subcategory: Freemium). When you sign up, the social app and service are completely free. While the existing features will always remain free, Mendeley plans to introduce new features in the future and make them available to premium users for a fee. Conclusion… Free + Premium = Freemium business model.

Myngle.com: The new way to learn languages

The crowds’ favorite at Plugg 2009 was the new study platform Myngle.com. This online platform offers a relative new way to learn languages by bringing together teachers and students from all over the world. Looking in our database of business models, you see that Myngle relies on a typical Broker model similar to eBay or Zopa: bringing a traditional business to the online mass market. The students pay a fixed price per lesson to a teacher. Myngle charges 18% commission on the transactions.

As such, Myngle brings a successful, existing online business model into a new market. Other start-ups like LiveMocha and Linkua offer similar services, but Myngle differentiates itself by asking students to pay 300-400 EUR upfront for lessons to ensure continuity of taking lessons (not stop after 1 lesson). Myngle has a revenue stream of 20,000 EUR per month growing steadily.