ICICI Bank and Stellar: Using Blockchain to Reach the Base of the Pyramid in India


ICICI Bank and Stellar: A look at a transaction enabled by blockchain.

Why are mainstream financial institutions and fintechs partnering to pursue financial inclusion? In the case of ICICI Bank and Stellar, it’s because combining forces enables them to reach clients with a free blockchain-backed mobile wallet that they could not sustainably offer on their own.

Last week we released a new joint report with the Institute of International Finance (IIF), How Financial Institutions and Fintechs Are Partnering for Inclusion: Lessons from the Frontlines. As part of the report, CFI and IIF conducted in-depth interviews with over 30 industry participants. We discovered dozens of partnerships between mainstream financial institutions and fintechs in emerging markets, and we detailed the workings of 14 of them.

The story of ICICI Bank and Stellar began when an ICICI Bank senior executive read a book about new technologies. The book mentioned a blockchain company in Silicon Valley called Stellar. Fast forward to today, Stellar now provides ICICI Bank with an open-source online ledger, or blockchain, designed to oversee the movement of money. ICICI Bank customers in India and abroad can transfer money through a free mobile wallet over Stellar’s platform. These transfers are made in real fiat currency, but internally they are documented in cryptocurrency. While the transfers are recorded on Stellar’s ledger in a cryptocurrency called ‘lumens,’ ICICI Bank holds the value for these transactions in Indian rupees in a pooled account. Due to the open nature of Stellar’s platform, ICICI Bank customers can transfer money to customers at any other bank on the platform. Stellar’s open platform has allowed ICICI Bank to easily connect with financial institutions that it might not have connected with otherwise.

The partnership is expected to help transform the way value is transferred—both within the bank and between the bank and other institutions. Following the establishment of 300,000 accounts, the bank will pay Stellar a fee for each additional account. This low pricing allows ICICI Bank to provide the wallet free to customers, enabling the bank to serve lower-income segments than it can reach with more traditional money transfer services.

Currently, ICICI is piloting the mobile wallet on university campuses in India. The bank envisions that it will become a core product for underbanked customers in the future.

Bank-Fintech Partnerships Are a Win-Win-Win

As we see with ICICI Bank and Stellar, partnering with fintechs is enabling mainstream financial institutions to create profitable and useful services including some that solve traditional problems in much more efficient ways. And this arrangement is a win-win-win for everyone. Banks can offer new services or reach new segments, while fintechs get to scale their technology and access growth capital. Customers, in turn, are offered a wider range of product options.

In another example, in Ghana, Stanbic Bank’s partnership with DreamOval led to the creation of Slydepay, a mobile money platform that serves both individuals and businesses with solutions tailored for the local Ghanaian market. And in Spain, Santander is partnering with PayKey to integrate a person-to-person payments function into popular messaging applications such as WhatsApp and Facebook Messenger. These partnerships were expected to increase customer loyalty and keep customers engaged in the long-run.

Many of the partnerships we identified focused on mobile payments. We see these moves to partner as responses to competition from mobile money providers. In addition to adding features and convenience to standard bank services, the products these banks are offering attempt to go one step beyond MNOs by bringing interoperability into the mobile money market, including acceptance of transactions from multiple mobile money providers and easy transfers between customers at different institutions.

For more on bank-fintech partnerships, including other standout examples, read the report: How Financial Institutions and Fintechs Are Partnering for Inclusion: Lessons from the Frontlines.

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How Financial Institutions and Fintechs Are Partnering for Inclusion: Lessons from the Frontlines

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