Branchless Banking in India: More Reasons for Optimism
Blog Series
This is the final post in a four-part series on branchless banking in India. The earlier blogs on MicroSave’s review of e/m-banking and the innovative service providers Beam and Eko demonstrated the power of convenience and simplicity. In keeping with this optimistic view of a still uncertain India venture, we conclude with three more positive items to highlight. Two reflect new changes by the government and one goes back to the fundamentals.
1. The Government of India has established a clearer vision for electronic payments and agents and aims to make a substantial investment to expand these capabilities across India.
The Government of India recently released a task force report on a unified payments infrastructure linked to the biometric Aadhaar number. While many questions remain, this report establishes important policy points. It recognizes the value of electronic payments to both cut costs for the government and bring convenience to the end recipients. It also sees G2P as a major flow of capital which can prime the pump, while recognizing that much more ought to flow over branchless banking channels. The Government of India also proposes to pay a 3.14% fee to banks for delivering G2P payments – a significant shift in the business case for banks. Some of the insights in the task force report built off of international G2P experiences shared by CGAP.
As always, there are potential pitfalls in this system, including the risk of building a single-purpose G2P payments infrastructure that is not widely usable for other payments. A supply push too hard by the government could create disruptions in customer service. There are other questions to contemplate such as whether biometric authentication of every transaction might forestall easier to use payments systems. such as PIN-based mobile phone payments, from emerging.
But these are all solvable challenges and the new momentum for branchless banking will shape the financial inclusion agenda in India in the coming months and years.
2. The Reserve Bank of India has removed restrictions on agent (customer service point) exclusivity.
Earlier restrictions limited one agent to transact on behalf of only one specific bank, but this has now been lifted. Customers can now transact at customer service points (CSP) of one bank even if their accounts are held at another bank. This allows the entire banking system to be more efficient by sharing customer service points and lowering overall costs. It also brings agent interoperability on par with ATMs in India. Such interoperability is more consistent with the views of most other central banks around the world.
3. There is a human story behind branchless banking.
In the north Indian hill town of Almora, 35-year old Sangeeta Joshi rises most mornings at 4.30 am to complete her household chores before heading out for a day’s work on foot. A member of the Self Employed Women’s Association (SEWA), a legendary labor union established for workers in the informal economy, Sangeeta works on commission as a customer service point for the State Bank of India.
Using technology provided by A Little World, Sangeeta has for the last 2 years opened nearly 500 accounts and now delivers regular pension payments to many people living along the hillsides in Almora. The work is physically demanding as Sangeeta has to travel by foot to deliver and authenticate payments. The fingerprint-based POS machine that Sangeeta wields provides her with a means of transacting securely, giving the bank and the government confidence that the right person has received their payment.
Sangeeta is one story among many thousands of new customer service points operators across India. But it is her effort that will make or break branchless banking. Despite the difficulties of being a CSP, it is a source of livelihood for Sangeeta. She also says that the job has given her respect in the community.
In the coming years we can expect Sangeeta’s story to be repeated hundreds of thousands of time across India. Building a mutually fulfilling relationship with the Sangeetas across India will be the key to the success of branchless banking.
- Greg Chen
Also in this Series
Making Electronic Money and Banking More Discrete
Electronic money is intangible, and that makes it intrinsically a lot more discreet than piles of cash or physical forms of savings such as jewelry or livestock.
Product Innovation that Provides Useful Services for the Poor
Mobile money’s first big success in serving poor people came when Kenyans discovered how useful it was to be able to “send money home” safely, quickly and cheaply through M-PESA. As mobile money moves from transfers into savings and loans, it will need to demonstrate a similar leap in the usefulness of its products.
Comments
Branchless Banking is a good
Branchless Banking is a good initiative by RBI, but at the village level good awareness among the people need to be created regarding the usefulness of having a savings bank account and the importance of savings. Its not just opening an account, but village people need to be encouraged to do transactions as this will enable the agents to earn commissions, else over a period of time the agents will lose interest and rather will focus more on his other business.
MOST OF THE VILLAGE PEOPLE
MOST OF THE VILLAGE PEOPLE ARE NOT AWARE OF HAVING BUSINESS CORESPONDENTS IN THAT PARTICULAR VILLAGE FIRST WE HAVE TO INFORM THE ESTABLISHMENT OF BCS IN THE VILLAGE TO ALL THE VILLAGE PEOPLE AND WE HAVE TO BUILD CONFIDENCE IN THE VILLAGERS AND NEED TO BE ENCOURAGED TO DO TRANSACTIONS IN THE OPENED SB ACCOUNTS
Hello Greg, my company,
Hello Greg, my company, egistec, emerges from supplying the fingerprint sensors to the notebooks, now the tablets/smartphones. I will personally travel to India, to introduce our products as an alternate to the current fingerprint-based POS to the parties invovling in the branchless banking. Then, I will just happen to travel to Washington DC around Dec. 16th. May I take this opportunity to visit you and exchange more ideas? I believe getting the consumerized/commoditized devices to work for G2P will provide values to potentially improve the bottomlines for all the stakeholders in branchless banking; hope this will be added as another reason for the optimism.
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