India: Will Payment Bank Help Mobile Financial Inclusion?

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Feb 2015
India, February, 19 2015 - Mobile operators have an edge vis-a-vis banks. Banks have limited exposure to individuals in comparison to mobile companies whose exposure is wide spread and are in a better position to provide affordable financial services for millions of unbanked households.

RBI’s payment bank license is getting good response from all quarters be it mobile operators, retail players and mobile commerce companies. It seems all types of corporates are interested in focusing on payment bank license to target migrant labourers for payment and remittance services thereby helping government to bring a large population under the ambit of banking transactions.

The recent success of India’s Pradhan Mantri Jan Dhan Yojana (PMJDY), national mission for financial inclusion has also given a lot of credibility to government’s initiative of financial inclusion as it is the biggest financial inclusion initiative in the world.

Before Jan Dhana Yojana, only 58 percent people had bank accounts in India. Against the original target of opening bank accounts for 7.5 crore uncovered households in the country by 26th January, 2015, banks have already opened 11.50 crore accounts (end-January, 2015) after conducting survey of 21.02 crore households in the country.

Mobile Financial Services Statistics
International
2.5 billion people do not have a bank account
1.7 billion people do not have a mobile phone
203 million registered mobile financial users
61 milion active users
India
58 percent population is unbanked
70 percent is mobile penetration
2 percent have credit card
20 percent take loans from family or friends
Source: Amdocs

As per RBI, payment banks will have a minimum paid-up equity capital of Rs 100 crore and license is open for existing non-bank pre-paid payment instrument (PPI) issuers, individuals/professionals, non-banking finance companies (NBFCs), corporate business correspondents(BCs), mobile operators, supermarket chains, companies, real sector cooperatives and public sector entities. All these new payment banks will focus on: acceptance of demand deposits (maximum balance of Rs 100,000 per customer), issuance of ATM/debit cards, payments and remittance services through various channels.

Mobile operators have an edge vis-a-vis banks. Banks have limited exposure to individuals in comparison to mobile companies whose exposure is wide spread and are in a better position to provide affordable financial services for millions of unbanked households. With the proliferation of mobile devices, it is only a matter of time when financial services too went mobile. Apart from all the advantages, the only challenge with mobile is to find the right balance between customer’s ease of use while maintaining the highest standards of data security.

The two main reasons for consumers not opting for mobile financial services is the complexity of using mobile financial services and concerns related to security. Not only this presently, 90 percent of consumers utilizing mobile financial services comes from urban and metro circles and this needs to be widened to rural areas as well by creating awareness about mobile financial services where mobile operators can play a bigger role through its network of retail outlets.

To take care of the security part, mobile operators are tieing up with banks to get payment bank license whose primary focus is to provide financial inclusion by providing small savings accounts and payments/remittance services to migrant labour workforce, low income households, small businesses, unorganised sector entities and other users.

As per one study, mobile financial services worldwide forecast is to reach $721 billion by 2017 whereas in India mobile financial services market is estimated to grow over three fold to Rs 12.1 billion by 2019 says Sharath Dorbala, vice president, head, Sales, Marketing and Products, Mobile Financial Services, Amdocs.

Widening of eco-system to incorporate all kinds of companies be it insurance companies, agent distribution network, NGO, government, money transfer organization, corporations, merchants, banks, micro finance institution and credit bureaus and credit providers will help in successful deployment of mobile financial services in the country.

“Presently, only 5.16 percent of respondents use mobile for financial services but the new regulation of payment banks will definitely drive financial inclusion as mobile network operators are well positioned as they have better coverage both in urban and rural areas vis-a-vis banks,” added Dorbala.



Source : TeleAnalysis
 

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