Payment banks, once hailed as a game-changer in furthering financial inclusion for all has been stuck with practical constrains. Critically examine
Refer – Business Line
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IAS Parliament 7 years
KEY POINTS
Payment banks
· Payment banks were introduced by RBI to deepen access to formal financial services in unbanked and under-banked areas.
· It can’t offer loans but can raise deposits of up to Rs. 1 lakh, and pay interest on these balances and can issue debit cards and ATM cards.
· It primarily aimed to help people to open a bank account almost at their doorsteps with the help of an agent.
· Payment banks can enable transfers and remittances through a mobile phone.
· Hence it is hailed as a game changer in furthering financial inclusion for all.
· Few example of payment banks in India are Airtel money, Paytm payments bank, Vodafone m-Pesa, etc.
Practical constrains with payment banks
· Lack of awareness – The awareness about payment banking system is yet to reach the vulnerable, illiterate, low-income and rural population.
· Different options – Among those customers who knew about the product, especially in urban areas, there was little interest in using it, since several other options already existed to perform financial transactions.
· Lack of training – Agents who work for payment banks have limited training on the features of the product, terms and conditions and its benefits.
· Heavy workload – Payment bank agents are frustrated due to amount of time needed to on-board customers, conduct transactions on their behalf.
· Less incentives - The agents were not provided with adequate incentives to promote the product.
· The monetary commission provided per transaction was also too low.
Way ahead
· Payment banks need to intensify their efforts and try different approaches to create awareness about the product.
· Payment banks need to heavily invest in marketing, especially in rural areas, and compensate agents substantially.
· Payment banks need to explain the features and uses of the product to their agents such that they can effectively transfer this knowledge to the consumer.
