Banking on the smartphone

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Very soon, you can withdraw money from an ATM even if you do not have a bank account or a debit card, but make sure you are carrying your mobile phone. Very soon, you can withdraw money from an ATM even if you do not have a bank account or a debit card, but make sure you are carrying your mobile phone.
SummaryVery soon, you can withdraw money from an ATM even if you do not have a bank account or a debit card, but make sure you are carrying your mobile phone.

First the figures. The World Bank Findex Survey (2012) says only 35 per cent of Indian adults had access to a formal bank account and 8 per cent borrowed formally in the last 12 months. Only 2 per cent of adults used an account to receive money from a family member living in another area and 4 per cent used an account to receive payment from the government.

On the other hand, research firm Juxt, in its India Mobile Landscape (IML) 2013 report, says India has 55.48 crore mobile users. More than 29.8 crore or about 54 per cent of these device owners are in rural areas compared to 25.6 crore in cities and towns.

Keeping this is mind, it is not surprising that the RBI, in its recent announcment, gave an in-principle approval to set up a payment system where all you need is a mobile phone to withdraw money from an ATM even without having a bank account.

Even as there are several modes currently available for remitting and receiving money, the RBI has added an innovative model for monetary transaction for individuals across the country.

“Cashing out is important for remittances because we have a large recipient population in the country most of whom do not have access to formal banking services,” the RBI Governor, Raghuram Rajan said while talking about this payment system. “We need more such innovative products, some of which mobile companies are providing.”

Now banks are working towards increasing their ATM network so that this facility is available to larger number of people.

“By March 31, 2014, all public sector bank branches will have an ATM machine and that will make increase penetration and thereby enable more people to have access to cash through this system,” said KR Kamath, chairman, Punjab National Bank who is also the chairman of Indian Banks’ Association.

“This will go a long distance in providing easy access to transferred money to individuals who do not have bank accounts. The idea is that there are lot of unsatisfied people who do not have bank accounts and don’t have cash withdrawal facility,” Kamath added.

How it works

Bankers say that it will work in a manner similar to some of the other options that are currently available in the market like the mobile transfer. In a mobile transfer, a sender needs to have a bank account. The sender deposits the money at a mobile shop from where the transaction ID or a code is sent to the recipient who needs to go to the mobile shop and provide the code and the transaction ID to receive the money.

“In this case a separate system would be prepared in tie up with mobile companies and the recipient would be able to withdraw the money from the ATM by punching the code in the machine,” said RK Bansal, ED, IDBI Bank. Bansal says that the sender will be required to have a bank account as of now.

In the second stage of this programme even the sender may not be required to have a bank account, making it accessible to more individuals.

IndiaPost also has a scheme in association with BSNL where money can be transferrer from one post office to another across the country. In this case also once the money to be transferred is deposited in the post office by a sender, a secret code is sent to the recipient’s mobile phone, who needs to visit a post office and show the code and an address proof to get the money from the post office.

While the current schemes charge a transaction fee of anywhere between 2 and 10 per cent of the amount transferred, sources close to the development say that the charges will be determined by individual banks in this case. It is, however, expected to be on the lower side.

The limitation

While mobile shops have deeper penetration, bank ATMs do not have that and therefore access to this service may be limited to individuals who are in areas that are closer to a bank branch with an ATM.

In a bid to make this facility a success, the Reserve Bank of India will have to deepen the penetration of the ATMs in the country and bankers say that after public sector banks have opened an ATM in every branch, the next step will be to open ATMs in places where there are no branches.

“It would be ideal to reach out and open ATMs into areas where there are no bank branches but the problem is that ATMs need to be serviced and just setting up ATMs won’t help. We are first focussing on having ATMs at all branches and then we will move forward in that direction of setting them up in places that do not have branches so that it becomes more accessible for individuals,” said Kamath.

Smartphone sales in India grew 166.8 per cent in the fourth quarter of 2013, the highest smartphone sales growth among the countries tracked by Gartner. RBI is also looking to tap that potential and push mobile banking as a delivery channel for financial services in a big way.

“We have a great opportunity for banks and telecom service providers to come together to deliver mobile banking services of all kinds in a seamless and secure manner to their customers. In the next few months, we will accelerate the dialogue between key players,” said the RBI Governor.

Smart cash

* The new payment system will work like a mobile transfer, where a sender needs to have a bank account. The sender deposits the money at a mobile shop from where a code is sent to the recipient who needs to go to the mobile shop and provide the code to receive the money

* In this case a separate system would be prepared in tie up with mobile companies and the recipient would be able to withdraw the money from the ATM by punching the code in the machine

* Initially, the sender will require a bank account. In the second stage even the sender may not be required to have a bank account

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