India Post Payments Bank aids financial inclusion

LAST mile financial inclusion received a big boost in India when 650 branches and 3 250 access points of India Post Payments Bank (IPPB) were simultaneously launched on September 1.

IPPB intends to piggyback on the post office network with its panIndia physical presence of 155 000 post offices, and leverage the postal network’s long experience in cash handling and savings mobilisation to provide hassle-free banking services at the doorsteps of the hitherto unbanked and unserviced population in remote corners of the country.

The trust the postal network enjoys among the citizens, backed by the technological empowerment through unique ongoing projects, is intended to bridge this gap in financial inclusion and turn last mile financially empowered by bringing them into formal banking channels.

IPPB will also serve as a secure and reliable payment channel, the preferred vehicle for transfer of social security and employment benefits and all government to citizen transactions.

IPPB intends to build the most accessible “payments bank” through various channels including ATMs, point of sale and mobile point of sale, mobiles, internet banking transactions at the post office as well as at the doorstep of the customers, and encourage the transition to a less cash-dependent economy.

For starters, IPPB will offer a range of products intended to meet the banking needs of the clients it is meant to serve savings and current accounts, remittance, insurance, mutual funds, pensions, bill and utility payments, etc. IPPB will also partner with third-party financial organisations to provide loans, investment and insurance products.

These products, and related services, will be offered across multiple channels counter services, micro-ATM, mobile banking app, SMSes and IVR.

IPPB’s core-focus will be upon serving social sector beneficiaries, migrant labourers, unorganised sector employees, small and medium enterprises, low-income households in rural areas and the unbanked and underbanked segments in both the rural and urban areas.

While IPPB will leverage the physical and IT infrastructure of the post offices and be set up on a lean operating model, it aims to create its own back-end technology platform and infrastructure, data centres, licences etc.

It will focus on low-cost, low-risk, technology-based solutions to extend access to formal banking especially in rural, unbanked and underbanked areas. Leveraging this tremendous last mile connectivity, it will set up a national financial architecture that will be capable of effecting omnichannel financial transactions in the country.

With a network of 155 000 post offices countrywide, and more than 300 000 postmen and rural post assistants servicing the last mile, IPPB will be India’s most accessible bank. In one stroke, launch of IPPB increased bank branches in rural India by 2.5 times. It will be the enabler for opening up of a huge market at the bottom of pyramid to various other banking and finance companies, retail chains and a plethora of other commercial goods and service providers.

IPPB will also leverage enabling digital ecosystem already in place like the National Payments Corporation of India – an umbrella organisation for operating retail payments and settlement systems in India. Customer on boarding based upon Aadhaar, the unique identification number for every Indian citizen, will reduce the cost of customer acquisition, a benefit that will be transferred to the end customer, helping IPPB to render its services in an affordable and convenient manner, meeting the twin challenges in last mile delivery of any product or service.

Another challenge which institutions face in mainstreaming last mile into formal banking systems is the inhibition and the fear of the unknown among the intended beneficiaries.

Attempting to tackle the challenge head-on, IPPB seeks to promote financial inclusion through financial literacy – educating customers on how insurance secures the unsecured, how wealth grows from wealth and how even a small saving can go a long way towards building a better future. IPPB will train 300 000 postmen and assistants to provide financial guidance.

With almost 70% of the population in India still living in semi-urban and rural areas, the IPPB has a seminal role to play in providing financial security to the unsecured.

It is hoped that the success of the IPPB in profitably banking the unbanked at the last mile will be a trailblazer for bringing about a paradigm shift in operating models of financial institutions and unleashing the entrepreneurial energies at the grass root levels.