Loud Thoughts on Financial Inclusion - Facets of Payment Systems and Card Management
Dinesh K Kapila
I had a short interaction (late September 2018) after a sort of summing up address to some participants at a seminar where we discussed some thoughts on payment systems and card management essentially as a part of financial inclusion. I stated that broadly we could say that financial inclusion is now driven by a focus on digital payments and this automatically involves availability of infrastructure, accessibility to payment channels, affordability that is reducing the cost of access and lastly but equally important awareness which means transforming consumer behaviour and moulding their acceptability for switching to the digital mode.
We have certainly evolved from the 1980 era of manual working and going onto ATMs, MICR Based cheque payments and processing centres to cards and CBS, Internet Banking, RTGS, NEFT, Mobile Banking, all this around 2010-15 to now NFS, IMPS, AEPS, CTS, NACH, APES, UPI and lately UPI, BHIM, Bharat QR, BHIM Aadhar Pay, PFMS etc. Security and Sophistication levels have increased exponentially. In fact, me a guy stuck on ATMs and Cards and 31 years of service behind me found the young participants from the Cooperative Banks and RRBs from all over India, mainly from their IT Departments much better clued in ! And focused upon technology but feeling somewhat constrained as their seniors were out of sync or uncomfortable with technology. Plus the usual known problems, which I listened patiently.
An immense technology backbone in terms of infrastructure - both hard or machine based and soft has gone into this speedy pace of development. We all must sincerely acknowledge the role of the pioneers, The Government, RBI, Banks, NABARD, varied Institutions, Private Sector Corporates, all put together. It has been a giant collaborative project. This has led us to our own Desi Card, the Rupay Card and it’s sibling, the Rupay Kisan Card. And let us not forget the role of the smartphone while we are at it, the Telecom Companies have never got the recognition they deserve for driving change.
I had observed that the faculty had covered the major issues over the past three days and the participants had certainly learnt from it but felt I had to add my perspective, specially that
- Technology will rule, it has always ruled in attracting customers, in retaining customers and building business with them. Be it, Personal Banking or Payment Systems or otherwise. And the deeper a customer was embedded into a bank through varied products including DMat Accounts or Insurance, the more difficult for him to migrate out ! The digital mode enables a deeper engagement with the customer with the ease of access driving business. But we need to have the products and the ability to market them.
- RRBs to a lesser extent and cooperatives to a larger extent have had a slower start in absorbing and using digital technology and card and payment systems. Our own culture in NW India was also a barrier. It was never easy to reduce or minimise such barriers. l shared my own experience at a leading doctor (charges for medicines too) who extracted Rs 400/- as debit or credit card charges and at a leading luxury watch store which just was too puzzled when I insisted on paying by a card.
- NABARD had certainly endeavoured to speed up implementation at banks and build a culture of acceptance by bringing together partners / stakeholders on one platform and supporting financial literacy camps. This needed to be leveraged.
- Cooperative Banks and RRBs should understand and realise the operating environment is changing and rapidly. The customers are aware as I personally know of young farmers going live on FB and youtube with their successes in farming etc. To cope up we should be aware and supportive and move from a mode of “yeh kahan jayenge” to yeh chale jayenge”, the customer will certainly migrate and move on, and SFBs are moving in as are NBFC MFIs deep into rural India. A case in point is the loan outstanding of MFIs or SFBs in microfinance at plus Rs 1200 crore in Punjab and Haryana. Rs 40000/- per head as loan can by itself scale up.
- We must therefore understand this particularly and to evolve our brand identity. In Cooperative Banks in Punjab the styling of the name is common, only the district is changed. This has to be understood as part of the drive. The technology backbone was now built across the states here but now needed to be leveraged. HP through the HPStCB had shown the path in this sector.
The RRBs and Cooperative Banks had to know their client base intimately. RKCs, their usage and activation were a concern and case to study, The financial literacy workshops needed to be drive people and our customers to technology by motivation and education. Security aspects needed to be deeply gone into. Branches are not obliging a higher tier or the Government by organising camps even if mandated but to build and protect their own businesses. The Boards, the Senior Managers and Staff should internalise this and review progress also on a regular basis.
Coming to some data, in NW India, while HP could certainly take credit for being the leader even then it was just marginally ahead. The usage varies from 1.59 % to 2.34 %, across cooperative banks and RRBs while commercial banks were at 93 %. The Regulator may have certain legitimate concerns as regards risk and security concerns and in according sanctions across the board but even the limited areas accorded permission had not been successfully tapped. POSECOM was 92 % for CBs and 8 % for RRBs / Cooperatives, this does require introspection.
Activation of cards is in my view directly proportional to the level and degree of customer engagement by the bank. One active card generally brings 3-5 new transactions for the bank for a given period. Engage with the customers through the SMS / Social Media / Branches / Camps etc. And tell the people that after so many years they also need to come forward, be more aware and embrace change and technology. Problems such as the degree of access, level of networks etc will remain but the pace has to pick up in NW India where the degree of infrastructure development is certainly higher.
While we discuss this I request security drills at controlling offices should be consistent. Do keep a close eye on BCs always, this is an important instrument for extending the reach cost effectively but does require consistent monitoring. And seek to be operationally efficient, share best practices and this ought to be across all modes such as ATMs, POS Machines, ECOM, IMPS etc.
More important technology comes with a cost, a consistent cost on servicing in addition to capital costs, business growth and profits had to be a resultant effect post upgraded systems. This must be our conscious realisation, the cost and business aspects. The world does not permit us the luxury of staying away and living in stagnation, we have to accept change and absorb it. Explore POS Machines at major rural markets and nodes, agri input dealers, shops etc, I really wonder how all cooperative banks and the RRB in a state are stating the demand is not there for such machines. Try the above.
We need to move to customer enablement, customer incentives, customer engagement, customer experience etc, we don’t oblige him, he obliges us, let us first accept this. Technical teams have to realise this while drawing campaigns and operations and strategize with the operating teams.
As regards reforms specific to some segments of banks, it is not that the problems and issues are not known but multiple controls and related aspects were barriers, in any case our reforms were like super tankers stopping, that is, slow and really slow ! we have to work within this parameter.
Lastly, focus upon Micro ATMs, AEPS Onboarding, PFMS, AUA KUA, RKCs Activation and Usage, Mobile Banking, CYC, Mobile Vans, Absorbing Technology within and without, Field monitoring and computerisation of PACS on return.
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Dinesh K Kapila
I had a short interaction (late September 2018) after a sort of summing up address to some participants at a seminar where we discussed some thoughts on payment systems and card management essentially as a part of financial inclusion. I stated that broadly we could say that financial inclusion is now driven by a focus on digital payments and this automatically involves availability of infrastructure, accessibility to payment channels, affordability that is reducing the cost of access and lastly but equally important awareness which means transforming consumer behaviour and moulding their acceptability for switching to the digital mode.
We have certainly evolved from the 1980 era of manual working and going onto ATMs, MICR Based cheque payments and processing centres to cards and CBS, Internet Banking, RTGS, NEFT, Mobile Banking, all this around 2010-15 to now NFS, IMPS, AEPS, CTS, NACH, APES, UPI and lately UPI, BHIM, Bharat QR, BHIM Aadhar Pay, PFMS etc. Security and Sophistication levels have increased exponentially. In fact, me a guy stuck on ATMs and Cards and 31 years of service behind me found the young participants from the Cooperative Banks and RRBs from all over India, mainly from their IT Departments much better clued in ! And focused upon technology but feeling somewhat constrained as their seniors were out of sync or uncomfortable with technology. Plus the usual known problems, which I listened patiently.
An immense technology backbone in terms of infrastructure - both hard or machine based and soft has gone into this speedy pace of development. We all must sincerely acknowledge the role of the pioneers, The Government, RBI, Banks, NABARD, varied Institutions, Private Sector Corporates, all put together. It has been a giant collaborative project. This has led us to our own Desi Card, the Rupay Card and it’s sibling, the Rupay Kisan Card. And let us not forget the role of the smartphone while we are at it, the Telecom Companies have never got the recognition they deserve for driving change.
I had observed that the faculty had covered the major issues over the past three days and the participants had certainly learnt from it but felt I had to add my perspective, specially that
- Technology will rule, it has always ruled in attracting customers, in retaining customers and building business with them. Be it, Personal Banking or Payment Systems or otherwise. And the deeper a customer was embedded into a bank through varied products including DMat Accounts or Insurance, the more difficult for him to migrate out ! The digital mode enables a deeper engagement with the customer with the ease of access driving business. But we need to have the products and the ability to market them.
- RRBs to a lesser extent and cooperatives to a larger extent have had a slower start in absorbing and using digital technology and card and payment systems. Our own culture in NW India was also a barrier. It was never easy to reduce or minimise such barriers. l shared my own experience at a leading doctor (charges for medicines too) who extracted Rs 400/- as debit or credit card charges and at a leading luxury watch store which just was too puzzled when I insisted on paying by a card.
- NABARD had certainly endeavoured to speed up implementation at banks and build a culture of acceptance by bringing together partners / stakeholders on one platform and supporting financial literacy camps. This needed to be leveraged.
- Cooperative Banks and RRBs should understand and realise the operating environment is changing and rapidly. The customers are aware as I personally know of young farmers going live on FB and youtube with their successes in farming etc. To cope up we should be aware and supportive and move from a mode of “yeh kahan jayenge” to yeh chale jayenge”, the customer will certainly migrate and move on, and SFBs are moving in as are NBFC MFIs deep into rural India. A case in point is the loan outstanding of MFIs or SFBs in microfinance at plus Rs 1200 crore in Punjab and Haryana. Rs 40000/- per head as loan can by itself scale up.
- We must therefore understand this particularly and to evolve our brand identity. In Cooperative Banks in Punjab the styling of the name is common, only the district is changed. This has to be understood as part of the drive. The technology backbone was now built across the states here but now needed to be leveraged. HP through the HPStCB had shown the path in this sector.
The RRBs and Cooperative Banks had to know their client base intimately. RKCs, their usage and activation were a concern and case to study, The financial literacy workshops needed to be drive people and our customers to technology by motivation and education. Security aspects needed to be deeply gone into. Branches are not obliging a higher tier or the Government by organising camps even if mandated but to build and protect their own businesses. The Boards, the Senior Managers and Staff should internalise this and review progress also on a regular basis.
Coming to some data, in NW India, while HP could certainly take credit for being the leader even then it was just marginally ahead. The usage varies from 1.59 % to 2.34 %, across cooperative banks and RRBs while commercial banks were at 93 %. The Regulator may have certain legitimate concerns as regards risk and security concerns and in according sanctions across the board but even the limited areas accorded permission had not been successfully tapped. POSECOM was 92 % for CBs and 8 % for RRBs / Cooperatives, this does require introspection.
Activation of cards is in my view directly proportional to the level and degree of customer engagement by the bank. One active card generally brings 3-5 new transactions for the bank for a given period. Engage with the customers through the SMS / Social Media / Branches / Camps etc. And tell the people that after so many years they also need to come forward, be more aware and embrace change and technology. Problems such as the degree of access, level of networks etc will remain but the pace has to pick up in NW India where the degree of infrastructure development is certainly higher.
While we discuss this I request security drills at controlling offices should be consistent. Do keep a close eye on BCs always, this is an important instrument for extending the reach cost effectively but does require consistent monitoring. And seek to be operationally efficient, share best practices and this ought to be across all modes such as ATMs, POS Machines, ECOM, IMPS etc.
More important technology comes with a cost, a consistent cost on servicing in addition to capital costs, business growth and profits had to be a resultant effect post upgraded systems. This must be our conscious realisation, the cost and business aspects. The world does not permit us the luxury of staying away and living in stagnation, we have to accept change and absorb it. Explore POS Machines at major rural markets and nodes, agri input dealers, shops etc, I really wonder how all cooperative banks and the RRB in a state are stating the demand is not there for such machines. Try the above.
We need to move to customer enablement, customer incentives, customer engagement, customer experience etc, we don’t oblige him, he obliges us, let us first accept this. Technical teams have to realise this while drawing campaigns and operations and strategize with the operating teams.
As regards reforms specific to some segments of banks, it is not that the problems and issues are not known but multiple controls and related aspects were barriers, in any case our reforms were like super tankers stopping, that is, slow and really slow ! we have to work within this parameter.
Lastly, focus upon Micro ATMs, AEPS Onboarding, PFMS, AUA KUA, RKCs Activation and Usage, Mobile Banking, CYC, Mobile Vans, Absorbing Technology within and without, Field monitoring and computerisation of PACS on return.
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