“One noon
during a break in the rains, there was a cool soft breeze blowing; the
smell of the damp grass and leaves in the hot sun felt like warm
breathing of the tired earth on one’s body…the postmaster had nothing to
do…” - Tagore in The Postmaster.
The peace and tranquil of the postmaster as captured by
Rabindranath Tagore more than a century ago may be coming to an end as
the ubiquitous postman adds ATM machines and mutual fund investments to the dwindling postcards and inland letters in his brown shoulder bag.
India Post, which has almost become extinct to a generation of people in urban India, prepares for a new life under the India Post Payments Bank by
marrying its almost 1.5 lakh physical branches, of which 89% are in
rural areas, and 3 lakh employees with the latest technology available
to reach out to villages which even the politicians visit only during
elections. A postmaster, or a postman, is not new to handling other
people’s money, but the recent past saw the institution taking a back
seat. Not long away, it used to be the only mechanism for thousands of
villagers to receive funds from bread winners from far off places
through money orders – an instrument that India Post suspended few years
back.
This year would see the postal bank expand its operations
through 650 branches at district headquarters across the country, where
it would provide services like remittances, bill payments, etc. A pilot
project is underway in Ranchi and Raipur. It aims to fulfil the needs of
millions of people in regions where nationalised banks failed and
private sector largely ignored them.
“I will provide payments infrastructure in the nature of
public good,” says Ashok Pal Singh, chief executive officer, India Post
Payments Bank. “What is this? It is a payments platform. The post office
has built a physical network and now that is getting connected. I want
to look at the network as a platform —both as a virtual platform as well
as a physical platform.”
Banks have been reluctant to come to villages because it
would be a loss-making venture given their infrastructure costs and the
need to have feet-on-street. As far as the postal department is
concerned, it has the infrastructure, personnel and the most needed
element in banking—trust.
“They already have trust factor on their side, they have
phenomenal access,” says Naresh Makhijani, partner and headfinancial
services, KPMG India. “Also there has been a large scale adoption of
technology in the postal department coupled with the government’s
Digital India initiative. All these factors should be positive
ingredients.”
India Post traces its history back to 1858 when India’s administration was transferred to the British Crown from the East India Company.
The legendary institution started its savings bank business in 1873 and
began insurance activities in 1884. It also has the distinction of
carrying the first airmail delivery in the world. Despite its head start
more than a century ago, it had fallen on bad times due to years of
neglect by the government and its inability to cope with developments
such as private couriers and lack of interest in lobbying for widening
of its role as an institution beyond accepting savings. But the tide
appears to be turning with it getting the payments bank licence and
Prime Minister Narendra Modi’s special attention to carry his financial
inclusion agenda.
“For India Post, it has already been in the business of
taking deposits, even basic banking,” says Vivek Belgavi, fintech
leader, PwC. “They can do deposit withdrawal through their PoS
terminals. They can add a lot more through their huge reach.” But making
India Post deliver on financial services may be like turning a giant
ship. Physical reach may be a given, but figuring out what the customer
wants, the technology and training its own men could be big challenges.
Furthermore, banks themselves have woken up to the potential. They are
widening their reach through tieups with fintech companies.
Payments banks like Bharti Airtel, or Reliance-SBI joint
venture may be able to reach customers more quickly as they do not have
legacy issues. But India Post is positioning itself more as an
aggregator rather than as a competitor to gain market share. “While the
other players in this space have their own financial goals to be met, I
am saying that I will serve them as well,” says India Post’s Singh who
has worked with UIDAI on the Aadhaar programme
too. “If an Airtel Payments Bank customer wants to withdraw his
deposit, my postman will get it done,” says Singh. “Even a Mobikwik
wallet can use our networks and not suffocate within a closed loop.”
To start with, the India Post Bank has got the basic right –
technology. And it would keep its costs so low that most banks would
not even attempt to compete with it, or they would also be forced to
give up their ways of milking customers with hidden costs.
It is developing an open source nonproprietary platform,
which makes transactions cheaper eliminating the entire debate around
digital payments being more expensive than cash. Aided by cheap
Aadhaar-based payments, biometric authentication, leveraging of the
UIDAI platform, India Post says it can authenticate and settle
transactions for as low as 5 paise when big banks are demanding Rs 15
per ATM transaction. “For UIDAI, the cost of each authentication is
around 0.1 paisa and this is because it is an open platform, not licence
based and is modular and scalable, we will do something very similar,”
says Singh.
THE JAPAN POST WAY
While there are skeptics about what India Post could do to un banked masses, there are examples like the Japan Post and Japan Post Insurance, which have become the supermarket for citizens’ financial needs. Japan Post manages close to $2 trillion of assets and is among the top generator of savings funds.
But for India Post to grow like its Japanese peer, the
regulator should provide it with a full fledged banking licence where it
not only takes deposits, but also lend. Of course, India Post which has
deposits of Rs 7 lakh crore, second only to State Bank of India, needs
to enhance the skills of its staff and it may be years before that
happens. The faltering of state-run banks in the past decade does not
inspire confidence in a government-owned institution being prudent with
money.
“The government has not been entirely successful in driving
financial inclusion through the public sector banks, hence that will be
a huge challenge,” says Makhijani of KPMG. “This is like a
transformation from the days of the money order to
the digital, it will be interesting to note how the switch happens.”
Even for Japan Post, diversifying of asset ownership happened in recent
years before which it was just buying the Japanese government bonds.
Now, it even invests in hedge funds to boost returns. “Eventually, they
will become a full service commercial bank,” says Bhavik Hathi,
MDtransaction advisory group, Alvarez & Marsal, a financial
consultancy.
“A payments bank licence is a good practice ground for
them. They get to know their customers better, people will also get used
to dealing with them for financial products. They can start off with
micro loans, small insurance products, etc. The natural progression
should be to become a full fledged bank.” The baby step has been taken,
but it may be a long wait for the giant leap.
Source:Economic times
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