Differentiated Banks – Payment Banks, Small Finance Banks, etc.

[op-ed snap] Payments banks can change the future. How?op-ed snap

The principle behind payments banks is simple –

Accelerating the penetration of financial services among low-income consumers by leveraging technology and the large, non-banking retail network without compromising the security of the financial sector.

With the Reserve Bank of India (RBI)’s in-principle approval to 11 payments banks, India has taken one big step forward on the road laid out seven years ago.

Challenges, if any?

A recent Consultative Group to Assist the Poor report titled Doing Digital Finance Right concluded that low-income consumers are hesitant to adopt digital modes for financial transactions due to:

  1. Inability to transact due to network/service downtime
  2. Insufficient agent liquidity or float, which also affects ability to transact
  3. User interfaces that many find complex and confusing
  4. Poor customer recourse for grievances and queries
  5. Non-transparent fees and other terms
  6. Fraud that targets customers
  7. Inadequate data privacy and protection

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