Itz Cash's MD explains why payment bank licence will be a game changer for his co
'We can help our customers in other banking services, such as domestic, international money transfers, provide third-party financial services products, cash withdrawals, etc.'
Last month, after the RBI came up with draft guidelines for 'payment banks', existing payment companies, financial institutions and others are excited as the movehas opened up a huge source of opportunity for businesses. The RBI's new guidelines allow any company to set up a payments bank in the country which, apart from a few limitations, will function as any other bank.
Due to their own limitations, traditional banks have been unable to cater to the banking needs of people living in remote rural areas. Though a payment bank still can't lend money to its users, it will allow deposit and withdrawal of money. Naveen Surya, Managing Director, Itz Cash, a payment company interested in becoming a payments bank and elevate its current service and customer base, spoke to Firstbiz on their plans. Excerpts from the conversation:
What plans do you have now with the new RBI guidelines?
This is a game-changer for us as it gives us an opportunity to leapfrog from what we are doing. Earlier, we were providing just payment-related services. Now, we can help our customers in other banking services, such as domestic, international money transfers, provide third-party financial services products, cash withdrawals, etc. In the beginning, we will leverage on what we have already done and be part of the formal financial inclusion process that the government has initiated.
Who will benefit the most from this - companies or consumers?
The biggest benefit is to the consumer. There are around 60-70 percent people who are financially excluded or underserved. Even if someone has a bank account they are unable to use other banking services such as fixed deposits, other financial services and so on. With payment banks, the consumer will have an easy way to access all banking services such as loans, insurance, money transfer, etc. People hesitate to go to a bank branch for such services as the paper work and the banking process itself can be very intimidating to some, especially migrant laborers and farmers.
How much work will you have to do to expand your base in rural areas?
We are already servicing the un-banked and the under-banked customers. We have issued more than 80 million prepaid accounts in the country and about 80 percent of these are issued to under and un-banked people. To cater to this category, we are currently present in more than 450 un-banked and under banked districts. We are present in more than 3,000 locations in the country represented by almost 100,000 outlets. These locations are beyond the district headquarters.
Unlike other payment services, Itz Cash has the permit to provide cash withdrawals to its users. Can you elaborate on this?
The cash withdrawal service can be provided only by a bank, and in a special case we have the approval from the RBI. We issue a prepaid card which gives a customer access to not just digital payments, but it also can be used at par with any bank's debit card. So you can use our card for payment at restaurants, shopping malls, and also at any bank's ATM to withdraw money. Cash withdrawal is allowed on the open loop prepaid card which is affiliated to a bank and a network partner such as HDFC Bank, VISA, etc. On submission of full KYC documents, the card gets upgraded from an "all services card" (for online use only) to an open loop; whereas in all matters online, POS (Point of Sales) and ATM transactions are allowed within the prescribed guidelines.
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