Showing posts with label banks. Show all posts
Showing posts with label banks. Show all posts

Sunday, April 26, 2015

PSU Bank RuPay Cards Now E-Commerce Enabled: NPCI

PSU Bank RuPay Cards Now E-Commerce Enabled: NPCI

The National Payments Corporation of India (NPCI) on Monday said it has completed system integration to enable e-commerce transactions through RuPay cards of public sector banks.

"RuPay card holders of all public sector banks are now e-commerce enabled. Card-holders can now conveniently purchase rail, road and air tickets by logging into the websites of travel companies or buy goods and services from online stores," an NPCI statement said.

Multiple levels of integration with the bank servers are required for enabling transactions like ATM usage, usage at point of sale terminals and e-commerce thorough the cards.

The RuPay cards, launched by the Reserve Bank of India-promoted NPCI, are alternative to foreign cards like Visa and MasterCard, which earn high revenue for facilitating transactions. There are 140 million RuPay cards in use at present.

The state-run lenders are the most active in issuing these indigenous cards.

For using the RuPay card for e-commerce transactions, a one-time user registration will have to be done at the time of the first transaction after which there would be the standard two-factor authentication process.

Over 30,000 online merchants in the country now accept RuPay cards, which includes Flipkart, IRCTC, Jet Airways, Snapdeal, Life Insurance Corp (LIC), Bookmyshow and Homeshop18.

Monday, September 22, 2014

Financial Inclusion in India: Moving Beyond Bank Accounts

On August 15, India’s Independence Day, Prime Minister Narendra Modi announced a national mission of financial inclusion. Called the Pradhan Mantri’s Jan-Dhan Yojana — the Prime Minister’s People’s Wealth Program — it envisions bank accounts for all Indians. In its first phase, ending August 14, 2015, the target is 75 million accounts. “I wish to connect the poorest citizens of the country with the facility of bank accounts,” said Modi. “There are millions of families who have mobile phones, but no bank accounts. We have to change this. The change will commence from this point.”

Earlier prime ministers had made similar grandiose announcements, with few results. Indira Gandhi started a campaign against poverty, but it never gained traction. Manmohan Singh started a campaign against unemployment, but that failed to take hold as well. The Modi government is still in its honeymoon period; people are willing to accept Jan-Dhan as a plan but not a reachable destination.
On August 28, Modi formally launched the program. Banks across the country had been working overtime to make the necessary arrangements. On the first day, more than 15 million accounts were added. “It is the end of financial untouchability,” Modi noted. “It is the beginning of freedom from poverty.”

It’s not just the accounts that enticed people to the camps set up by the public sector banks. Every account holder will get a RuPay debit card, launched by the Reserve Bank of India (RBI)-promoted National Payments Corporation of India (NPCI); accident insurance cover of Rs.100,000 (approximately $1,650); life insurance coverage of Rs. 30,000 for those opening accounts before January 26 (celebrated as Republic Day in India), and an overdraft facility of Rs. 5,000.
“Never before in economic history have 15 million bank accounts been opened in a single day,” said Modi. “Never before have insurance companies issued 15 million accident policies in a single day. Never before has the government of India organized a program of such scale — over 77,000 locations — with the participation of so many chief ministers, union ministers, and government and bank officials.”

ICICI, India’s largest private sector bank, opened only 100,000 accounts that day. “ICICI Bank has been working on a comprehensive financial inclusion plan over the past four years,” MD and CEO Chanda Kochhar told Knowledge@Wharton. “Through our network, we cover approximately 15,600 villages and have brought more than 18.5 million unbanked people into the banking fold. We aim to open 2.5 million accounts under the yojana, taking the total number of accounts under our financial inclusion program to more than 20 million.” As of September 8, major private sector banks taken together opened just 580,000 accounts.

Reasons for Concern
It remains to be seen whether the program will lead to big changes. “This is a small step and the take-up is encouraging,” says Wharton finance professor Krishna Ramaswamy. “It might lead to small and improved savings in an accountable and hopefully trustworthy way.”
The skepticism comes in part due to questions about the veracity of the numbers themselves. RBI governor Raghuram Rajan has publicly warned the banks not to run after records. “We have to make sure the Jan-Dhan Yojana does not go off track,” he said at a conference on September 15. “The target is universality, not just speed and numbers.”

According to H.K. Pradhan, professor of finance and economics at XLRI Jamshedpur, there are concerns of duplicate accounts from people who may have opened them “without really understanding what they were doing.” He adds that the issue will be sorted out when biometric identification is introduced. But there could be operational complications: Anybody in India can open multiple accounts, so how can there be a different rule for the currently unbanked?

The second — and more important — issue is that India’s problem of financial inclusion is gargantuan. According to World Bank data, only 35% of Indians have an account with a formal financial institution. This is 42% in the case of men and 27% for women. Only 8% have debit cards and 2% credit cards. According to the government’s 2011 Census, 58.7% households utilize formal banking services.

Rating agency Crisil, a Standard & Poor’s company, has a financial inclusion index called the Inclusix. The all-India Inclusix score is 40.1 (which mean that about 40% of the country has access to formal banking services). There are wide variations — from 62.2% in the southern region to 28.6% in the eastern region.

The high-powered Nachiket Mor committee on Comprehensive Financial Services for Small Businesses and Low-Income Households, set up by the RBI, found that 60% of the rural and urban population did not have a functional bank account. “India’s financial inclusion indicators, particularly in banking, put it below the median of countries, and bank accounts are a first step to inclusion,” says Rajesh Chakrabarti, executive director of the Bharti Institute of Public Policy at the Indian School of Business.

According to a report by global consulting firm Frost & Sullivan, India’s continued growth can only be assured “if steps are taken to ensure that social and economic development is inclusive.” Financial inclusion has moved into public consciousness only over the past decade or so. “Financial inclusion can no longer be treated as a fringe subject,” notes Jayanta Nath Mukhopadhyaya, director of the J.D. Birla Institute (department of management). “It has to be recognized as an important part of the mainstream thinking on economic development.”

The immediate challenge for banks, Pradhan says, will be acquiring the technology needed to facilitate more financial inclusion. “Moreover banks need to convert the old and dormant accounts into the new financial inclusion accounts in order to get the accident coverage and overdraft facility for the account holders.” This means that some of the work done on financial inclusion so far will have to be duplicated.

“There is much more to financial inclusion” than simply opening accounts, says M.S. Sriram, visiting faculty at the Centre for Public Policy at the Indian Institute of Management in Bangalore. “The state needs to put its resources to ensure that the infrastructure backbone is available — which means that there is ubiquitous presence of interoperable point of sale devices that allow people to transact without a hefty fee…. Once this architecture is available, the poor will start transacting.”
Chakrabarti adds that the government “seems to be fighting the symptoms rather than the disease. The point is for the formal banking system to be present when needed and be superior in convenience and efficiency. However, the approach taken seems to be to lure people into banking through incentives and to hope that the habit sets in. The trouble is that once the sweetener goes away, day-to-day banking provides little benefit in convenience to many users at the bottom of the pyramid.”

Long Road Ahead
The consensus of opinion is that Jan-Dhan is a worthwhile effort, but it’s too early to say whether it will succeed. “As compared to its predecessor — the Swabhiman scheme — this program has a high possibility of success due to two major strategic improvements,” states Rana Kapoor, MD & CEO of YES Bank and president of apex chamber Assocham. “First, it mandates provision of ATM-cum-debit cards to each account holder instead of the Smartcard [for thumbprint authentication] as earlier, where the customer was solely dependent upon agents or business correspondents. ATM debit cards give 24-7 access to savings, which is critical for the below-the-poverty-line population. The quantum of savings is limited and probability of emergency requirements is high.”

http://knowledge.wharton.upenn.edu/article/financial-inclusion-india-aims-move-beyond-bank-accounts/

Friday, September 12, 2014

Card payment network RuPay sees boost from government banking scheme



A government drive to expand banking services in India is giving a boost to home-grown card payment network RuPay, which expects to quadruple the number of users by March and make debit cards more acceptable in a nation where cash is still king.

Started in 2012 by a company owned by 10 local and foreign banks, RuPay competes with global payment firms Visa Inc and MasterCard Inc for the few customers in Asia's third largest economy able to afford a debit or credit card.

As of July, banks issued just under 435 million payment cards in India, a nation of 1.3 billion people. Most were debit cards.

RuPay's share of daily card transactions, however, remains small compared with the global firms, which are more established, offer both debit and credit cards and are accepted by more retailers. RuPay currently offers only debit cards.

RuPay users account for just 1.5 percent of daily card transactions of almost one million at retailers, said A.P. Hota, chief executive of the National Payments Corp of India (NPCI), which runs RuPay.

Hota told Reuters the payments network was set to grow rapidly from the government's so-called financial inclusion scheme, which aims to ensure the majority of households has a bank account within months.

Under the scheme launched late in August, Indians who open a bank account for the first time automatically get a RuPay card.

Hota said the number of RuPay users has now almost doubled  from 23 million at the end of July.

By March next year, he expects that number to rise to 160 million, with more than 60 percent of the increase coming from the government scheme.

"Jan Dhan itself would provide a big opportunity for the domestic card brand to be a formidable force," said Hota, referring to the financial inclusion scheme, Jan Dhan Yojana, which means People's Wealth Scheme.

"(RuPay Card transactions are) just a drop in the ocean at the moment. But drop by drop we are increasing our size."

NPCI is also trying to lure more customers by charging banks lower fees than Visa and MasterCard, Hota added.

Visa, the world's largest credit and debit card company, declined to give its India market share, but said the country was amongst the world's fastest-growing payments markets.

"We believe Visa is well-positioned competitively," Uttam Nayak, group country manager of India and South Asia, at Visa, said in emailed comments, adding his company welcomed competition.

MasterCard did not reply to Reuters' requests seeking comment.

NPCI's shareholders include India's biggest bank, the State Bank of IndiaBSE 0.93 %, and foreign lenders Citibank and HSBC. The central bank has a nominee on its board.

The organisation plans to launch RuPay cards that will be accepted overseas through a partnership with Discover Financial Services, Hota said, and is also in talks with Japanese card network JCB about a partnership.

RuPay had aimed to issue credit cards by March 2015, but those plans have now been delayed by the government scheme, Hota said. "Rural acceptance of the Jan Dhan cards will be our priority," he added.

Wednesday, September 10, 2014

Improving capacity is key to financial empowerment

A lot has already been said about the Jan Dhan Yojana; by the eloquent prime minister himself and then by advertisers, commentators and other worthies.In the crowd of messages, one called for urgent action. It said, 'Free accidental death insurance of up to Rs 10 lakh on your debit card has expired. Shop NOW to activate cover for the month.' I have no intention of dying to find out how much free insurance I am worth.

However, with the Jan Dhan Yojana fresh on my mind, I pulled out the plastic at the gas station, only to put it back because the two factor authentication required that I step out in the rain to punch my PIN at the handheld device, now irrefutably attached to the cashier's table!

I guess I am now without cover and I wish the new millions getting free insurance with their new debit cards better luck than that.

A lot has already been said about the Jan Dhan Yojana; by the eloquent prime minister himself and then by advertisers, commentators and other worthies. It is phenomenal as far as communication and intent goes. It warms the heart to know that the bullet trains will not bypass the small hapless woman, but that there is a plan to empower her in plastic and reward points.

It is difficult to argue with the potential of financial inclusion to significantly change lives and create long term, sustainable value. And yet, it will be a while before we know if the Yojana triggered or delayed financial inclusion.

Banks successfully opened 1.5 crore accounts on the launch day. However, achievement of numeric targets will not indicate success here as the entire value of the banking relationship is from ongoing use of the accounts. One hopes that low hanging fruits such as benefits transfers will be implemented efficiently by the government and banks will be able to manage BCs who in turn will be able to fulfill customer expectations.

But given the different agencies involved, it will be interesting to see who takes long term responsibility for actions, inactions and decisions made for and on behalf of banks, including potential credit and cost decision made for and on behalf of banks, including potential credit and cost decisions.

On their part, the central bank has been working at a furious pace to change the bank licensing framework to accommodate needs of an economy marked by small value, high frequency transactions.

The idea is that if supply side constraints are removed, old and new banks will compete and collaborate and test new, innovative, technology-driven distribution frameworks that will meet the demand side at a frameworks that will meet the demand side at a fair price, correcting a historical skew.
http://economictimes.indiatimes.com/opinion/comments-analysis/improving-capacity-is-key-to-financial-empowerment/articleshow/42138671.cms
In the crowd of messages, one called for urgent action. It said, 'Free accidental death insurance of up to Rs 10 lakh on your debit card has expired. Shop NOW to activate cover for the month.' I have no intention of dying to find out how much free insurance I am worth.

However, with the Jan Dhan Yojana fresh on my mind, I pulled out the plastic at the gas station, only to put it back because the two factor authentication required that I step out in the rain to punch my PIN at the handh ..

Banks to start with only Rs 500 overdraft under the Jan Dhan Scheme

Banks will be initially extending a lower overdraft facility under the Pradhan Mantri Jan Dhan Yojana lenders and not of Rs 5,000 which is the maximum amount under this scheme. Based on the credit history banks may later decide to extend the amount. The moves comes after the finance ministry clarifies that lower amount can also be extended under the overdraft scheme.

Under this scheme, on opening of a bank account holders are eligible for an overdraft facility of Rs 2,000 that can be extended up to Rs 5,000, based on the consumer's credit and transaction history. Apart from this account holders will also get a RuPay debit card with a Rs 1,00,000 accident cover. Also, customers who open accounts by January 26, will be entitled to an additional life insurance of Rs 30,000.

Bankers say that in order to avail the overdraft facility customers have been queuing up to open the accounts. However, a banker requesting anonymity explained that most banks are likely to start lending from a small sum of Rs 500 onwards instead of going for Rs 5,000 as seems to be the understanding amongst new account openers.

"Though banks have been given the leeway to extend overdraft facility on the basis of credit history but since the government is very aggressive on this plan, banks would not like to at least initially discourage too many customers for fear of a complaint. As a result we will start with small amount of up to Rs 500 in the first stage," said a banker with a public sector lender.

Another banker also echoed the reasoning for starting with smaller amount and explained, "There seems to be a  misconception amongst account openers under this scheme that they don't have to return the money. As a result, we think it is better to start extending a credit of smaller amount initially and that can later be hiked, said another banker.

Bankers explain that the overdraft facility had been misunderstood, as several account openers have understood that Rs 5,000 would be deposited in their accounts, as would the subsidies and freebies. And as a result it has become more important to start off with a smaller amount, say experts.
The government has been working on this scheme very aggressively and plan to achieve the target of opening 7.5 crore accounts in the country by January 26, 2015. In fact, on the very first day the banking sector had managed to open 1.5 crore accounts as part of this scheme.