INDIA POST AS A PAYMENTS BANK
– A DREAM OF DIGITALIZATION
RIDDILE TIME?
• What is the easiest way to double Put it in front of the mirror of
your money? course!
• Would you like have a million
dollars today or a penny today and Double your money every day
double your money every day for for 31 days
31 days?
• It is young but not that old. It gives
you money. What is it? Your mom
Savings
Savings are the part of our income that we don’t
spend.
S=Y-C
When there is no income, what will
we save?
=? = INCOME
When there is a saving, without investing
the saving there are no benefits. But, when
the SAVINGS are turned to INVESTMENTS,
there is a EARNING.
A penny saved is a penny earned.
Financial inclusions, the main motive of Government
Financial inclusion is where individuals and businesses have access to
useful and affordable financial products and services that meet their
needs that are delivered in a responsible and sustainable way.
Government of India has taken several steps to increase the financial inclusion.
One of the steps being Pradhan Mantri Jan Dhan Yojana.
Source: https://hindupurpostaldivision.blogspot.com/2017/04/department-of-posts-interest-rates-from.html
Source: https://hindupurpostaldivision.blogspot.com/2017/04/department-of-posts-interest-rates-from.html
Banking In India - Current State
The Indian banking system consists of
1,589 93,550
•26 •25 •56
•43 urban •43 rural
public private regiona
foreign cooper foreign cooper
sector sector l rural
banks ative banks ative
banks bank banks
banks banks
• Public-sector banks control nearly 80 percent of the market
• Smaller shares for private peers
Banking In India – The Other Side
bank branches per
30 underbanked adults 8 100,000 population for
Crore in India rural areas*
number of female
More of population is not Savings Bank accounts
than covered by any health 536 per 1000 of female
80% insurance* population*
adult with accounts at of rural households
46 source loans from non-
a financial institutions 61%
Crore institutional agencies*
are dormant
*Sources: Report of the Committee on Medium-term Path on Financial Inclusion by RBI, National Health Profile 2015, compiled by the Central Bureau
of Health Intelligence, Times of India-In India bank account penetration surges, but 43% dormant( Nov. 10,2015)
Payments Bank
What is Payments Bank?
• A “differentiated bank” to further financial
inclusion for the unbanked and
underbanked population.
• Will provide current, savings accounts and
payments or remittance services to migrant
labour workforce, low income households,
small businesses, unorganised sector
entities and other users.
Why payments Bank?
• A vast majority of rural population (approximately 61%, as per RBI), is still
not covered by formal banking and are unbanked.
• A Payments bank will provide new low cost, lean, modern technology
based delivery models that will further financial inclusion with the
differentiated scope of activities
Source: https://hindupurpostaldivision.blogspot.com/2017/04/department-of-
posts-interest-rates-from.html
Concept of Payments Bank
• A payments Bank is started with the main objective of filling that unfilled gap of
providing the financial inclusions. It is conceptualized by RBI.
• Payments banks are to be registered as public limited companies under
Companies Act, 2013 and licenced under section 22 of the Banking Regulation
Act, 1949. Payments Bank are to be given a status of scheduled bank under
section 42 (6) (a) of the Reserve Bank Act, 1934.
• RBI’s main moto behind the starting of Payments Bank is to serve the need of
different Banking activities in rural areas.
• By the same token, main objective of payments bank is to increase the financial
inclusions by providing small savings accounts and payments/remittance services
to low income households, migrant labour workforce, small businesses other
unorganised sector entities and other users in a secured technology driven
environment.
Understanding the Banking Pain Points of Customers
Banking is for the rich and
wealthy – not for poor
Confused about financial people, who might end up Afraid of perceived
products losing money in the process complexity
Banking is cumbersome What does he
and inefficient THINK and FEEL?
Discrimination in offering
rural people bank products.
People are unfriendly and
rude in the bank What does What does Bank officials do not value
he HEAR? he SEE? villagers. They are insulted,
intimidated and made to wait
longer
Digital banking using phone
or online or even cards is What does he
risky Bank branch is really
SAY AND DO?
far. It is expensive to
Rarely goes to a bank, go there
Conducts all transactions
Does not receive
in cash – spends time in Prefers to stick to informal
any financial
queues to make bill channels
education
payments
Need for India Post Payments Bank (IPPB)
DoP needs IPPB because
Nation needs IPPB because • IPPB will help arrest DoP’s
• It can further provide financial share decline
inclusion agenda as it is the IPPB
• IPPB will contribute a
only organization that has wide sizeable revenue for DoP
branch network with majority of
its branches in rural India • IPPB will strengthen the
relevance / equity of DoP
Department of Posts’ Current Share in the market
The size of the opportunity is vast. DoP even with its superior reach has not been able to capture market
share in line with its scale of operations
Key Retail Payments
Retail Payments (in-store/ Mass Transit & Transport Bill Payments** E-Commerce
physical)
Rs. 9 Lakh Crore
Rs. 42 Lakh Crore Rs. 9 Lakh Crore Rs. 1.6 Lakh Crore
Key Retail Fund Transfers
International Inward Subsidies Domestic Remittance
Remittance*
Rs. 5 Lakh Crore Rs. 3.6 Lakh Crore Rs. 1.2 Lakh Crore
DoP Share ~ 0.3% DoP Share*** ~ 15% DoP Share ~ 4%
* Significant volume of last mile transactions in cash
Sources: RBI, Industry reports, Deloitte Analysis, Figures for 2015 ** Top 20 cities
*** Only DBT Share
Vision for India Post Payments Bank
Building the most
accessible, affordable and
trusted bank for the
common man
Spearheading the financial inclusion
agenda by removing the barriers for the
unbanked and reducing the opportunity
cost for the underbanked populace
IPPB will be a 100% subsidiary payments bank of the Department of Posts and will have an independent
board of directors with representation from the Department and other stakeholders from within the
Government to ensure strategic alignment with the overall objectives of the DoP and the Government of
India.
Potential Customer Segments
Six customer segments were prioritized based on their potential, overlap with IPPB’s existing customer base, influence factor and ease of
acquisition
Rural heartlands
Small farmers, vegetable sellers, small shop owners, rural homemakers
Rural influencers
Panchayat, large farmers, landlord, teachers, ASHA / NGO / SHG workers, shop owners,
anganwadis
Urban blue collar
Masons, electricians, laborers, drivers, petty traders, factory workers
Rural students
Rural students above 15 years in school and colleges
Elderly
60 years and above, pensioners and retired professionals
Urban home maker
India Post Payments Bank – Products
CASA Accounts
Savings Bank accounts with 1 lac balance
limit; Current accounts for MSME, Village
Panchayat, SHGs
3rd Party Remittance
and Bill 3rd Party Products
Products Payments 3rd party partnerships to provide loans,
insurance, pension products, MF etc.
C2G and G2C
Payments
Remittance and Bill Payments
International and Domestic Remittance
Utility bills, municipal dues, fees etc.
C2G and G2C Payments
C2G: Government payments, taxes etc.
G2C: DBT, MNREGA, NSAP disbursements
Facilitate e-Com
IPPB Product Provide platform for enabling online
Portfolio
purchase
Channels
Services
Post Office
counters
eKYC Door-step
banking IPPB will be able to provide
Digital wallets through
postmen/
GDS • Affordable and best in class services to
AEPS
IPPB its customers by leveraging on the latest
branches services delivery platforms.
• Door step banking via Postmen and
Internet /
IMPS mobile
ATMs & GDS.
Micro-ATMs
banking • A push towards less cash economy by
Digital incentivising digital transactions
UPI
transactions
• Key differentiator in terms of DoP’s
at Merchant
locations reach and network to catalyze financial
inclusion
IPPB is uniquely placed to win with DoP
Largest network in India
Access to banking
155,000 135,00
0
Door step banking provided by
>150,000 GDS + Postmen
Post Offices Commercial bank
branches
IPPB is
uniquely
positioned
toDoP
win with
DoP
Existing customer base Brand identity & trust
160 Million savings bank accounts Iconic brand depicting trust
330 Million POSB accounts (MIS, FD, RD etc.) especially in the rural areas
Department of Posts and India Post Payments Bank
While IPPB, will be responsible for setting up the payments bank and designing the products, it will
extensively leverage DoP’s physical, technological, human, and brand assets
Existing staff to manage Design products, define standards,
counter operations and build 3rd party tie-ups, and manage
customer interface for IPPB marketing and customer grievances
Leverage DoP’s existing customer
Assist IPPB manage excess IPPB base (~160 million savings accounts)
(> 1 lac) balance of IPPB
customers and pay interest on
Offer a complete suite of services by
the same DoP offering DoP’s deposit products
Set up 650 branches
1.55 lac POs to be physical
access points for IPPB Leverage DoP’s brand
Customer Story
IPPB offerings for the priority segments were identified and value proposition was defined targeted to
them
Auro is a worker in a glass factory in a town in West Bengal
Remittance to family in village
Low cost, hand-to-hand formal
remittance
Securing cash earnings and
Awareness about new doing micro-investment
financial products
Doorstep cash deposit via
Financial education via GDS,
GDS
at branch, and public demos
Personal insurance products Paying bills
Access to 3rd party health and Blue Collar Bills payment facilities
life insurance
Maximizing interest
Access to loans earning on savings
Access to 3rd party and loans Access to POSB’s RDs, FDs,
TDs
e-documentation, Aadhaar
Speedy, hassle free banking services
enabled services
Legend
IPPB offering
Customer Story
IPPB offerings for the priority segments were identified and value proposition was defined targeted to
them
Chandra Gupta is a 70 year old pensioner residing in Madhya Pradesh. He supported by his two sons, the older son is married
Ease of money transfer
Hand to hand remittances via
doorstep at low cost
Easy access to pension funds Gifting for grandson’s birthday
Direct transfer to IPPB account P2P transfer through wallet
Minimal effort to access Higher interest rates for
banking services deposits
Doorstep banking services for Elderly Integration with senior citizen
deposits, withdrawals, etc. saving schemes
Payments for medicines and other Loans for medical emergencies
household expenditure
Medical loans through third party
Provision of P2M payments
partnerships
Convenient electricity bill
Legend Bill payments
payments
IPPB offering
Customer Story
IPPB offerings for the priority segments were identified and value proposition was defined targeted to
them
Akash is the owner of a kirana store in Ludhiana – he has 3 employees and an income of INR 2-2.5 Lac p.a.
Managing daily cash requirements Daily doorstep cash
management services
Easy payments to suppliers Quick payment of bills
Online transfers from IPPB Bill payments through self
CASA care
Easy way of accepting Convenient payment of
payments salaries to employees
P2M mobile-to-mobile Kirana store SA for employees – direct
payments salary transfer via NEFT
Effective inventory Requirement of additional
management working capital for growth
Business improvement tools Loans through third party
partnerships
Shop insurance through third
Ensure safety of stock, shop
Legend party partnerships
IPPB offering
CHALLENGES
• Returns
• Non tech savvy customers
• Indirect Competition
References
https://www.bankersadda.com/2017/09/if-you-can-dream-it-
you-can-do-it-anup.html
https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?pri
d=32615
https://www.moneycontrol.com/news/trends/current-affairs-
trends/pm-modi-rolls-out-india-post-payment-bank-10-things-
you-must-know-2907181.html
https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?pri
d=32615
https://economictimes.indiatimes.com/industry/banking/finan
ce/banking/government-expects-india-post-payments-bank-to-
be-profitable-after-2-years-communications-minister-manoj-
sinha/articleshow/65616188.cms
Mounika Pitla
Student of ICBM-SBE
