The government’s ambitious unique identity (UID) project, under the stewardship of Nandan Nilekani, proposes to introduce a micro-payment platform that would make use of mobile technology. This platform would enable business correspondents (BCs) to carry out instant transactions at the remotest places in the country. The BC model has been implemented by the government in its efforts to tap the unbanked population in the country, as a part of its financial inclusion measures.
This micro-payment platform would function through low cost devices (or micro ATMs), said Mr Nilekani at Monday’s Banking Conclave 2009-10 in Mumbai. Also, these ‘micro ATMs’ would function as a network through connections with other banks across India. This would enable a person to instantly deposit or withdraw funds regardless of the bank associated with a particular BC. However, he mentioned that for this platform to become a reality, an inter-bank switch (similar to the National Financial Switch) would be required to make the system interoperable. Mr Nilekani pointed out that the National Payments Corporation of India (NPCI) would look into the matter.
Speaking at the conclave, Mr Nilekani said, “This will create a whole new paradigm in the financial inclusion process. What we propose is really creating, in effect, a low cost, high volume equivalent of an ATM network. This device will be based on a mobile phone connection and would be made available at every BC. Customers would just have to get their identity authenticated and withdraw or put money into their bank accounts. This money will not come from the ATM, but from the cash drawer of the BC.”
Stressing the importance of having these BCs connected, he added, “It is essential that it is made an interoperable system. Customers should be able to go to any BC to withdraw money, regardless of who is the merchant bank of the BC. It is similar to the way bank ATMs operate. If we have these BCs connected, it would also lead to more competition, thus bringing down transaction costs for customers.”
Mr Nilekani was also optimistic about the success of financial inclusion efforts, pointing out that various things are coming together at a very opportune and critical time to make it more feasible. These include the adoption of new technologies by the banking system, the spread of the mobile network, easy verification of identity supported by the UID project, the large flow of money between people through remittances or government welfare schemes and the regulatory environment being amenable to put things together. — Sanket Dhanorkar