Here is all you should be knowing about Mobile Wallets and Payment Banks:
With the popularity of Smart phones and the introduction of Mobile Wallets such as M-Pesa, Airtel Money, PayTM, etc. it has become very easy for us to make transactions such as payment of utility bills, purchase of goods, withdrawal of cash at ATMs/Banks, transfer of funds from one account to another, share money with friends and family through the preferred social media network, etc. The innovation of mobile wallets, the launch of Unified Payment Interface (UPI) and many such services in the pipeline such as Payment Banks, are paving way towards a cashless economy.
Learn how to mange your money & create wealth, Download your FREE eBook now
What are Mobile Wallets?
Mobile wallets are a mobile-based virtual wallet that enables you to load a certain amount in advance to the account created by your mobile wallet service provider. You can spend this amount online as well as offline at the merchants listed with your mobile wallet service provider.
Limitations of Mobile Wallets
Although mobile wallets have given you the convenience of easy and fast transactions, it still has some limitations as listed below:
• You cannot make transactions such as withdraw cash at ATMs or banks, offer forex services, etc. through your mobile wallets as these services can only be provided in collaboration with banks.
• The limit on the amount that can be deposited and spend through a mobile wallet is low.
• Some of the sites wallet money is just restricted to a particular e-commerce site.
• There exists a huge population untouched from the financial inclusion or banking services, especially in the remote or rural areas. Mobile wallet is not viable for such population.
To overcome the limitations such as lower limits on money transfer & online payments, restricted banking transactions, and primarily to increase financial inclusion and provide basic banking services, especially in rural or remote areas, Reserve Bank of India (RBI) has decided to set up the Payment banks.
What are Payment Banks?
Payment banks are non-full service niche banks that are allowed to receive deposits and provide remittances. They are not allowed to perform lending activities. As I have mentioned above, the primary objective behind coming with the Payment banks is to increase the financial inclusion by providing small savings accounts and payments/remittance services to low-income households, migrant labour workforce, small businesses, other unorganised sector entities and users.
To meet the very purpose, RBI has given approval to some big names such as Vodafone m-pesa Ltd, Vijay Shekhar Sharma, National Securities Depository Ltd, Aditya Birla Nuvo Ltd, Fino PayTech Ltd, Department of Posts, Airtel M Commerce Services Ltd and Reliance Industries Ltd.
How will the Payment banks function?
These companies will have to tie up with the banks to act as a Payment bank and provide banking, mutual fund and insurance services to its customers. For instance, Vodafone already has collaboration with ICICI Bank and its app M-Pesa allows the users to send or receive money, make bill payments, recharge mobile balance, etc. who have limited access or do not have access to the bank account.
Similarly, PayTM has also collaborated with ICICI Prudential, IndusInd Bank and HDFC Mutual Fund for offering banking, mutual fund and insurance services to its customers. The company had tied up with HDFC Mutual Fund, ICICI Prudential and Reliance Mutual Fund for the creation of money market funds and with IndusInd Bank for the creation of a super liquid Fixed Deposit.
What are the eligible transactions you are allowed to do with Payment banks?
You can make the following transactions with the help of mobile wallet provided by the Payment banks:
• You can make a deposit up to a maximum of Rs. 1 Lakh. You will also be earning interest on these deposits similar to the savings bank account.
• You can make payments and remittances via various channels through your mobile phone.
• You will be getting a debit/ATM card which can be used across ATM bank networks in the country.
• You will be allowed to make utility bill payments, cheque less transactions, cashless purchase, etc. through your mobile phone.
• You can get the money transferred directly to your account from Payment banks with the help of a mobile phone or unit.
• You will be provided forex services at a lower cost than banks.
• Travellers can get the forex cards from the Payment banks that can be used as an ATM/debit card across the country.
• You can purchase financial products such as mutual fund units and insurance products, etc. from the Payment banks.
What are the transactions you cannot do with Payment Banks?
• You cannot take loans from the Payment banks.
• You will not get a credit card from the Payment banks.
• An NRI cannot make deposits with the Payment banks.
How to open an account with a Payment Bank?
You can open a bank account with payment banks through digital banking. RBI has also allowed mobile phone users to open a bank account with the payment banks promoted by the telecom companies if all the KYC formalities are already completed. You may not be required to submit any additional documents if the KYC is carried out as per the regulations stipulated by RBI.
You will not be required to provide a wet signature and can open an account through digital signature and electronic verification. It makes easier for people residing in the rural areas to open a bank account where opening a physical bank branch is not viable for the banks.
Learn how to mange your money & create wealth, Download your FREE eBook now
How is the Payment Bank beneficial to you?
• Transaction fee will be lower as compared to normal banks.
• You can transfer the money to someone residing in rural area through your mobile, and the recipient can take the cash from the authorised agent to act as a payment bank.
• Account opening process is simpler and easier than normal banks.
• Income level restriction is not there to open an account with payment banks.
• You will be earning interest on the money deposited in your payment banks account which may be higher than that paid on the normal savings bank account.
• Simpler KYC norms.
Also read: Unified Payment Interface(UPI): Gateway to a Cashless Economy
Final Words
Payment banks are anticipated to be a game changer especially for those who do not have access to banking services or have limited access. With the introduction of payment banks, one does not have to look for an ATM or a bank and travel by far to send or receive funds. People having existing bank accounts can also have a payment bank account and will be able to perform routine banking transactions through their mobile phones.
Also, the launch of Payment banks along with the existing mobile wallets and Unified Payment Interface (UPI) app is certainly a stepping stone towards RBIs target of transforming Indian economy into a cashless economy.
