A payments bank operates like any other bank, but on a smaller scale with virtually no credit risk involved. Essentially, they provide a range of banking services, but cannot advance loans or issue credit cards. This is a new type of bank, conceptualized by the Reserve Bank of India, that functions less like a bank with no credit risk to speak of.
Why do we need a payment bank in India?
These banks operate digitally, rather than through physical branches, via mobile phones and other devices connected to the internet. In order to realize the vision of digital India, the idea of payment banks was conceptualized to maximise the reach of financial services so as to target the places where there are no banks in existence.
Benefits of payment banks:
Zero Balance Account: The account holders are not required to maintain balances, especially if the account is used for regular expenses. You do not need to keep track of the minimum threshold, and there are no penalties for failing to maintain balances.
Higher Interest Rate: The savings of operational efficiency are passed on to the customers via a higher interest rate. Airtel Payments Bank decided to issue digital debit cards instead of physical debit cards, thereby reducing costs further. As long as deposit rates remain relatively high, deposits will also be attractive.
Convenience: Those with a wider distribution network are more likely to succeed compared to those who do not. According to recent news reports, Airtel Payments Bank will have Rs 7.5 Lakh Banking Points in the near future.
Safe and Secure: Online transactions are safer and more secure in India than anywhere else in the world. In addition, the number factor authentication methods provide it a unique flavor of safety, and it’s foolproof if used wisely.
Cashback and Discount Offers: Similar to mobile wallets, payment banks also provide attractive cashback offers and aid in saving a tiny amount through discounts as well
Examples of payment banks in India:
Paytm: India’s leading financial services company, Paytm, provides consumer, offline merchant and online platforms with full-stack payment and financial solutions. Vijay Shekhar Sharma, the founder of One97 Communications Limited, which owns Paytm, is headquartered in Noida, Uttar Pradesh.
Following the demonetization of the Rs. 500 and Rs. 1,000 notes, Paytm and other mobile wallets have grown tremendously. Lack of cash and long lines have made digital wallets a necessity for the common man, at least for those with smartphones Paytm can be an ideal choice. In India, there are more than 150 million Paytm users, making it the largest online payments platform for its safety and ease of use.
Airtel payment bank: With the new license, Airtel Payments Bank is set to bring banking services to every Indian citizen. It became the first payments bank in India to receive a license from the Reserve Bank of India (RBI) on April 11, 2016.
Customers of Airtel Payments Bank can deposit and withdraw cash, transfer funds to other Airtel Payments Bank Accounts and other bank accounts, recharge mobile & DTH, pay bills, book tickets, make online payments and more.
