India Post Bank is likely to tap World War-era tech to garner business

NEW DELHI: It is back to basics for India Post Payments Bank (IPPB). It is tapping into World War-era phone-based technology and its vast network of postman to target a customer base of around 850 million, which either have no access to telephony or still depend on feature phones.

"Banks and payments banks are two different things. Over 90% households have access to bank accounts. So, we are targeting remittances and bill payments," said an officer at the bank, which launched operations a month ago, offering 5.5% interest on deposits.

Unlike full-fledged banks, payments banks can accept deposits up to Rs 1 lakh and have to mandatorily park 75% of funds in government bonds. They are not allowed to offer loans either.

With its network of over 1.5 lakh post offices, IPPB is seen to be a major competitor for banks, especially in rural areas and small towns. The bank, floated by India Post, is running behind schedule as it is yet to tie up with a technology vendor for its banking services. But it is still targeting 2 crore customers in the first year with business of around Rs 450 crore. By the fifth year, the bank hopes to have eight crore customers with a business of Rs 2,500 crore.

A key focus area for IPPB is one billion bills that are paid every month, with the average ticket size being Rs 300. This is where Giro — an electronic fund transfer tool used in Europe and Japan — will come in handy. Apart from helping customers settle bills, a worker in a city can add his wife or mother as a beneficiary and transfer funds into their accounts by issuing instructions to a call centre. The wife or the mother will then use Aadhaar based authentication to withdraw funds either at a post office or ask a postman to deliver cash at home, for which a small fee may be levied.

IPPB is also in talks with the rural development ministry for accessing details of NREGA beneficiaries and pensioners getting funds under the National Social Assistance Programme. Again, idea is to make the payments Aadhaar-based to minimise leakages.

While apps to compete with PayTM and Airtel Payments Bank are also planned, IPPB may not offer credit card to its customers. "My market is going to be very large in the feature phone and those without phones," said an officer.

He added that those with some savings will also have the option to buy from a simple portfolio of insurance and mutual funds. Unlike banks, which hawk complex products, IPPB intends to confine itself to term assurance plans from all the companies and plain vanilla index funds for equities and a debt plan. "We do not want to be accused of mis-selling and therefore want to keep it simple. If someone wants an annuity plan or money back, he or she can go to an agent or a company," the officer said.