Payment Banks and the Evolution of Financial Services

Payment banks are a relatively new concept in the world of financial services, but they're already making a significant impact. They were introduced by the Reserve Bank of India in 2015 to provide basic banking services to the unbanked population.

Payment banks are not full-fledged banks, but rather a type of bank that offers limited services, such as accepting deposits and facilitating payments. They can't lend money, but they can provide other services like mobile wallet services and bill payments.

One of the key benefits of payment banks is that they can operate with a lower capital requirement, making it easier for new players to enter the market. This has led to a surge in the number of payment banks in India, with several major players like Airtel and Paytm launching their own payment banks.

Payment banks are specialized financial institutions designed to provide basic banking services to the underbanked and unbanked population.

Their primary function is to provide safe and convenient access to banking services.

Payment banks offer a limited range of products and services, focusing on facilitating financial transactions and promoting financial inclusion.

They primarily provide services such as deposits, withdrawals, remittances, and payments, which are mostly accessed through digital channels.

Unlike traditional banks, payment banks cannot issue loans or credit cards.

Their main goal is to offer banking services to those who are underserved by the traditional banking system.

The concept of payment banks has a fascinating history. It all started in Kenya with Safaricom's 2007 launch of M-Pesa, a mobile money storage and transfer service.

Safaricom's innovative idea allowed users to store and transfer money, paving the way for other countries to follow suit. Bangladesh, Nigeria, Brazil, and Indonesia are just a few examples of countries that have adopted the concept.

In India, the government introduced payment banks as part of its efforts to promote financial inclusion. The Nachiket Mor committee proposed two types of differentiated banks, namely payment banks and small finance banks, in 2014.

Here are the six payment banks that started operations in India: Airtel Payments BankPaytm Payments BankIndia Post Payments BankFino Payments BankJio Payments BankNSDL Payments Bank

The concept of payment banks first gained prominence in Kenya with Safaricom's 2007 launch of M-Pesa, a mobile money storage and transfer service.

In 2014, the Nachiket Mor committee proposed two types of differentiated banks, namely payment banks and small finance banks, as part of India's efforts to promote financial inclusion.

The Reserve Bank of India (RBI) published guidelines for licensing of payment banks in 2014 and approved 11 entities, out of which six started operations.

The RBI formed the Committee on Comprehensive Financial Services for Small Businesses and Low Income Households, headed by Nachiket Mor, on 23 September 2013, which led to the formation of a new category of bank called payments bank.

Six payment banks have started operations in India: Airtel Payments Bank, Paytm Payments Bank, India Post Payments Bank, Fino Payments Bank, Jio Payments Bank, and NSDL Payments Bank.

The RBI gave "in-principle" licences to 11 entities to launch payments banks on 19 August 2015, valid for 18 months, after which the entities must fulfil the requirements to obtain a full license.

Airtel Payments Bank was the first payment bank in India, launched by Bharti Airtel in January 2017.

The Real-Time Payments revolution is still in full swing. It's been a decade since technological innovation, consumer demand, and new market players started driving the growth of global real-time payments systems.

Consumer demand has been a key factor in the evolution of real-time payments. Over the last decade, consumers have been increasingly expecting instant transactions and seamless payment experiences.

Global real-time payments systems are continuing to evolve rapidly. This is due to collaboration among industry players, governments, and technology providers.

New market players have entered the real-time payments space, bringing fresh ideas and innovative solutions.

Payment banks offer a range of basic financial services to the underbanked and unbanked population. They provide a convenient way for people to manage their finances.

One of the key services offered by payment banks is mobile banking. This allows customers to access their accounts, transfer funds, and pay bills using their mobile devices. Mobile banking is a convenient feature that makes banking easier and more accessible.

Customers can open various types of accounts with payment banks, including savings accounts and current accounts. They can also open fixed deposits and recurring deposits, which offer attractive interest rates and minimal charges.

Payment banks are designed to offer a range of services to low-income households and small businesses, including savings accounts and current accounts.

They provide mobile banking services, which are incredibly convenient, allowing users to check their balance, transfer funds, and even pay bills directly through their mobile apps.

One of the key benefits of payment banks is their ability to offer remittance services, making it easier for people to send and receive money.

Mobile banking services include balance inquiries, fund transfers, and bill payments, all of which can be done through a mobile app, making banking more accessible and convenient than ever.

Payment banks offer a range of basic financial services to the underbanked and unbanked population. They provide convenient banking services through mobile apps, including balance inquiries, fund transfers, and bill payments.

Customers can open savings accounts, current accounts, fixed deposits, and recurring deposits with payment banks, enjoying attractive interest rates and minimal charges. These accounts enable individuals to manage their finances effectively and securely.

Payment banks collaborate with traditional banks and technology companies by acting as business correspondents, offering co-branded products, leveraging digital platforms, and integrating with existing payment systems. This collaboration helps to expand the reach of payment banks and improve their services.

The main purpose of payment banks is to enable financial inclusion by offering savings accounts, current accounts, mobile banking, and remittance services to low-income households and small businesses. By doing so, they help bridge the gap between the financially excluded and the mainstream banking system.

Commercial banks offer a wide range of financial products, including loans, credit cards, investment products, and insurance, while payment banks are restricted to basic banking services like deposits, withdrawals, remittances, and payments.

Payment banks have a maximum deposit limit per customer, whereas commercial banks have no such restrictions. This means you can keep as much money as you want in a commercial bank account, but payment banks have a cap.

Payment banks primarily invest in government securities, while commercial banks have a broader investment portfolio. This is because payment banks are designed to be more conservative with their investments.

Commercial banks offer various loan products, including personal loans, home loans, and business loans, while payment banks cannot provide any form of credit.

Payment banks often rely on agent banking for wider reach, whereas commercial banks typically have a larger and more extensive branch network. This can make it easier to access commercial bank services, but payment banks are still working to expand their reach.

Here's a comparison of key differences between commercial banks and payment banks:

Open Banking is revolutionizing the way we make bank-to-bank payments. It's a game-changer for both individuals and businesses.

Open Banking allows for data sharing between financial institutions, giving users more control over their financial information. This means you can now send and receive payments directly from your bank account, without the need for intermediaries.

With Open Banking, you can enjoy a seamless user experience, thanks to instant confirmation of transfers. This is achieved through secure and controlled data sharing between financial institutions.

The rise of Open Banking has led to the development of innovative payment solutions, such as the Instant Bank Pay solution. This allows you to send payment requests to your customers, who can then authorize payment directly from their bank account.

Open Banking has also opened up new opportunities for collaboration between traditional banks and technology companies. They're working together to offer co-branded products and integrate with existing payment systems.