Telco Bank - An innovation for economic resurgence

Telco Fintech, finance companies, loans

Telcos to operate payment banks:

Leading mobile operators are drafting their business proposals for submission to Indian central bank to operate as 'Payment banks' in India.The Indian central bank ' Reserve bank of India' had issued draft guidelines in this regard by July 2014.

Highlights:

The Telecom operators have a wider network of operations across the country and they will be able to bank from their customers and can operate between Business to Business and Business to Customers.

Strengths:

  • Mobile operators have the Fintech capability to operate from very small denomination of payments to large ticket items.

  • Strong network across length and breadth of the country. Even the remotest part of the country can be connected to the banking system

  • Commercial viability of normal commercial banks are questionable in terms of their Investment Vs Profitability of a branch. In such circumstances, the telecom operators can operate with minimum overheads

  • There is a great possibility that, the Transaction banking costs will significantly come down through the sheer size and breadth of the transactions.

Challenges:

  • Payment reconciliations accuracy in case of small ticket ransactions due to high volumes

  • Complexity of inter operator's transactions and disputes handling

  • Customer complaints handling and Banking ombudsman system

  • Telco's ability to invest huge money in Technology.

  • Development of suitable technology for new comers

  • Need for strong regulatory oversight over money laundering and anti social activities.

Innovation areas:

  • Will enable governments and agencies to distribute subsidies, publicize government schemes

  • Will operate as a B2C enabler to sell products to targeted customers over internet efficiently

  • Peasants, can sell their Agricultural crops through online channels and to get a better price

  • Will emerge as a disruptive technology for the future and to develop the rural economy

  • Technology innovation to deal with Multiple banking, Insurance & Lending products

  • Simple authentication mechanism for customers to deal across products/benefits

banks, finance, loans, interests

Economic Benefits:

  • Large overseas population from the West Asia and other countries can benefit from this. $70 billion of foreign exchange remittances from foreign countries by Blue & white collar workers and a sizable percentage can use this payment methodology

  • Can act as a significant employment generator through direct or indirect channels. Poverty alleviation and better tapping of surplus income from the non banked customers. As a consequence, realistic GDP growth numbers and projections.

  • Indian GDP will grow further. 60% of the rural economy will see economic resurgence and growth. Better circulation of money for economic development.