Ants or drones - who travels faster to a village?

Specially, when the village is in India, and when the journey is undertaken for payments. But, what if the Indian Dakiya (the Postman) has cracked it?

Digitisation of finance may have poured into the country with a huge force, but this big torrent is bound to shrink into a stream, and then into a few drops by the time it reaches the nooks and shadows of rural India and the corners called the 'unbanked'.

How do you ensure that an old couple gets the pension in time without having to climb inhospitable tea plantations and hopping numerous buses and bullock carts? India Post Payments Bank may have found that answer in the power, reach and affinity that the mystery called 'Postman' wields in India - thanks to all the legwork (literally) that has been put in for so many decades.

Combining the navigation skills of an ant and the technology prowess of a drone may sound clever but it is not easy. How does one make payments simple, fast, effortless, fair, last-mile-friendly and yet digital? Suresh Sethi, MD and CEO, India Post Payments Bank (IPPB), walks us through all the lanes and furrows. And, some tea gardens too. Excerpts:

DQ: Tell us something about the journey so far - what was the road looking like when you begun and how far have you come?

Suresh Sethi: Primarily, our journey started with a huge network of post offices that are sprawled across the length and the breadth of the country. India has a vast and deep network of these anchors. And they reach Indians almost on a daily basis. Now, we could leverage this entire ecosystem for the last mile and accomplish far-reaching financial inclusion.

Two points were important for us when we started. When we applied for the license, we were cognizant of the deep legacy of the Post Office Savings Banking infrastructure which is not under the RBI, but the Ministry of Finance. It echoes a social universal obligation. It has its own set of customers and represented a strong community.

Our goal was to give this community the advantage of interoperability because it was not, hitherto, connected to other financial services. We had to empower these users with the digital ease and quick transfer-speed for bills, accounts and other payments. Despite the success of many earlier initiatives on creating bank accounts, the activity factor was a concern. Our mandate was to cover the last mile effectively - to bring banking at everyone's doorstep.

DQ: Has that happened the way you envisioned?

Suresh Sethi: Quite so! We recently achieved an important milestone of 2 crore customers. We hit 1 crore customers in just our first year of operations. The next 1 crore customers were acquired and on-boarded in just 5 months. On an average, IPPB has been opening/maintaining a run rate of 33 lakh accounts per quarter. We have enabled more than 1.36 Lakh Post Offices and 1.9 Lakh Dakiyas to provide a complete suite of banking services at the doorstep of the customer providing access to any Aadhaar linked bank account. We have managed to raise the rural banking infrastructure by almost 2.5 times.

While Jan Dhan Yojana was the first step in bringing crores of Indians into the financial mainstream, our focus on giving Interoperable Doorstep banking services to customers of any bank including the over 38 crore Jan Dhan account holders is what defines us.

DQ: Reaching 'everyone' - that seems quite an operative word here?

Suresh Sethi: Our reckoning is that money has not reached every doorstep yet. It is all about having a well-oiled railroad with money-transfer systems, RTGS (Real Time Gross Settlement), account-to-account rails. We have to ensure that the underlying handshakes are in place for these trains to travel smoothly. Digital speed cannot be achieved with tracks that are not connected.

The IPPB has been established under the Department of Posts, Ministry of Communication with 100% equity owned by Government of India. Launched by the Hon’ble Prime Minister Narendra Modi on September 1, 2018, the bank has been set up with the vision to build the most accessible, affordable and trusted bank for the common man in India.

Our mandate was clear - to remove barriers for the unbanked and the underbanked, and reach the last mile leveraging the Postal network comprising 155,000 Post Offices (135,000 in rural areas) and 300,000 Postal employees.

DQ: Interoperability is the plank needed to do that? But, even with all the new-found attention to it, with even SWIFT coming with APIs (Application Programming Interfaces), with BankID network and Open Banking - how pragmatic is this concept when it plays out for the end user?

Suresh Sethi: Everything today works on API integration for financial as well as non-financial services. Open Banking is an integral part of payments to reach faster and farther than how banks did before. As long as security is taken good care of, and APIs are constructed with the right instances, break-downs and configurations, we would see interoperability gathering more ground.

DQ: Why did you pick the Aadhaar Enabled Payment System (AePS) Services as a route to accelerate payments?

Suresh Sethi: Well, as of September 2019, we have become the single largest platform in the country for providing interoperable banking services to the customers of any bank. With AePS, the idea is that any common person with a bank account linked to Aadhaar can perform basic banking services such as cash withdrawals and balance enquiry, irrespective of the bank they hold their account with.

One can simply authenticate his/her identity with fingerprint scan and Aadhaar authentication to complete a transaction. AePS services are bank-agnostic and enable low cost delivery of doorstep banking services to every section of the society without discrimination.

DQ: The Payments problems that you had targeted were also something that players like Aditya Birla's Payment Bank offering, Phone Pe and Fino (specifically for rural solutions) aimed for. What is your niche if any? Anything you learnt from the successes and failures of other players?

Suresh Sethi: Technology players are targeting a different segment. A huge community out there - 67% or so, of the country, does not use a smartphone. In fact, 33% may only have one family phone. To cater to people who cannot use apps – now that is not easy. They need an assisted model.

That's why we have identified three critical pillars - Aadhar (as the mechanism for opening accounts and for transactional authentication), full integration of all RTGS and UPI (Unified Payments Interface) parts, and last-mile reach (using the Department of Post's strengths for enhancing reach and leveraging the huge footprint and trust built over the years).

Dakiyas - Postmen - have been there in the hinterland for generations. They have read and written letters on behalf of the people - so they are the best bets if we want to assist people with financial advisors. We have an edge over others, hence, on trust and on last-mile reach.

As to what we have learnt, we acquire our customers with the model of being sustainable and viable. This means working on digital literacy and training. Deploying the necessary infrastructure, with biometrics or QR (Quick Response), for example, is a serious investment by the government. The goal is not limited to the question of just having a profitable customer. It's more.

DQ: How do you ensure speed and simplification? Is that where QR and AePB come into play?

Suresh Sethi: For us, the last-mile simplification entails both Dakiyas and users. We trained them as per the new norms and needs. Most of the times, the process entailed an account number and PIN - that customers used to scribble on scraps of paper. We created a QR card or a code embedded in the account number. The customer simply gives that card to the Dakiya. There is no need to enter too many digits. This is a huge simplification part.

IPPB has also implemented one of the largest ever digital financial literacy program by investing over 1 crore man hours in training and certifying more than 250,000 Postal Assistants, Postmen and GDS as Banking Service providers. For us, the goal is to make doorstep banking as simple as hailing a cab.

DQ: Are there any challenges that you felt so far?

Suresh Sethi: The one lakh limit could be made flexible as most unbanked merchants may need different brackets as per their average turnover. This can reduce some friction experienced at the ground level.

DQ: What about connectivity that can be quite a snag in rural India?

Suresh Sethi: Even in an urban house you have dark spots of network. So these are not going to stop Postmen who do not mind walking an extra length to get a signal. Local Jugaad is still a winner. That said, connectivity is much better than before.

DQ: What about the possibility of including Small Finance to expand your portfolio and revenues?

Suresh Sethi: We can take only deposits and enable withdrawals. The revenue part is fresh and challenging. This is where third-party products can come on the platform. Stacking up other financial products like Insurance or Pension can be an avenue. We can also consider stacks of non-financial services on a smartphone - like education, agriculture (say crop communication, crop pricing) and health apps.

We are now working on these areas and talking to relevant ministries. Speaking of Small Finance, yes, it can be a good business model. What is important is the ability to lend. That's where transaction data for players and ecosystem would be useful. We are exploring micro-credit, credit-scoring, etc.

DQ: What does it feel like to empower a villager tucked far away somewhere on a hill or behind a river?

Suresh Sethi: Great! I remember meeting this Postwoman in Kunoor. She managed 10 to 14 villages in her vicinity. Every village has some households and tribals that are now being helped. Like this bedridden man who used to struggle a lot for getting the pension from his account. His wife had to take a day off from her work (that meant that day’s wages gone), walk through tea plantations, catch a bus (that meant bus fare too), walk many miles and then get to the bank.

But now, she can avail it sitting at her home, without moving an inch, thanks to this Postwoman. So, yes, a lot of Dakiyas have been equipped with devices and trained well for doorstep banking.

We have covered a lot of rural branches successfully. So many post offices are now connected with the banking ecosystem. Our network can provide interface to other banks too. We can become the bank to all banks and make life easy for so many Indians. Now, a customer can open an account in paperless ways in just three minutes, with the assistance of the Dakiya and also access a full suite of services. We are working to make it easy for a customer to withdraw and deposit money for any bank account as well. That's true digital freedom.

-- Pratima H.