Now take a selfie, open a bank account
In a few weeks, you can probably create a bank account with a self ie. All you’d have to do is upload a selfie, a photo of your PAN card taken with your mobile phone, and a scan of the QR code of your Aadhaar card using an app. They’ll serve as Know Your Customer (KYC) credentials, and you can open a bank account and conduct transactions up to Rs 10,000 a month.
The app that will make this possible is Chillr, a mobile payments app that links one’s phone number to the bank account and makes money transfer as seamless as WhatsApp chats. The company, started in April 2015, sees `75 crore in monthly transactions, with more than four lakh consumers using the app. Unlike mobile wallets, Chillr is a tool to make mobile banking seamless. About half the transactions on the platform are person-to-person money transfers.
NEXT WAVE OF BANKING
With the ubiquity of smartphones and more than 11.5 crore new bank accounts being opened under Prime Minister Narendra Modi’s Jan Dhan scheme, the opportunity for apps and products like Chillr to deliver the next wave of banking services is immense. “Digital platforms reduce the cost of delivery of services tremendously and hence you can serve more customers. The perceptions about the lack of security in mobile transactions have disappeared,” says Sony Joy, CEO and cofounder of Chillr, which has tied up with HDFC Bank, Bank of Baroda, Catholic Syrian Bank and others. Money transferred using the app can be withdrawn from ATMs or used to recharge mobile phone cards or pay merchants registered with Chillr.
This has been enabled by the creation of National Payments Corporation of India (NPCI), which helps in immediate clearing of money transfers without having to wait for the bank’s nod. It uses the Immediate Payment Service (IMPS), an instant interbank electronic fund transfer service that works through mobile phones. Within five years, the service has gone from zero to `15,000 crore in transactions every month, almost 30% of the total remittances market.
IMPS is the preferred system of remittance for migrant workers, says NPCI COO Dilip Asbe. In the next few quarters, it will surpass the value of credit card transactions, which have been around for two decades. NPCI has already linked more than 15 crore bank accounts with Aadhaar.
“These technologies have enabled banks and entrepreneurs to bring innovation to consumers. It is easy now to onboard customers, and over the long term, it will probably reduce the requirement of banking correspondents (staff who collect deposits from rural areas with bank branches). This, in turn, will reduce the cost of banking,” says Asbe, who is hoping that a Unified Payment Interface (UPI) will further ease making payments.
While players like Chillr have to stitch together partnerships with various banks, UPI will enable inter-operability between different bank accounts using one mobile number and a single app, thus making payments seamless.
This is what Infosys cofounder and former UIDAI (popularly known as Aadhaar) chairman Nandan Nilekani calls the WhatsApp moment in the Indian financial and banking sector. (Within five years, the number of messages sent on WhatsApp -30 billion a day -crossed the number of text messages sent across all telecom operators.) “The credit for the success should go to the RBI. It has given 21 more banking licences in the last six months, which is more than what it has granted in the last 15 years. Many of these are only payment bank licences, but they will serve the customer as well as any bank can. In the next two years, we will see all these technologies coming together. It might take some time to pick up adoption and be impactful, but the sector is ready for a disruption,” says Nilekani. A payment bank is one with permission for limited functions such as accepting deposits, facilitating money transfers and payments and internet banking; they cannot lend. At present, the money held in mobile wallets is deposited in a bank. Once payment bank licences become effective, this will change and wallet companies will take on banks, he says.
SERVING THE UNDERBANKED
Noida-based mobile wallet firm Paytm has 12 crore customers, which is three times the number of customers HDFC, the country’s most valuable bank, has. Paytm has a conditional payment bank licence and may start banking operations by mid-2016.
“We plan to convert all our current wallet accounts into payment banking ac counts if we get regulatory approvals. By 2020, we will have 500 million payment banking accounts, most of which will be for unbanked or underbanked citizens,” says Nitin Misra, head of payments products at Paytm. As these consumers start getting a digital transaction history, they could be assessed for credit worthiness, he explains. “Maybe we can introduce transactional credit for goods and services being purchased from our platform,” he says.
REPLACING INFORMAL SYSTEMS
Sharad Sharma, angel investor and co-founder of software products thinktank iSpirt, says innovations in fintech have the potential to replace the existing informal credit system in the country .
There are other ambitious players in this emerging sector. Khosla Labs-backed Novopay is an Aadhaar-enabled, mobilebased paperless banking facility . It helps users open a savings account, deposit money, make withdrawals and transfer cash through the more than 30,000 Novopay outlets, which can also be used to pay bills. It started off as a business-to-business product, but recently launched a consumer app. It plans to reach one lakh retail outlets by the end of this year.
“Mobile wallets have a higher chance of taking their success to newer arenas when regulations enable them to expand their scope and sphere of operations,” says Viral B Shah, who looked at the financial inclusion possibilities of UIDAI and is a founding partner at Julia Computing, a new computer programming language.Shah adds that NPCI has been designed to allow inter-operability among wallets and mobile payments and unless it happens, it will not realize its full potential.
Sensing opportunity , Khosla Labs has instituted an incubator to help entrepreneurs develop products that could use Aadhaar information and deliver services to customers. The Aadhaar software developer toolkit has been purchased by more than 100 entrepreneurs over the last four months, says Srikanth Nadhamuni, CEO of Khosla Labs. “We will see viable products being developed in the next six to eight months.”
All aspects of fintech, such as wallets, banking, salary accounts, business expenses and loans, will look very different in the next two to four years, says Sanjay Swamy , managing partner at Prime Ventures, a fund that focuses on fintech startups, including Ezetap and Happay . “Several startups will emerge and many will partner with banks or NBFCs to disrupt the status quo. Banks that partner with such innovators will thrive and be able to offer better customer experience and ease of doing business,” he adds.