Banking on Aadhaar without bank accounts via IndiaPost payments bank can be a real game-changer

Aadhaar-based transactions by people even without a bank account through the IndiaPost payments bank’s Aadhaar-pay model could be the real game-changer.

It appears extremely attractive in the context of the government’s drive to promote digital transactions in a big way that Aadhaar numbers of the people—the total number has touched 112 crore already—will be good enough to pay or receive money, even without a bank account.

This is what IndiaPost payments bank is striving to establish as its basic model once it starts operations in the next few months. According to its CEO A P Singh this can change the face of financial transaction in the country, especially in the rural areas where post offices can play a big role in promoting financial inclusion and handling direct benefit transfers (DBT), which is still around Rs 50,000 crore in a year.

The way it will work is, take for example MGNREGA payment to a worker is sent to the nearest post office mentioning his/her Aadhaar number. The worker will go to the post office, complete the Aadhaar authentication process, and just take out that money.

There will be various options with him apart from just taking cash—he/she can open an account with the IndiaPost payments bank immediately as the e-KYC process is complete with Aadhaar authentication, or just take a pre-paid card which can be used in any ATM to withdraw cash or make payments anywhere just as a debit card does.

Switch to normal transaction between two persons, and the same thing can be replicated through mobile wallets without bringing in any bank account. Going ahead, India Post is planning to equip the postman with biometric authentication and payment machines to remove the hassle of even going to the post offices.

Thanks to the extensive reach of India Post throughout the country, something that has been a major bottleneck for the banks in handling transactions in rural areas and also DBT, Aadhaar-post combine can prove to be a big driver here.

That India Post is targeting about 650 districts in the country in the initial stages itself with the help of those having feature phones and even those who have not, through its network, indicates that the door-to-door banking model may soon become a reality.

But, for this model to succeed, the mobile and broadband connectivity in the rural areas will also have to improve besides Aadhaar seeding, which to a certain extent is happening at a better pace now than what it was in the UPA years, even after the launch of DBT on January 1, 2013.

Only about 35% people in India are having internet facility, and out of the 65,475 gram panchayats with access to the optic fibre laid under the BharatNet project, according to a report in The Indian express, less than 25% have active internet. So, even though the government, as announced in the Budget, achieves the target of taking broadband connectivity to 1.5 lakh panchayats by the end of 2017-18—it will be of help if there is a working internet available in these panchayats.