Branchless Banking: The Emerging Holy Grail

Now it is indisputable that the pandemic will have a far greater impact globally than the 2008 crisis and economies will take longer to turn around. What is certain is that essential services like the banking ecosystem need to evolve rapidly, to ensure offering uninterrupted banking services at the last mile while making seamless consumer connect a ground reality.Therefore, there is a need to propagate branchless banking through an assisted model, thereby building access to financial services as a ubiquitous phenomenon. Branchless banking is making India more financially inclusive one Pin Code at a time.

The COVID-19 crisis presents unforeseen challenges to global economies in the immediate, short, and longterm. Even as countries fight this global crisis, the response has clearly outlined the lack of resilience at the macro level. The sharp decline in global trade, liquidity crunch, difficulties in accessing credit, disrupted income streams, increase in bad debts, lowered cross-border remit-tances, and lack of access to finance, especially in developing countries like India, is reflective of the lack of a robust public infrastructure which will have long-term implications on the future eco-nomic growth.

Consumers without access to basic banking facilities have been the most affected. In the purview of future contingencies such as the Covid-19, banks and payment companies are under greater pressure to transform their operating models to expand their reach in the last mile, across both physical and digital touchpoints. Therefore, there is an imminent need for an omni-channel strategy, which is form agnostic and can serve the common citizens.

India, home to one of the most fragmented banking systems has been pushing for rationalization and rolling out new age financial start-ups to widen reach, thereby pushing the agenda of financial inclusion. However, in a vastly geo-distributedpopulationlike ours, financial inclusion has been a huge challenge owing to factors such as – socio-economic influences, inhibition to adopting tech-nology, high distribution and operational costs and lack of inclusive growth among others.

With the democratisation of financial services occupying the centre stage, offering unprecedented access is what will help revolutionise banking in India. This is where ‘branchless banking’ is pinned as the go-to model offering innovative distribution while seamlessly accelerating reach.

Today, while we have 400 million active WhatsApp users, less than 160 million avail mobile pay-ments.Thus, a majority of the population in our country, either lack the technical know-how or are inadvertently technology-shy which builds a strong case for a more personalised platform that of-fers adequate handholding besides trust and confidence that form an integral part of financial transactions.Moreover, for our country to realise the true potential of Digital India, financial inclusion should transcend beyond just a banking transaction, addressing allied offerings such as savings, lending and insurance whilst building a comprehensive service model.

Branchless banking is the new mantra of the banking industry. It is the way of offering banking services in unbanked rural areas outside of the traditional bank branches. Business correspondents (BCs) have been effectively bridging the gap between the banking institutions and the unbanked masses located in the rural areas. They act as representatives of banks and play a crucial role in promoting the financial inclusion agenda. The BC network has been an absolute win-win for the banking industry as it helps them drive an asset-light model while offering unparalleled last-mile connectivity including the tier-II, III markets and the hinterlands.

Gone are the days when countryside citizens travelled hours to visit a bank just to check their balance. Banking Correspondents have come as a boon to the rural masses by helping them enjoy banking services without going through the hassle of travelling. Even during the lockdown, the government’s direct benefit transfer of 1.7 lakh crore to the poorest sections, worst hit by the pandemic was largely realised by banking correspondents who ensured that the most margina-lised communities could easily access the relief funds.

Furthermore, banks must understand the enormous unrecognised potential of the rural cohorts. Taking cognizance of the existing financial strain, it is imperative to realign our focus as ‘rural consumption’ is all set to play a catalytic role in the growth of the overall economy. Considering the strength of the BC establishment, especially in rural India, the latter is well poised to play a very significant role in this growth story.

With microfinance being an integral part of the rural economy, sachetising financial services like lending and insurance through branchless banking and the BCs’ actively serving as agents of change can encourage and equip the rural cohort with the means to meet their financial goals.Financial offerings are inherently based on trust and who better than the local kiranawala, who enjoys both a personable relationship and an affinity for their needs. Besides financial inclu-sion, this will also help boost consumption and spending among the masses, eventually offering huge impetus to the economy.

Gradually, even non-banking financial services are also joining the bandwagon, especially with the launch of e-KYC. Regulators like RBI and SEBI are continuing to encourage the move towards branchless transactions through pushing the technology acceptance model.

Now it is indisputable that the pandemic will have a far greater impact globally than the 2008 crisis and economies will take longer to turn around. What is certain is that essential services like the banking ecosystem need to evolve rapidly, to ensure offering uninterrupted banking services at the last mile while making seamless consumer connect a ground reality. Therefore, there is a need to propagate branchless banking through an assisted model, thereby building access to financial services as a ubiquitous phenomenon. Branchless banking is making India more financially inclusive one Pin Code at a time.

  • Source – Economic Times - BFSI (ET BFSI)

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