Bharti Airtel, India’s largest telecom company, will take a crucial step towards entering the financial services business as it launches its Payments Bank operation across India tomorrow.
Payments Bank refers to a limited operations bank that can be primarily used for making transactions, and not for depositing money.
The operator has already started operations of its payments bank in states like Rajasthan on a pilot basis.
In such places, the customer’s Airtel mobile number will be his or her bank account number.
It is also offering an interest rate of 7.25 % per year on deposits in savings accounts, which is nearly double of what most other banks give in India.
Though it is not allowed to take deposits, the interest on its payments account itself is more than what most banks give on fixed deposits. Most banks given between 5-7% interest for fixed deposits of up to a year in tenure.
The payments bank operation will enable users to transfer money to any bank account in India, including free money transfer within Airtel Bank.
PayTM, India’s biggest mobile wallet, also announced it will soon launch its payments bank as well.
PayTM, Airtel and upcoming ventures from the likes of Idea Cellular will mount a big challenge to India’s traditional banking industry.
Indian banks typically charge Rs 5.75 for a small sized money transfer operation, while the same can be done free of charge on these new ventures.
As such, people are likely to use the new apps instead of traditional banking channels to do most of their transactions in the future.
Airtel’s account will also come with a free personal Accidental Insurance of Rs. 1 Lac.
The service can be accessed by users on their mobile phones through the Airtel Money app, through USSD by dialing *400#; or via a simple IVR by dialing 400.
Both the USSD & IVR options are available in Hindi and English language and work on simple feature phones as well. Users can also log in by dialling 8800688006.
In addition, they can visit any of the company’s retail outlet to access services (and not just the outlet where they have opened the account).
At these outlets, customers will get account opening services and cash deposit & withdrawal facilities.
PayTM, on its part, clarified that users of its app will have to submit additional KYC documents to convert their wallet accounts to bank accounts.
However, this requirement is less onerous for Airtel, as all telecom companies have stringent KYC norms that require them to collect proof of identity and residence at the time of issuing new connections.
In contrast, wallets like PayTM have only the customer’s verified phone number as their main form of identification.