Payments bank account is the new buzzword in the town after UPI and demonetization. The personal finance space is overloaded with information in last one year or so :). It is good for me as i have a lot to share with the readers of this blog. The readers complain that i take the time to share my views. The simple reason is that i try not to share what you already know. You may find large no of posts on payments bank account but unfortunately, all are one and the same. Let’s check the payments bank account from a different perspective.
The first reaction of most of the people reg payments bank account is “One more bank account”. Personally, i also don’t like keeping too many bank accounts. I shared my views on this subject in my post, how many savings accounts i need? Let me clarify payments bank account is not another savings account. It is a very niche account. With increasing focus on cashless payments and use of digital money, the payments bank account in best suited.
Why not Mobile Wallets or IMPS / UPI?
Every individual has its own payment preference. You must be wondering i am using Mobile Wallet or IMPS / UPI then why i need another payments bank account. I can answer this question in one line. The payments bank account provides best of both the worlds i.e. Mobile Wallets and direct bank debit.
As i highlighted in my earlier posts that 2 key disadvantages of the mobile wallet are that you don’t get any returns/interest on the mobile wallet balance and secondly, cash withdrawal from mobile wallets is not possible. Also, i shared a post, Mobile Wallets – Is your transaction reported twice to income tax. Though i am not sure of this point. On the other hand, the disadvantage of direct bank debits like UPI or IMPS is that you don’t get any offers or cashback.
The key disadvantages of mobile wallets and UPI / IMPS are fixed by the payments bank account i.e. you will get interest till you spend the amount and also get offers & cashback. I will discuss it in detail later in the post. Therefore, i mentioned that payments bank account provide best of both the worlds.
7 Benefits of Payments Bank Account That You Should Know
1. Zero Balance Account:
In my opinion, it is a huge benefit especially if you are not using the account for investments/savings purpose. At the same time, it is not beneficial for the account holder to maintain low balance as he will lose on the higher interest rate. We will discuss it in detail in point no 2.
Now why zero balance account is beneficial. Firstly, there is no commitment from the account holder to maintain balance especially if you are using the account for regular expenses. You need not keep track of minimum threshold. For example, one of my relatives has almost 10 savings accounts. Therefore, a minimum balance of Rs 10,000 in each account means Rs 1 Lac is locked. Secondly, there is NO penalty for non-maintenance of balance in payments bank account.
2. Higher Interest Rate:
The cost savings due to operational efficiency is passed to the customer by way of higher interest rate. For example, Airtel Payments Bank is not planning to open any branch of the bank. The existing retail outlets or airtel stores will act as Banking points. Thus the benefit of savings in infrastructure cost is passed to the customer and interest rate offered is 7.25% in a savings payments bank account. It is same as existing fixed deposits rate and highest savings account interest rate among all the banks. Secondly, Airtel Payments Bank decided to issue virtual debit card instead of a physical debit card. It will further reduce the cost. In my opinion, the rate of interest will always remain relatively high to attract deposits
In my opinion, the payments bank with wide distribution network is most likely to succeed. Currently, out of 8 license holders, 4 are telecom service providers and one is a mobile wallet. These telecom service providers & mobile wallet will convert retail outlets to banking points. Therefore, the payments bank with wider distribution channel is more likely to succeed compared to others. As per recent news reports, Airtel payments bank will have 7.5 Lac Banking Points in near future.
I am not expecting all 8 license holders to start operations. The 3 license holders have already surrendered their license among 11 original allottees. In my opinion, only the license holder with access to distribution channel will start operations.
To summarize, banking points (retail outlets) will be sort of mini-bank branches near you. It is not feasible for the normal bank to open 7.5 Lac branches but payments bank account holder may find large no of banking points in the vicinity even though they will provide only basic banking services. In short, you can open an account, deposit cash or withdraw cash at these banking points.
Another important point is that these retail outlets aka banking points are normally open all 365 days from 8 AM to 10 PM. Therefore, timing is another convenience factor. You can bank anytime :).
4. Safe and Secure
The experts are of the opinion that mobile transactions are not safe and secure. I agree with them but only if you are transacting through a mobile browser. Alternatively, if you have malicious app or software installed on your mobile then your transactions are unsafe. I look payments bank account differently. I take the example of one of a senior citizen who stays in our apartment. He has only one bank account and he uses the same for all online transactions i.e. net banking or debit card transactions. Though in India online transactions are safer & secure compared to any other part of the world. The 2-factor authentication is mandatory for all cashless transactions. Still, the risk is always perceived and unknown. Therefore, he exposes his lifelong savings of Rs 50 Lac at risk.
I suggested him to open payments bank account and make all the online payments through payments bank account. The maximum account balance allowed under payments bank account is Rs 1 Lac. He opened an account and he told that he maintain an average balance of Rs 20,000 i.e. monthly online spend. In other words, at given point of time, only Rs 20,000 is at risk instead of Rs 50 Lac :).
In my opinion, all mobile transactions require 4-factor authentication. At least it is the case with me. Now you must be wondering how?
A. I keep my mobile phone locked. These days almost all the mid-range smartphones come with a fingerprint scanner. Therefore, password/pattern/PIN/fingerprint scanner is 1st level authentication.
B. You can lock the App (Another common feature). Therefore, you need to enter pin or draw the pattern to open the app & it is 2nd level authentication
C. You need 4 digit mPIN to access your bank account. It is 3rd level authentication.
D. To complete the transaction, you need OTP that you receive through SMS on your registered mobile no. It is 4th level authentication.
I hope you agree with me that mobile transaction is more safe and secure :). Also, the lesser amount is at risk as we discussed earlier.
5. Account No is same as Mobile No
I opened my first bank almost 20 years back in 1996 (I still remember the branch in my home town). From that day i always hated the long bank account numbers difficult to remember. Though in 1996 my bank account no was just 4 digits :). Today it is minimum 10 digits. My mobile no is 15 years old. I took it in the year 2001. Honestly, i always wondered why my mobile no cannot be my savings account no. Easy to remember for everyone to deposit money in my savings account :).
I wish i could have asked something else from god. Today, my mobile no is my payments bank account no. Post-MNP people prefer to retain the same mobile no and this mobile no can be your payments bank account no. Though many of you might not find this as an important benefit but imagine the large population in rural and semi-urban areas. In my opinion, this feature will make banking convenient for people in the hinterland especially small merchants, traders etc. The reason being, they may find account no’s and other details difficult to remember. From an individual perspective, I was spared from remembering one more account no :).
6. Cashback and Discount Offers
As i mentioned earlier that payments bank account provide best of both the worlds. Similar to mobile wallets it also provides cashback offers and discount offers similar to mobile wallets. Last week i received a cashback of Rs 150 on a purchase of movie tickets from a particular movie ticketing website. I paid the amount from my payments bank account. Besides that currently, there is a cashback offer on first two transactions during the month.
7. Additional Benefits
You can always expect payments bank account to offer additional benefits. These benefits are over and above cashback and discount offers. For example, Airtel payments bank account holder is offered free accidental insurance cover of Rs 1 Lac. Besides that Airtel is offering talk time equivalent to the every rupee deposited in payments bank account only for the first deposit. The only catch is that free talk time is applicable only for Airtel to Airtel Calls with a validity of 30 days.
The utility of Payments Bank Account
Based on my personal experience, i can conclude that payments bank account come handy for monthly online payments. For example, if i earn Rs 1 Lac then i spend approx 30k online towards grocery, electricity bill, other utility bills, shopping, mobile recharge, DTH recharge etc. Therefore, i transfer Rs 30,000 from my current account to my payments bank account. I use this account for all my monthly online spends. The best part is that i am earning an interest of 7.25% till i actually spend the amount or actual debit from the account.
In my case, i keep a balance of max limit i.e. Rs 1 Lac in payments bank account as the risk-free return of 7.25% will be thing of past in some time. Recently SBI quoted that existing interest rate of 7.25% on Fixed Deposits will come down in near future :)
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