Driving Financial Inclusion through India Post

Any institution that works to establish financial inclusion takes on the role of becoming a emissary of trust - trust in the economy . To establish the first level of trust for the unbanked  is one of the biggest challenges across third world economies. Postal networks have often been the most effective tools of establishing inclusion and yet remain the least accredited  and overlooked.

The Global Findex mentions that 67 percent of bank regulators across 143 jurisdictions, have a mandate to promote financial inclusion. 4 International organizations, including the G-20 and the World Bank, have either formulated strategies or are in the process of doing so to promote financial inclusion. In recent years more than 50 countries have set formal targets and ambitious goals for inclusion. A study by the Universal Postal Union (UPU) states that 1.4 million postmen go door-to-door daily establishing a daily 2 million odd contact points across the world. Postal networks therefore become the strongest channels of inclusion globally and India has one of the most ambitious projects at hand.

India's Financial Inclusion Agenda

On the 15th Of August 2014 , Prime Minister Narendra Modi announced a large scheme for inclusion under the Pradhan Mantri Jan Dhan Yojna . The number of accounts opened under the scheme reached 255 million (including 57 million zero balance accounts) by November 2016 and 15 million more accounts were opened post the Demonetization announcment. The amount of deposits rose to about 665 billion Indian Rupees (10 billion USD) and over 19 lakh householders availed the overdraft facility of 2.56 billion (US$38 million) by May 2016.

Banking with the Post Office

Globally , 50 percent of adults have an account at either at a financial institution , post office or both institutions, 12 percent have an account at the post office as well as a bank, and 3 percent (6 percent of all account holders) have an account at the post office only.

Roughly 28% of the world's adults use postal services for payments (for example, invoice payments and social benefits) and remittances. According to UPU research 1.5 billion people worldwide currently go to post offices for these types of transactions, but only 1 billion have accounts. One strategy, adopted by posts in a number of countries, is to use cash-based services as an introductory product to account-based services and savings. Following that model, people who use posts to access certain financial services without an account could potentially move from informal to formal savings.

In the mobile financial services ecosystem, we can identify three groups of actors: users (individuals, businesses, governments), providers (banks, post offices, MNOs, MFIs, etc.), and support services for providers (FinTech, agent networks, switch, etc.).41 Postal operators across the world have been playing a role both as direct providers of mobile financial services and as support services for other providers .

Below is an adaptation from a comprehensive SWOT Analysis done by the Universal Postal Union as part of the Global Panorama on Postal Financial Inclusion 2016 to assess the role of Postal networks in digital financial services -

Strengths

• Ubiquitous physical network
• Cash management experience
• Experience in managing agents
• Trust and proximity to customers
• Experience in financial transactions
• Experience in distributing large volume/low margin products and services
• Regulatory approval to offer mobile financial services

Threats

• Declining traditional postal market
• Exponential growth of mobile money operators/card networks/digital financial service providers
• Current price structure of postal financial products

Weaknesses

• Lack of technological innovation
• Lacl of consumer orientation
• In some cases liquidity management challenges in rural areas
• Insufficient connectivity
• Lack of resources needed to invest in development of digital financial services

Opportunities

Experience in financial transactions which can be a building block to expand activities in the field of digital financial services

• Agents for Cash In/Cassh Out
• Super-Agent
• Strategic partnerships/joint ventures
• As a trusted public actor , interconnection tool /switch  for mobile money providers
• Launch own digital services

A Mammoth Challenge for the World's Largest Postal Service

Established in 1854 ,India Post today has about 150,000 post offices in the country today ,  almost growing to seven times its size since the Indian Independence in 1947.India Post has been battling a number of challenges to establish its inclusion programs - shortage of trained staff , cost of implementation and a credit hungry rural India. With no lending programs as part of its roadmap , the post office has fallen behind in its customer acquisition to a number of rural regional banks who grew in the light of the PMJDY .

India Post has undergone multiple makeovers since its formation. Apart from mail delivery , India Post has been servicing India as a business logistics service provider and a trusted financial advisor . Its  services range from basic financial services such as provision of savings bank accounts , recurring and time deposit schemes as well as saving schemes for senior citizens. There are short and long term investment options through the NSC schemes . It plays a key role for the thousands of migrant workers who send home money through a tie up with Western Union for its International Money Transfer Scheme and also with MoneyGram for payments from the US into India. Money Orders , Instant Money Orders help money to be wired across the country. India Post takes on the support role for small businesses and infrastructure service providers in the form on a collection agent and its logistics arm.Yes ,  India Post enables payment collection from the remotest of areas through its many-to-one solution which allows collection of money (telephone bills, electricity bills, examination fee, taxes, university fee, school fee etc.) on behalf of the subscribing biller . The collection is consolidated electronically using India Post's web based e-Payments solution and the payout is made centrally through cheque from a specified Post Office of the biller's choice. Since demonetization, India Post has helped hundreds of thousands deposit up to Rs. 32621 crore ($4.75 billion) in the two weeks since 500 and 1000 rupee notes were withdrawn.

A  Gameplan to Scale

A 4,909 crore (US$730 million) project for computerization and networking of 1.55 lakh post offices across the country is being currently implemented by the Indian government which is aimed at providing better tracking , more relief to staff and digitization of operations. It also involves core banking and insurance  solution implementation and upgrades . Project Arrow aimed at upgrading technology and service was initiated in 2008 and since then garnered lot of appreciation and investment from the government. Further investments have poured in ever since .

The current government has plans to use the digitization exercise for data registration services via its postal network to enhance digital reach and establish phase 2 of financial inclusion. Prime Minister Narendra Modi has set up a Task Force to leverage the postal network in India to enhance the role of India Post in financial inclusion, among other services and is expected to submit its report by year-end.

India Post Payments Bank (IPPB)  has rolled out its pilot services in the end of January 2017 in Ranchi and Raipur. The bank targets to have 300,000 postmen trained to take on the additional  role of payment bank correspondents .By September 2017, 650 bank branches will sprout across the country and 1000 existing ATMs of India Post will be transferred to IPPB . The paid up equity of the new bank is Rs 800 crore, of which the government has already infused Rs 275 crore.

The stereotypical image of a postman riding down a dusty lane on a rickety old bicycle carrying letters delayed by weeks if not months has changed . Over the last 15 years of India's economic uprising , the red post boxes across the country which eventually turned into spitoons and disappeared mark the end of traditional post. India Post has held on strong through the years of transition continuing to make  a deep impact in India's financial inclusion journey and is now ready with an army of digital-savvy banking and mail correspondents who are poised to take it to the next level .