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Agreed but, in the perpetual conflict between the quest for efficiency versus effectiveness, I tend to side with the latter even if the ways to achieve it might appear stupid and wasteful at times. Certain countries have enjoyed a basic level of public-private partnership for a long enough time for loftier goals like greater alignment of the partnership make sense. However, in other countries where the expression is almost an oxymoron, public services are better run by the government - in any case, there's no commercial incentive for banks to do so. While citizen ID projects undertaken by the government might have failed in other countries, its success in India proves that there's nothing fundamentally wrong with the model, just that its implementation must be gotten right.

Maybe saving taxpayer's money is a good item on a private sector bank's CSR agenda but, personally, I believe that such social causes are best driven by - warts and all - the government. UIDAI / Aadhar stands testament to this. This government agency is in the midst of issuing a biometric ID for all citizens of India. It has a long way to go before it can hang its boots but, even after successfully rolling it out to 200M citizens - 20% of its mandate - it has earned the distinction of becoming the world's largest national ID program. At this point, an Aadhar # is sufficient for opening a bank a/c in any bank in India and for enabling direct cash transfers from the government to beneficiaries. Going forward, it could qualify as the common credential system for all public services. It could be questioned why, when there are so many banks that have already built credential system, a separate program is required for this. However, with so many banks involved and the difficulties involved in demarcating roles and responsibilities between banks and the public agencies, it has proven impractical for this task to be carried out by any one bank, even in India where many banks are state owned.

It is not obvious that a bank would be willing to permit use of its credential system by others. I remember reading a report recently which clearly stated that banks are not comfortable authenticating users for services over which they have no control. 

As a member of the male species, I find it extremely difficult to believe that women in rural areas are too scared to visit public sector banks staffed with men but are bold enough to visit moneylenders who are inevitably men. According to anecdotal evidence and personal observation, such women don't visit banks because they know that they'd never qualify for a bank loan and visit moneylenders because they know that they'd be able to walk out with money in hand in five minutes. As long as this reality continues - and I don't see why it shouldn't, since banks are for-profit businesses - I don't see a, b and c making the slightest difference to bringing more women into the banking system.

@FinextraM: Interesting point. Maybe it's because (a) it affects fewer than 5% of cardholders in UK, (b) it's already under the purview of SEPA and, most importantly, (c) the 3% charged by issuer banks is much lower than the commission levied for GBP:EUR currency changes by exchange houses in airports, railway stations and hotels all over Europe. 

Can you please throw some light on what exactly would happen if a bank does not comply with Basel-III? Will it lose its banking license or will its CEO simply have to appear on the proverbial 6 o'clock news?   

At the risk of a double alliteration, reuse is one of those perpetually promising concepts that have forever failed to deliver. Several reasons have been proferred to explain this, the Rule of Three being my favorite: "It takes three times as much effort to make something reusable as to make it usable". While reusable systems might save money in the long term, their higher frontend costs make them impractical in many situations. In my personal experience, reuse is no more common in the private sector than the government, if that's any consolation. That said, those who do bite the cost bullet to build reusable systems upfront do reap a rich harvest at the end.

Everytime I read about financial inclusion, unbanked, women's bank and things like that, I always wonder if there are any studies about the size of market of people / women in rural areas who need loans and would qualify for one under the prevailing loan approval policies of banks but are driven to moneylenders just because they can't find any banks in their neighborhood.

Brilliant move. Kudos to the UK government. It's true that merchants incur MSC / MDF to accept card payments. At the same time, many of them receive freebies (e.g. free fire insurance coverage for their premises) when they sign up for a merchant account. Therefore, their net cost of accepting cards is even lower than the MSC / MDF rack rate. Therefore, they have no justification in levying surcharges higher than this net cost and I hope the government bans them from doing so as the next step.

Brilliant post! It's going to be Apple that does it again: As I'd predicted at the time of its launch, iOS Passbook - once it starts supporting payment cards - is going to be the mobile wallet that crosses the chasm by making the "which app, which card" decision effortless.