THE ABC MODEL OF BANKING – A REVOLUTIONARY BANKING MODEL FOR BHARAT AND DEVELOPING COUNTRIES

After celebrating our 4month anniversary, we are back again with another weird and radical idea, which is again a culmination of hours of not just brainstorming but “brain-tsunami/hurricaning/earthquaking” sessions.  But before you proceed, we strongly recommend you to kindly check our articles on the EconomicCost Concept and The Mobile Money Machine in order to get a better appreciation of this our economic-blitzkrieg idea.

Before beginning this article, we wish to clarify that the model of banking that we are proposing is in no way a match for the concept of The Mobile Money Machine that we have proposed and if the mobile money concept is implemented, then all this circus of banking, finance, and the general economy at large will undergo a monstrous positive change for the good.  But till then, this ABC model of banking can serve as a good alternative and act as a bridge to ultimately go towards a totally "no-cash economy."

The Automated Teller Machines or the ATMs as we all know them today came into existence way back in the 1969 and were first introduced by the Barclays Bank in order to bring down operating costs and easy banking for its customers.  All other banks aped the same and bingo – now virtually every bank, even the “Who-Knows-What Co-operative Bank” is also flaunting its ATM!  ATMs do provide ease of transaction, ready availability of cash for public, and even help in transferring money and other ancillary functions like cheque book order, etc. and anything you can dream of except doing a brain surgery!

Then slowly the ATMs became compact and were metamorphosed into the Point of Sale (PoS) machine.  Yes, this is the same small cuboidal hand-held device that you see at your favorite supermarket (say Big Bazaar or Max) wherein you flaunt your ATM card instead of cash and the cahier swipes your card on device and gives you a slip to sign (Strange that the wordings are “I agree to pay as per the user agreement” while the matter of fact is that the money has already been plucked out of your bank account!).  But then why are we giving our readers a sermon on such a silly thing like ATM that even a child will be knowing about?  Because we believe that the ATMs are the best money-wasting equipments in our country as well as the entire world and that it needs to be eradicated as soon as possible!  Now before you take a Bofors gun and blow our heads, please listen to our rationale and explanation for the same.

ATMs require huge resources – Yes my dears!  To maintain an ATM is no joke for the poor banker.  The ATM is like a King who needs to be treated with the utmost respect by the banker, who keeps him in a chamber with at least two air conditioners which are self-timed to operate for 12 hours each.  Furthermore, the ATMs have be literally “fed” cash at least twice a week or if it is a gluttony ATM which vomits cash very frequently (i.e. where withdrawals are very high like the ones situated near railway stations or bus stands), then the same needs to be loaded may be every day with cash.  And our King is not content with any type of cash – the quality of notes have to be very good.  If by any unfortunate chance the banker could not arrange for freshly printed currency notes, then s/he has to manually “hand pick” the good “ATM-ready” notes (a tough process called note sorting) and “feed” into the ATM.  The processing of arranging ATM-ready notes itself is a very cost and time consuming process.  Just leaving the complex cost accountancy and coming straight to the point – the average cost of just the maintenance of an ATM is around Rs. 50,000/- or more per month for any bank.  Now there are nearly 1.80 lac ATMs in our country.  So please consider the economic cost for the ATMs per annum, i.e. Rs. 50,000/- X 12 months X 1.80 lacs = Rs. 10,800 Crores per annum.  Whopping figure right!  But then many argue that the income generation from ATMs covers up this cost.  But from where is this income coming?  It is from you and me – say if we take cash from any ATM other than our own bank, around Rs. 15/- will be extra debited from our account as service charge.  Plus, in order to profitably run an ATM, it needs at least 170 to 180 withdrawals on a daily basis, which is not very feasible in a semi-urban or rural area set up.

Anyways, going into the details about the pros and cons of ATM and the general banking operations cost is not our point.  Now coming to our point – What we want to tell is that when there are other cheaper alternatives for not only withdrawal of money but also general banking operations for the masses, why keep feeding a white elephant known as ATM or for that matter, any cash deposit machine (which are the reverse of ATMs where in you can deposit cash).

What is the alternative to ATM, CDM, and the time-consuming general banking operations???

My dear friends, we want to introduce you to the revolutionary idea of THE ABC MODEL OF BANKING

ABC stands for Aadhar and Banking Correspondent banking:-  We know that you may be thinking “Oh ****!   Now what’s this new crap these idiots have brought up??”  So here goes your vindication:-

For the layman readers, let us just inform that recently RBI has notified that similar to the mobile number portability concept, there should be bank account number portability concept, which means that one should be permitted to switch accounts from one bank to other by keeping the same account number.  For this the RBI has instructed all banks to create a unique identification number for every individual who has an account with the bank so that a common database of customers can be created for portability purpose to be implemented later on.  Now what we propose is – why to waste huge resources and time on creating and cleaning multiple databases when we already have a good database of people in our country in the form of the UID or the Aadhar card?  Why not use the Aadhar card number as the unique identification number for bank account portability purpose? 

How will this change the banking as we know today?  It will change everything of a bank that we know today.  When mobile SIM cards were introduced in the country, the telecom companies found a very unique way of distributing the same and increasing their network – the kirana stores or the general stores.  Slowly and steadily medical stores, electrical stroes, paan waalas and person-selling-whatever started taking franchise from these telecom companies and sourcing applications for them, thereby earning some decent side-income as well as giving a vital service in the form of mobile connectivity for our Bharat.  Presently you can purchase a SIM card by giving your KYC documents at any of these stores and get your connection activated within a week at maximum – no need to speak to Sunil Mittal or Anil Ambani to get an Airtel or Reliance connection!  We have taken the liberty of borrowing this concept and applying it to banking and generated the idea of ABC – Aadhar and Banking Correspondent.

What is a banking correspondent?  The concept of banking correspondents or BCs as they are called in banking parlance is not new to our Bharat.  Ask any person in a rural or semi-urban setup and he will tell you what a BC is.  BC acts as an agent for the bank similar to agents for insurance business.  They are provided with handheld devices and ID cards by the banks and are authorized to act on behalf of the bank under certain controlled conditions like opening of accounts, recovery purpose, collection of deposits, delivery of ATM cards, etc.  They are not permanent employees of the bank but work on a contract basis and are paid as per the work done or business generated depending on bank to bank.  For those who want a little trivia – The BCs were very active in the opening of more than 17 crore bank accounts under the Pradhan Mantri Jan Dhan Yojana (PMJDY) in a record span of hardly 3 to 4 months, thus covering a huge chunk of population under the financial services umbrella, which is why they are now able to get their subsidies and government grants directly into their bank accounts without greasing much palms in between!

Connecting the Dots:-  By now, you may have got an idea what we are going to propose.  Akalmand ke liye ishara kaafi hai…….anyways, for the less akalmand, here is the ABC Model for you:-

1. Give the BC agency to shops and establishments who have good dealings in cash.  For example, any properly running supermarket will have cash of around Rs. 50,000/- at any point of time during the day.  This agency will be similar to the ones given by telecom firms to agents for procuring business.
2. Functionality of instant account opening on hand-held devices – THIS TECHNOLOGY ALREADY EXISTS and it just needs to be scaled up in proportion to cover the entire length and breadth of Bharat.  Give these devices to our BC agents in every nook and corner of the country.  No need to go to any bank for opening an account.  There should be functionality of choosing the bank and branch for the customer so that a customer can open account with any bank of his/her choice from the agent nearest to his house.
3. Want to open an account – go to the nearest agent with your Aadhar card.  The device should be installed with the technology to recognize the biometric details on the Aadhar card.  Once the details are validated, a one-time password (OTP) should be sent to the registered mobile number (mobile number given on the Aadhar card) of the customer and after the customer enters the OTP, the account should be opened in a bank and branch of his/her choice.
4. HOW IS ATM AND BRANCH BANKING ELIMINATED?  As we mentioned earlier, any BC agent who is taking the agency should be having good cash transactions with him/her on a daily basis so that s/he can handle the cash inflow and outflow on a day-to-day basis.  Say if you want to withdraw Rs. 5,000/- from your account – NO NEED FOR AN ATM – just take your Aadhar card with you, put your fingerprint for biometric scan with the hand-held device of your nearest supermarket/kirana store BC, and once the details are validated, the BC will pay you Rs. 5,000/-.  Similar procedure for depositing cash also can be done but in deposit of cash,     biometric verification is not mandatory since anybody can deposit a cash on another person’s behalf – just s/he needs to carry the person’s Aadhar card with him/her for account number validation.  The same procedure can be extended to all sort of branch operations like ATM request, cheque book request, INB kit request, transfer of funds from one account to other, NEFT/RTGS, etc.
5. IF EVERYTHING IS DONE BY BCs, WHAT WILL THE BANKERS DO?? An excellent question – Even though you implement the ABC model, the banker will have the following works

a.       Collection and deposit of cash from the BCs in their area of operation or BCs attached with a specific branch and depositing the same in safe custody.

b.      Internal audit and controlling of BCs to remove any malpractices.

c.       Clearing operations.

But this is not what you are paying the Banker to do – You are actually paying the banker to safe guard your money and to generate income from your money by prudently lending your money to credit-worthy entities who can pay interest on your money.  So, now the banker will be a little bit of a free man to look after and manage your money properly and will be better able to handle some of the defaulters who have eaten away your money and are not willing to poop it out. 

The following are some of immediate benefits of this ABC model as we visualize today:-
1.  Huge reduction in operating costs to all banks.
2.  Banks need not kill each other for deposit mobilization and all.  In fact, customer service will have new definitions after the introduction of this model and banks will be more rated based on their prudent lending decisions rather than their ability to butter up the customer and get his/her hard-earned money.
3.  Huge reduction in the NPA portfolio of banks and improvement in asset quality.
4.  Nearly paper-less banking and hence no need to maintain huge space to store the "kabaad" generated out of day-to-day banking operations.
5.  Even passbook updation functionality can be provided with passbook printing machines installed at BC kiosks.

The possibilities, permutations & combinations of the ABC model are innumerable and only time will tell that how this genius of an idea from a worthy Ethmotican has changed the world.

Happy Ethmos to you