The Hindu Business Line : Smart-card solution may hold the key to financial inclusion

Mangalore, Oct. 2 On a visit to Soorinje, a village in Dakshina Kannada district, in 2007 for a story on a branchless banking model, one found it in an IT-enabled hand-held device for providing banking services in un-banked areas.

Though this model continues to be in use, it has been modified by various banks over the past two years.

Lack of technical standards affected the pace of implementation and banks had to depend on vendors for technology components; in some cases the models remained at the pilot stage.

In February, the Indian Banks Association (IBA) and the Institute for Development and Research in Banking Technology (IDRBT) together hosted a workshop on ‘Open standards for financial inclusion’. Following this, a technical committee was set up with representatives from various banks, Nabard, IIT-Kanpur and National Informatics Centre.

Mr B. Sambamurthy, Director of IDRBT, told Business Line that there is lack of inter-operability in the IT-based financial inclusion models within a single bank. The hardware and software within a single bank are heterogeneous. Different banks follow different vendors.

Draft document

The technical committee has now come out with a draft document on ‘Open standards for smart-card based solutions for financial inclusion’. Mr Sambamurthy said the technical committee had more than a dozen sittings before coming out with the draft.

Though the IT-enabled financial inclusion programmes follow either smart-card- or mobile-based technology, the draft focuses on the former. The overview of the draft says, “Smart-card solutions have been relatively easily implemented compared to the mobile-based solution as it is in a nascent stage.”

Pan-India use

The draft says the common standards would facilitate pan-India deployment of the solution, as well as bring in demand aggregation and economies of scale in procurement and deployment. They would enable speedy deployment of information and communication technology (ICT) and avert vendor lock-in for technology components. Moreover, they would enhance customer convenience and provide inter-bank and intra-bank access, it adds.

“Basically, this will help mainstream bankers enter financial inclusion in a big way,” Mr Sambamurthy said.

“We are also trying to organise standards with the UID. The dialogue is on through the IBA,” he said.

The draft documents are available on the Web sites of IBA and IDRBT. Mr Sambamurthy said the final standard specifications will be made available to the banking industry after gathering responses from stakeholders.