The government on Wednesday announced the launch of Saral Money, which brings banking services for the unbanked by tying five banks through a Visa payment gateway, using the Aadhar unique ID number as a proxy for cumbersome Know Your Customer (KYC) norms.
The five banks that are part of Saral Money scheme include SBI, HDFC Bank, ICICI Bank, Indian Overseas Bank and Axis Bank.
The key to the new solution is Visa network, which integrates and links the different systems being operated by banks with the government's national identity database. This means Saral Money is not restricted to a specific bank or region.
"This is a perfect example of how the public and private sector have come together to… develop India's payment ecosystem," said Uttam Nayak, Visa's group country manager for India and South Asia.
The system works by enabling an individual with Aadhaar number to be issued a Visa Instant Account that simplifies the KYC criterion. Prior to this customers would have had to provide numerous documents to fulfill KYC requirement, which was a big deterrent for marginalised.
The service aims to target the 210 million Aadhaar holders and expand them to 600 million by 2015.
The benefits to the consumer come from the ability to receive payments direct to the Saral Money and use it to withdraw or remit those payments to family members. For the government, it helps improve transparency and efficiency while driving the country's electronic payment and financial inclusion agenda.