We want to make cashless payments to farmers, rural labourers directly to their bank accounts and hand them over a card which they can use to transact “business”.
By removing cash from the system, we have managed to remove chances of “middlemen” (our very own people handling payments) siphoning money out of the system before it reaches the farmer or the labourer.
But then, what does the farmer do with the card? Where does he get the cash? Nobody in his immediate neighbourhood accepts cards! He needs to pay cash to buy his food!
He has to go to the bank which is in the next town to draw cash from the bank. All the farmers/labourers in his area get the transfer on the same day and so on one day of the month the bank branch in the nearby town is packed with villagers looking to withdraw their cash. It is a nightmare for the bankers and the villagers because they have to wait for hours and they have spend money and one full day to go the town.
To solve the problem, we got agents who carry a small authentication device and a bag full of cash. The agent then delivers the cash to the farmers at his doorstep. What if the agent gets the authentication and then does not pay the full amount of due like the earlier “paymaster”. Off course, the agents are “recruited” by organisations and hence the villagers have an institutional “back-end” to file complaints and given that this institution is smaller than Govt, it should be more responsive compared to the big Government machinery. But, does it really happen that way?
Moreover, the agent runs the risk of being robbed/killed because of the amount of cash that he is carrying. How do you prevent that?
What is the way out? Carry on with this till the kirana shops in the villages accept cards for payments? Given that mobile is now ubiquitous, how about mobile payments? How complicated is that?
An interesting article on the PSD World Bank blog: Read