Payment Cards: Central Bank of India, Rev and MasterCard join for new products
The Central Bank of India is not India's Central Bank. That's a role reserved for The Reserve Bank of India. Fortunately, new payment card products are a lot less confusing. But they do raise some worrying issues.
Central Bank of India (CBI), REV and MasterCard have combined to provide new payment card services designed to bring more of India's large "unbanked" population within the range of financial services.
Indians are used to portable currency, and to buy even small things, they need big bundles of notes. It is said that some 20% of the world's gold reserves are tucked in little cloth bags hidden away in the homes of rural Indians.
The challenge for banks is to find a product that can be as convenient as cash. And that means making it work without the need for a bank account.
Enter the world of "gift cards."
"The agreement will enable Central Bank of India to regain our hold among retail customers. And, through a range of prepaid card and mobile payment products, deliver on the bank's mandate for financial inclusion," said Mr. S Sridhar, Chairman and Managing Director, Central Bank of India,
The Central Bank of India MasterCard Gift Card offers gift-givers a gift option that recipients can redeem as they wish to make purchases anywhere MasterCard is accepted in India. The Rev MasterCard Virtual Card is a prepaid MasterCard number that gives shoppers a secure way to buy online, over the phone or by mail order wherever MasterCard is accepted without requiring a bank account or credit card.
Since both new products will be widely available to Indian consumers without bank accounts or credit cards, the partners expect them to lay the groundwork for widespread access to the financial mainstream by enhancing familiarity with prepaid cards. The virtual card is the first in the Indian market available without a bank account or credit card, and it is the first MasterCard payment product in India available outside a bank branch.
REV marks its entry to the Indian market through this partnership. The collaboration with Central Bank of India allows Rev - a prepaid leader in Asia Pacific and a member of the Rev Worldwide global network of payments companies for underserved markets - to showcase its payments technology and deep social mission in India.
But such schemes are not without their critics.
Nigel Morris-Cotterill, Head, The Anti Money Laundering Network, who has made a study of the development of alternative payment mechanisms including so-called "gift cards" says "If I were the money laundering risk officer for any of these companies, I would have a bruise on my head from banging it against a brick wall. While the world is trying to move away from unregistered, unregulated pre-paid cards, or at least to restrict them to tiny sums of balance, the USA has led the way with a card that is a money launderer's dream. And now, in a country where hundreds of millions are uneducated and poor, the tools are being handed to them to practice with."
He draws specific attention to the huge problem India faces with illicit funds export.
"The Indian government tried for years to get other countries to act on informal value transfer systems such as hawala and they were told to go away. Even now, in this post World Trade Centre world, where governments have taken action, India has a problem that is incalculably large. Putting the tools to make untraceable transfers overseas by internet is a very high-risk strategy. I just hope that this has been fully thought through. Similar products in other markets have not, leaving companies to play catch up behind criminals."