Plastic is out, fingerprints are in

Smart cards have been outsmarted as the country’s largest lender, State Bank of India (SBI), has come up with a card-less transactions that requires only an account holder’s fingerprints.

The bank has decided to dispense with cards to lower the cost of transactions, particularly for the disbursement of social security pensions and wages under the National Rural Employment Guarantee Scheme (NREGS).

Under the new system, which is been implemented across the country, a point of sale (POS) machine, comprising bio-metric details of account holders would go to a particular village where the bank’s customers can withdraw or deposit funds using the fingerprint-based method.

Earlier, each account holder was given a card with a magnetic strip that was swiped at the POS machine before any transaction. The price of a smart card depended on its memory. For instance, 4GB cards cost Rs 75, whereas it costs Rs 140 for a 32GB card.

Since the inception of the NREGS in 2004, SBI had disbursed around 1.6 million smart cards across the country, before deciding to shift to the new system a couple of months ago. “In the last two months, we have opened more than 400,000 accounts but we have not disbursed any smart cards thereby saving close to Rs 3 crore,” said S Mukhopadhyay, deputy general manager in the bank’s rural banking department.

What has also helped the bank roll out the new system is the fact that 2 per cent of the no-frills account holders stepped out of their villages. Since most of the account holders only accessed the bank to receive the pension or the NREGS payment, a banking correspondent could easily go with a POS machine at periodic intervals to help them complete their transactions.

“These villagers do not require inter-operability, which a smart card offers, since most of them use their accounts only once a month to avail of the NREG scheme, practically the accounts remained dormant for the rest of the month. Therefore, it was not cost-effective for the banks to carry on with cards,” an SBI executive said.

Other banks, however, have not shifted to card-less transactions. “Different banks use different technologies and we are sticking to a card-based system, at least for the time being,” said an executive at a public sector bank executive. The cost-saving is not significant, added another banker.