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Payment Bank Accounts v/s Zero Balance Savings Accounts from Banks – Who Will Win?

The recent launch of the Paytm Payments Bank has brought payment banks (PBs) in the spotlight. Earlier in 2017, three other PBs – Airtel Payments Bank, India Post Payments Bank, and Fino Payments Bank became operational and the fifth PB, Jio Payments Bank is expected to launch soon.

Payment Banks

Unlike regular banks, PBs are allowed to only accept deposits and remittances. These banks are not allowed to offer loans to its customers. Furthermore, traditional banks take a lot of time to open an account due to the cumbersome documents and other requirements. PBs are technically driven, which ensures the opening procedure to be paperless and quick.

In addition, PBs are allowed to accept deposits of only up to INR 1 lakh per customer. The primary focus of PBs is to reach the untapped market, which is estimated to exceed 19% of the total Indian population. However, this does not mean that PBs are beneficial only for low-income families or the rural areas.

Even if an individual has an account with a public or private sector regular bank, opting for a PB may be beneficial. Here are three reasons for the same.

  1. Convenient

One of the biggest benefits of PBs is their wide distribution reach. Their model allows the banks to reach customers through mini branches, such as fuel stations, retail outlets, post offices, and many more. Therefore, customers have the convenience of having a PB closer to their location when compared to the regular bank account.

  1. Higher interest

Most regular banks that offer zero balance savings account offer only basic banking services. Premium account holders who have access to high-end features like special investment solutions or preferential product pricing need to maintain a higher balance. Furthermore, the interest earned on this balance is not very high. In comparison, PBs offer a higher rate of interest to their account holders. In addition, there are no minimum balance requirements, which ensure you do not worry about any penalties.

  1. Special offers

PBs are providing special offers to customers, which include free accident insurance coverage or free talktime. Furthermore, account holders may choose doorstep banking for a minor fee. All types of online fund transfers are free. On the other hand, regular banks levy charges for offering additional features or online fund transfers. PBs are ideal for completing cashless transactions. Digital wallets offer such facilities; however, these wallets are not allowed to accept deposits, provide withdrawals, or earn interest. When you open an account with one of the four existing PBs, you are able to enjoy the benefits of digital wallets as well as direct banking debits. The focus of such banks is to deliver seamless transactions in a safe technically driven environment.

Although PBs have several benefits, it is not advisable to forego your existing banking relationship. Several constraints, such as low deposit limits and no direct lending limit the benefits of an account. You must compare the benefits and the limitations of regular banking and PB account. It is important you make an informed decision based on your lifestyle and requirements.

Open a PB account today as your second bank account and manage your finance smartly.

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