Why change narrative when it comes to banks paying for services?
Those in power -the incumbents -prefer to stay in power. They feel threatened by free markets. Free financial markets are especially problematic because they provide resources to newcomers, who then can make other markets competitive.-Raghuram Rajan and Luigi Zingales in Saving Capitalism from Capitalists.
It is that familiar territory . Be it telecom, transportation, financial services or oil exploration, when the giants in a business feel threatened by nimble newcomers, they raise the bogey of security , integrity and reliability. If all of those are overcome, they then gang up and find ways to kill the newcomer by erecting obstacles. In their eagerness to counter emerging competition, they end up saying something contrary to what they preach.
Big Indian banks are just there. The issue is the interchange charges they have to pay the providers of Micro ATMs whenever the customer of a big bank uses the service. The Indian Banks Association, the industry lobby group, recently ordered that charges that big banks pay for Micro ATMs be cut by 90%. That’s unreasonable even on a multinational pharma company that has earned billions on a patented drug, leave alone a start-up bank.
The move flies in the face of IBA since it comes just at a time the big banks have been arguing for charges for usage of their services like ATMs, cash deposits, and even minimum balance. Aditya Puri, the chief executive of HDFC Bank, was rational when he argued for customers paying for services. As the economy moves from the dole-out regime, to earn-out regime, customers should stop expecting freebies. Why does the narrative get different when it comes to banks themselves paying for services?
At present, micro ATMs have an interchange fee of 1% with a minimum of Rs 5 and a maximum of Rs 15, which is the flat rate charged for interchange on standard ATMs. IBA proposed for transactions up to Rs 1,000 the few would be Re 1, Rs 2 for Rs 2,000, and Rs 10 for Rs 10,000 for watching Video Production Studio How does this compare with the charges at big banks? Most banks allow five free transactions a month. After that, every withdrawal is charged Rs 20. If withdrawn from another bank’s ATM, the bank where the account is, pays Rs 15 per transaction.