A co-operative bank in Kerala, India, has found an innovative solution to the country’s liquidity problem following demonetisation.
Thenhipalam Co-operative Rural Bank Limited in Malappuram has launched a digital currency, COOPaisa, which enables customers to buy goods worth up to Rs 10,000 (£180) per day.
Last month prime minister Narendra Modi announced the demonetisation of Rs 500 and Rs 1,000 banknotes, in an effort to stop the counterfeiting of banknotes and reduce corruption.
Co-operative banks were severely affected by this measure, given that they have not been allowed to engage in the collection of deposits and exchange demonetised banknotes.
Authorities claimed the decision to bar co-op banks from the exchange was due to a lack of automation, which meant they were unable to detect fake banknotes.
But customers of Thenhipalam Co-operative Rural Bank can use the COOPaisa app on their smartphones and scan the barcode to purchase products. Alternatively, they can make transactions by entering a Merchant ID provided by the bank.
Customers without a smartphone can enter their registered mobile number in the trader’s smartphone and use a one-time password sent to their mobile by the bank.
Customers with no internet access can also complete transactions by using a QR code generated on their mobile screen, which can be scanned to complete the transaction.
The COOPaisa software is secured with an antivirus certification. The app is currently limited to customers at the Thenhippalm branch but the bank’s IT team is already looking at expanding it. Over 1,600 customers had downloaded the app within the first three days of it being launched.
The co-op bank had been working on the app for six months but sped up the process in the aftermath of demonetisation.
COOPaisa deducted money directly from customers’ accounts and does not charge commission, which gives it a competitive edge over other digital payment alternatives.
The majority of the bank’s members are senior citizens but the co-op bank hopes the app will help attract more young members. More than 100 stores in the area are now linked to the app.