With four large business houses, a couple of telcos, an IT player, the department of posts, a mobile wallet firm and several others picking up payments bank licences on Wednesday, the age of digital transactions is here. The business models will no doubt vary — some will look for float, others for fees and some for both — but the idea will be to grab a share of the growing electronic spends, whether from tycoons or truck drivers. Given the reach of telcos across the country, it’s no surprise banks are partnering with them. Kotak Mahindra Bank, for instance, has teamed up with Bharti Airtel, which has over 200 million users. Indeed, digital payments have the potential to attract a large unbanked population that, over time, can access formal banking services.
That payments banks can attract deposits up to a limit may not be a big draw. Instead, the larger universal banks will use the ease of digital transactions offered by payments banks, to attract new customers into the bank to be able to lend to them. State Bank of India (SBI), for example, has a joint venture with Reliance Industries (RIL) and R Sriram, managing director said the bank was looking to tap the larger ecosystem via the payments banks.
Players like Paytm already have a foot in the door with 100 million customers using its multilingual mobile wallet facility but with the big boys — SBI, Bharti Airtel, RIL, the Mahindras and the Birlas — now in the game, it’s not going to be easy even if the opportunity is huge. Which is probably why no was talking of a timeline for breaking even.
NBFCs such as Cholamandalam Investment and Finance will look to combine their physical infrastructure with a digital platform to tap into their existing customer bases, much of it in the hinterland. Managing director Vellayan Subbiah pointed out that the existing customer base of 7.5 lakh gave the firm an edge. “The larger Murugappa group ecosystem offers an even larger base of rural customers and we will use both technology and our physical footprint to digitise cash transactions and providing additional services,” Subbiah added.
Dipak Gupta, CEO, Kotak Mahindra Bank, believes if his bank can get say around 7.5 million mobile users as his customers, that would be 10 times the bank’s current base of borrowers.
Fino Paytech MD &CEO Rishi Gupta plans to use the business correspondent outfit, through which he already reaches 30 million customers, to break even in three years on an investment of Rs 300 crore. Gupta is clearly banking on promoter ICICI Bank to achieve his targets. Tech Mahindra will, of course, team up with Mahindra & Mahindra Financial Services (MMFSL) but CEO CP Gurnani believes the distribution network would need to be bigger. “The flexibility we have of being able to tie up with a telco or a kirana will lead us to a population not addressed so far,” Gurnani observed.
The Reserve Bank of India on Wednesday awarded 11 in principle licences for payments banks indicating these would be available on tap at a later stage.
GV Nageswara Rao, MD & CEO, NSDL, told a television channel that the depository, while keeping its options open, would be working on its own for the present. Rao was confident NSDL would not be at a disadvantage in enabling electronic payments given the institution was doing Aadhaar enrolments at a run rate of 1 lakh a day. Vijay Shekhar Sharma, the founder of Paytm, believes technology could be a differentiator; Sharma’s wallet company already has 100 million customers, 60% of who are in rural India.