The demonetisation of ₹500 and ₹1,000 currency notes has come as a booster for digital wallet players. While there are a number of entities in the digital payments space, Rishi Gupta, MD and CEO of Fino Paytech, spoke to BusinessLine about why the company has an edge over many others in this segment. Fino is also a banking business correspondent (BC) and runs an NBFC-MFI with a portfolio of ₹400 crore. Excerpts:
How will the recent demonetisation announcement impact your payments bank plans?
The government’s demonetisation drive is a good development for payments banks as it pushes digitisation. We have already seen the spike in digital transactions with wallet players gaining ground in the last few weeks. Lack of currency led to many people moving to digital transactions. It remains to be seen how many will continue in this digital journey once currency becomes available post-December 30.
The next five to six months would be interesting as there is a need to accelerate our digital footprint as we can see new entities embracing digital payments, such as salaries for workers by SMEs and MSMEs (micro, small and medium enterprises). Even if there is a moderate impact of digitisation in rural areas, it will be a game changer.
How soon do you think you will be able to launch the payments bank and with how many branches initially?
There is a need to improve infrastructure in terms of awareness and training among customers as well as the bank staff, availability of right devices to facilitate digital banking/payment transactions and willingness of people to move into the digital ecosystem.
If all this is in place, then execution will be fast and easy. Regarding our launch plans, we are still awaiting a few approvals, after which we will apply for final licence, which could be around December 2016. After receiving the licence, we will launch in two to three months. Geography-wise our focus will be both urban and rural areas across Maharashtra, UP, Bihar and MP.
How many branches or kiosks are you planning to have in the first year of operations?
We will have 400 payments bank branches spread across urban and rural areas, along with 30,000 to 40,000 transaction points that facilitate banking access. We will have a mix of physical and digital strategy in servicing our customers.
How is Fino planning to generate revenues from this channel given the fact that payments banks are not allowed to lend? What are some of the possible revenue channels?
Payments banks will largely have three avenues to operate and generate revenues: remittances/merchant paybacks; customer deposits (government securities give 7 per cent return and with bank rates to customers at 4 per cent, payments bank can make at least 3 per cent); and through cross-selling third-party products, such as insurance, bill payments, recharges and offering lending services on behalf of banks.
There are reports that your deposit rates will be as high as 14 per cent. Is this sustainable? How are you planning to take deposits at such high interest rates at a time when big banks are currently not able to offer more than 7-7.50 per cent?
That kind of interest is not possible for any payments bank. We plan to stick to the prevailing bank deposit rate of the day.
How many current accounts and savings accounts are you targeting in the first year of operation? What is the target for the next four years? What is the profile of customers you are targeting?Ten million in the first year and 40-50 million in the next four years. We are looking at all those customers who can be digitally serviced. Interestingly, through the demonetisation move we expect over 500 million people to join the digital bandwagon, of which, a significant portion will be serviced by payments banks.
There will be other payments banks competing for the same set of consumers. How are you planning to differentiate yourself?Our strengths are our differentiators. We have been in the business of banking and payments business for over the last one decade and have experienced teams from the corporate to the ground levels. Besides, we have been working closely with the un-banked and under-banked and have a good understanding of the geographies.
For network and reach, we have also partnerships with companies, such as Bharat Petroleum Corp, which have deep rural penetration.
How are you planning to leverage your other businesses — mobile wallets, for instance — for your payments bank?
Currently, our wallets are used by our executives to facilitate assisted services to customers — domestic remittances, bill payments, recharges, and so on.
As an extension of the bank account, a wallet can be used to make electronic/digital payments without cash. As a payments bank we will offer self-operated wallets to customers.
Are you planning tie-ups with banks and non-banking finance companies to originate loans for them? What will be the scope of such tie-ups in terms of revenues?
Payments banks are allowed to lend on behalf of banks. We already offer BC lending on behalf of banks and will continue this service as a payments bank. Maybe, we can partner with three-four banks for offering lending services. For such associations, revenue is fee-based for the loans handled.