Today's Business Standard carries a rather sobering piece on payments banks - With wings clipped, payments banks face uphill task. While it is true that these niche banks cannot do the regular banking business of lending, the players themselves continue to be optimistic.
Take Fino for instance. It started with 410 branches across 14 states, 25,000 banking points across the country and sees a little more than 15 million monthly transactions, as it "provides the full stack of services, from loans, remittances, digital payments to savings accounts, through its collaboration with companies. The bank earns revenue for the partnerships by directing customers to different entities, even as its mainstay remains the remittance business. Fino is looking to diversify by offering mutual funds in the near future. “We also make money like any other bank. We can’t do credit but can do it on someone else’s behalf. We have a tie-up with ICICI Bank, where we disburse gold loans and the book is about Rs 800-900 million every month,” Pandey said. The business correspondent model of lending earns the bank about 10 per cent of interest on the loans they facilitate."
The second payments bank that appears to be doing well as far as accounts go is Paytm Bank, that reports 100m e-Verified accounts and says everything falling into place. Airtel Payments Bank has however, run foul of the regulator - was fined, along with Axis Bank, last month by UIDAI for breaching terms and conditions attached to Aadhaar authentication; the initial high interest rate of 7.25% has now been slashed to 5.25%.
India Post Payments Bank is still to roll out full operations (See 650 India Post Payments Bank branches to start by May; 1.55 lakh post offices to be empowered as Payments Banks)
Now Jio Payments Bank begin operations and its reputation for causing a flutter in the industry is already well established.
It must be said here that a lot has changed since the 41 applications for payments bank licenses were given to the RBI in 2015. For instance, UPI whose transactions have now risen to 190 million last month have changed the payments landscape. KYC regulations have also tightened considerably.
Over the next few years, we will understand the real impact, whether or not payments banks make a real difference to the lives of low income customers, particularly in rural areas, the segments traditionally ignored by full service banks
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