Fino PayTech is among the 11 companies that won a payments bank licence. The company is already the largest banking business correspondent in the country and caters to population that does not have access to bank branches.
It is also in the process of launching mobile wallet services. Rishi Gupta, CEO and MD, Fino PayTech and Fino Money Mart talks to Tinesh Bhasin about how payments banks will benefit the urban population that are well serviced by banks. Edited excerpts:
Payments banks are now synonymous with financial inclusion. Can you explain how consumers in urban areas will benefit?
Payments banks will cause a disruption in banking. But this will be a slow process. People across cities and income categories would use payments banks for micro transactions. Along with a full-fledged bank account, they will have a separate payments bank account.
Usually, people don’t keep more than Rs 70,000 – Rs 80,000 in their account. If there’s anything more, it’s put into a savings instrument like fixed deposits or mutual funds. This is the money that payments banks are targeting. No strata of society will be left behind but those at the bottom of pyramid will benefit the most.
We already work as business correspondents with a considerable branch network. In many places, people come to us despite having an existing bank account. This is because we offer convenience. We are like a neighbourhood grocery store. There are no limited working hours or long queues.
Payments banks will also be present in the e-commerce space as it needs a better quality products and services and more choices.
You are also entering mobile wallet business. Can you explain how payments bank score over it?
A consumer would trust a bank more. Unlike, mobile wallets, a payment back will have 100% G-Sec coverage. In a wallet, you cannot do cash out. Once consumers load money in wallet, they cannot withdraw it.
Necessarily, they need to do transactions. But in payments banks you can withdraw it through a branch or ATM. Customer will also get to earn interest on their money which is lying in payments bank. A wallet does not offer this option.
As per the current regulations, wallets need to deposit the money in an escrow account with a bank. But a customer is not aware of which bank has their money, how is it monitored and the kind of security and controls that are in place. With payments banks, there will be transparency. Overall, the money is more secure in a payments bank than in a wallet.
Are payments bank going to be cheaper than full-fledge ones?
Yes, the cost structures will be very different. We will be using a lot of digital technology. Banks have legacy systems. They are into many things at the same time due to which their cost of transactions go up. Payments banks won’t have a legacy. They will only focus on transactions business.
Take an example of certain banks that restrict withdrawal below a certain limit as their cost is high. Payments bank won’t have such issues. They will also have lower manpower costs as number of employees will be lower.
In addition, there won’t have any extensive branch or ATM networks. When we are looking at payments bank, we have to look at a completely paperless structure. The key to their success is low-cost model.
The primary focus of our company, however, is to serve people without a bank account and those who may have a bank account but don’t have access to proper banking branch network or don’t have products which will suit their needs.
How will you do it differently?
We will have cash collection on daily basis, which banks don’t do. They expect the person to come to a branch. If a person wants to open a recurring deposit of Rs 50 a day or wants to deposit that amount in his bank, it’s not practical at present. The cost of doing a transaction through a branch is Rs 70 and ATM is Rs 20. We will provide services that cater to such population.
Can you give some example of how you plan to keep costs low?
As we are business correspondent, we have been opening Fino Money Mart in rural as well as urban areas. These are 100 square feet outlets. We can convert this overnight to a branch. At present, it’s a one man outlet. We can covert it to two-person bank branch when we start operations. Everything here is electronic.
All these outlets are internet enabled. All transactions happen online. Payments bank branches will look very different than a full-fledged bank branch. In a bank branch, you cannot see what’s happening behind the counter. In our centre, the person can see everything. We already have 450 branches in India.
Do you think KYC can be relaxed for payments bank to ensure success?
This facility already exists. For an amount of Rs 1 lakh, an institution can do e-KYC. We have all the approvals required for it. We can do e-KYC for customers internally just based on the Aadhaar card number.