Page 42 - Banking Finance October 017

ARTICLE

effectively mode available but with invent of technology, Rs.1 lakh, about 70% which are mandatorily required to be
affordability of mobile phones this is not only possible but invested in Govt bonds. On an average, the 10 year bench-
also the cost benefit analysis shows the result in green. mark bond yield is ranging around 7-8%, which means that
these deposits will have to be priced lower than that for a
India has around 90 crore mobile users and out of which payment bank to earn a margin, as they are not allowed to
around 70 crore are active users. The total number of mo- lend. Moreover the regulator has asked the payment banks
bile subscribers in rural areas are 38 crore. to maintain a capital adequacy ratio of 15% from the start
of their operations.
The technology together with a proper business model in
place is the winning age today. The PSBs with a good tech- Every payment bank is bound to have lower and middle in-
nology platform in place can very well take on the challenges come customer portfolio base who will take their own time
posed by the payment banks. In fact by the financial inclu- to use the digital platform. While most payment banks will
sion of lower income groups and small businesses, thereby start with one or two products that are close to their pre-
familiarising them with the banking system, there are hopes vious business models and serves as vantage points, a full
of greater involvement in the future. Thus contrary to the bouquet of services for each should emerge in about 5-7
general perception, payment bank may be beneficial to the years.
banking sector in the long run.
Thus the payment bank business is long gestation business
Not a Cake walk for Payment Banks ei- where one has to wait for around 10 years to start making
money and that also subject to weathering all changes in the
ther eco system. Only players with deep pocket can survive that
A year after the RBI issued in principal approval to 11 pay- long period. Also there is a question mark on payment banks
ment bank applications, only four have a clear business viability once customers of PSBs move to UPI interface.
model in place to start operations in a realistic time frame.
Three have already backed out of setting up payment banks Conclusion
as it did not make economic sense to them.
In any business, if the need is not fulfilled by you, somebody
else will come and do that. If the vacant space is not occu-
In Mar16, Cholamandalam Distribution Services Ltd surren- pied by you, somebody else will come and fill that. Same is
dered its approval to RBI citing- "competition and long ges- happening with the traditional banks. They have not included
tation period." In May Dilip Singhvi of Sun Pharmaceuticals the vast unbanked population and could not offer any easy
and Tech Mahindra too surrendered their respective in prin- way of transacting so is the scope of payment bank comes
cipal approvals. The four remaining payment bank applicant to surface. However it is not too late to remove the defi-
continues to be vague about their business plans. This shows
ciencies and equip for newer opportunities.
that setting up and running a payment bank in a profitable
manner is not an easy game. Lately PSBs has also launched its own UPI apps. The idea,
obviously, is to keep the money with themselves and retain
In an environment where normal banks that have been func- the low cost floats. Paytm has been successful because till
tioning for decades are finding it difficult to garner public lately traditional banks do not have that seamless technol-
deposits, payment banks can not actively target large de- ogy to make possible all type of cashless payments.
posit base. Paytm Payment bank which plans to start op-
erations from oct-Nov this year says it plans to start with a There is no reason for you to go to a payment bank when
basic savings account for its customers, it will continue to your existing bank can provide you all the facilities.
drive payments through the mobile wallet for which Paytm
is known. While basic transactions will be the key business A well thought delivery model backed by secure technology
but it will be by selling third party products through mobile and continues adaption of market requirements through
phone only which generates money. innovative products is what it takes to take on. If we can do
that, it would be just one more challenge else it may be a
Besides payment banks are only permitted to deposits upto survival threat. T

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