Payment banks can help in extending the benefits of banking to a larger set of people, believes
Shinjini Kumar, CEO, Paytm Payments Bank
The whole concept of payment banks came up due to the issue of remittances. Money creates divisions in relationships, however when you think about payments, they unite people. For example, a rich person is very likely to get out of his Mercedes and buy a vada pav and his driver is very likely to go to shop in Big Bazaar. Thus, when you pay, it’s not connected to the status of the people.
The best example of this is that an XYZ person hires four people, and he is never able to pay them on the first of every month. It could be due to various reasons like the employer is travelling or because he forgot to withdraw the cash from the ATM. The point to emphasize here is that payments are made to different types of people. So, remittances are just one more P2P payment type. When I pay to the woman who works for me, that’s a P2P payment. It’s as big a social problem as her problem of not being able to send the money to her family members. Therefore, payments need to be thought about in a much more inclusive way.
The value of a digital credit history
In the case of remittance, we create a pipe of cash in and cash out, wherein the receiver of remittance receives money and transfers it in a digital mode. It reduces the friction for the worker to pay a visit to the bank branch and stand in a line. But it doesn’t really solve the ecosystem problem where the receiver sends the money to somebody who now have to encash it, so again the digital money gets converted into cash. For example, I have been paying the salary to my driver through a cheque for ten years now. However, he was denied a housing loan by the bank, because his money hasn’t created any transaction history. He looks no different in the bank’s record from another similar account holder. They all look the same in the database. But if the bank has a transaction history of the same customer that he transfers money to his wife and she regularly recharges her phone four times a month, she pays school fees, electricity bills etc, it can log in a good credit history, which can be helpful to get her a loan and other bank products. So, remittance is a big problem but what is done with the same money when it is delivered is also a big one.
Since we have the opportunity and the government has taken a big bet of releasing multiple players into the system, different people will be doing different things. Someone may solve the P2P remittance problem in a way that is cash in and cash out through a payments bank. The idea of competition is highly exaggerated. There are more complementary angles in the ecosystem. Market should be allowed to play it out and we should be allowed to do different things.
Correcting wrong assumptions
Who is my customer here? If I can make payments to my employees on the first day of the month using Paytm, that is a customer. I am creating more customers by paying my customers and creating ability for them to pay to somebody. The problem is we assume that poor people do not how to use this channel, and middle class are digital centric people. In fact this payment channel diminishes that dichotomy. The idea is if someone is using the wallet only to recharge his cell phone, how can I increase the value of wallet to him, so he can also have a savings bank account and can increase his transactions. It needs to create convenience for him as well.
Creating massive advantage with technology
Technology is of course a differentiator here. The core of our company is technology. The only way we can make it work is if the mobile and potential of mobile as a financial service provider is used to its optimal level. We are very committed to the single idea of empowering the person with mobile both for digital journey and access of financial services. India is such an incredibly large market of both payments and banking services that competition is not going to kick in for quite sometime. We are not the first wallet company to launch, but we have the largest customer base. Our app and integration is much better. We also have been able to scale up without having any issues.
Our APIs are available to the client, so it gives them the freedom to design their own ecosystem. The go-to market becomes available for them. We spawned ecosystem of partners more than a decade ago when the initial wave of banking happened. We decided to do both the skill development and knowledge sharing. With payments bank, it is the first tie-up.
Considering that India is a such a branch centric industry, the large banks have gone with the branch. The more prevalent model in India and SE.Asia is based on customer accounts. It is very tangible. Sometimes customers have more than one account at the same time. The channel offering we have on Internet banking or mobile is based on registered users. There is a diverse set of players that has been offered this license.
