Two years on, but payment banks yet to find traction
Total deposits of four payment banks in operation are just under Rs 540 crore.
Mumbai: They were called the big disrupters in the Indian banking sector. But close to two years of their launch, India’s payment banks continue to struggle for various reasons , ranging from a recent ban by the central bank on accepting new customers, imposition of penalties and slow deposit growth.
The total deposits of four payment banks in operations are just under Rs 540 crore, which is lower than the funds mobilised by some large bank branches. Of the four payment banks operating in India, Airtel Payment Bank had deposits of Rs 306.74 crore, Paytm Payment Bank (Rs 193.68 crore), Fino Payment Bank (Rs 37 crore) and India Post Payment Bank (Rs 1.39 crore respectively). The numbers are as on May 2018 and were revealed in response to a Right to Information (RTI) query filed by a newspaper.
In August 2015, the banking regulator cleared 11 organisations for setting up paymen tbanks with an objective to promote digital paymentand boost financial inclusion. However, three applicants withdrew as they doubted the viability of the business model.
Recently, Airtel Payment Bank, India’s first payment bank, revealed its financial details for FY18. The banking arm of Airtel recorded over Rs 160 crore in revenue in FY18, a 68.6 per cent increase from the previous fiscal. But reported an increase of 11.68 per cent in losses to Rs 272 crore in FY18 as compared to Rs 244 crore in FY17. However, its expenditure had increased to Rs 433 crore in FY18 as compared to Rs 339 crore in the previous fiscal.
Launched in September 2016, Airtel Payment bank got badly hit over Aadhaar-based e-KYC since December 2017. The increase in loss could be due to the sudden fall in e-KYC verification as RBI and UIDAI had barred Airtel Payment Bank to enrol new customers. However, the RBI lifted the ban to add new customers in July.
Says Karthik Srinivasan, head financial sector ratings at Icra, “Given the regulations around borrowing and investing, payment banks will require sizeable volumes and fee income to generate strong profitability. Payment banks in a new concept and will take time to stabilise and you can’t generate super normal profits. Let’s see if the telecom model or the NBFC-driven model becomes successful.”
Says Ashvin Parekh, managing director at Ashvin Parekh Advisory Services, “The fundamental underlining assumption for payment banks is the value and volume of transactions. There will be intens competition going forward as there will be 7-8 paymentbanks. Those who have one of the three things will really do well. One, those who have the telecom pipeline. The reason is the transaction has to move on the telecom networks for real time digital settlements and realisation. Secondly, those who have effective payment platforms and have already acquired a large number of customers. Third, the one who have a large customer base such as retail companies and financial services.”
“Over a certain period of time, the financial performance will benefit the telecom companies and ofcourse only those platforms who already have an established digital banking presence. Paytm Bank stands out alittle in the fore front as they already have a customer base and more significantly a large number of investors with deep pockets,” added Parekh.