Fino Pay­ments Bank starts as fully dig­i­tal bank

Banking Frontiers - - News - Mo­han@bank­ingfron­

Fino Pay­ments Bank, which launched its op­er­a­tions re­cently, in­tends to make a dif­fer­ence with its ac­quired ex­po­sure to the ru­ral masses as Fino Paytech. Rishi Gupta, MD and CEO, out­lines the plans

Fino Pay­ments Bank, which launched its op­er­a­tions re­cently, in­tends to make a dif­fer­ence with its ac­quired ex­po­sure to the ru­ral masses as Fino Paytech. Rishi Gupta, MD and CEO, out­lines the plans

N. Mo­han: You had a mo­men­tous launch with 400 plus branches and 25,000 touch points on day 1. What in­puts had gone into this ac­com­plish­ment? How do you plan to scale up this reach?

Rishi Gupta: What we had as Fino Paytech were ru­ral as well as ur­ban branches. We knew our ge­ogra­phies and where our cus­tomers were po­si­tioned in these mar­kets. How­ever, when we started op­er­a­tions as a pay­ments bank, we launched to­tally new branches, but lo­cated in the same ge­ogra­phies. Our old branches were small and largely present in res­i­den­tial ar­eas. We closed them and brought the new pay­ments bank branches into mar­ket ar­eas. Our cus­tomers can ac­cess us through our phys­i­cal net­work com­pris­ing 422 branches and 25,000 ac­cess points through our mer­chant net­work.

Our plan for the branches is to ex­pand the foot­print. For us, cus­tomer con­ve­nience is very im­por­tant and to­wards that we of­fer them the choice of how they want to bank with us. One way of do­ing this is to ex­pand the phys­i­cal net­work and the other ob­vi­ously is to of­fer dig­i­tal plat­forms. While we have a strong branch net­work in place, we are now plan­ning to ex­pand our dig­i­tal reach, es­pe­cially through BPay, our mo­bile bank­ing app. BPay en­ables sim­ple, pa­per­less and con­ve­nient bank­ing that al­lows cus­tomers to make bill pay­ments, recharges, fund trans­fers and buy in­sur­ance ei­ther through wal­let or bank ac­count. The user can also ac­cess the app through the debit card, which we have started is­su­ing.

How do you pro­pose to lever­age the rec­og­niz­able foot­print you al­ready have as an MFI and a tech­nol­ogy provider to the bank­ing in­dus­try?

For us, ev­ery­thing will be dig­i­tal, com­pletely pa­per­less. We have al­ready set up a plat­form for eKYC, and we are us­ing bio­met­rics for trans­ac­tion ver­i­fi­ca­tions. All our op­er­a­tions are be­ing done on tab and web-based plat­forms, in­clud­ing in­ter­ac­tions with our cus­tomers and our em­ploy­ees. To me, tech­nol­ogy is a crit­i­cal fac­tor in reach­ing out to the mil­lions of cus­tomers in the coun­try.

What are the busi­ness tar­gets for the next 5 years? When would you be break­ing even?

In the next 3 to 4 years, we plan to have 100,000 touch points, 1000 plus branches and `10,000 crore de­posits. More im­por­tantly, we would want to be­come the first prof­itable pay­ments bank. The bot­tom line is very im­por­tant to us. In to­day’s world, money is be­ing put in busi­ness but im­por­tance is not as­signed to vi­a­bil­ity and sus­tain­abil­ity of the busi­ness. I feel that is very crit­i­cal. We will con­tinue to work in a man­ner where the prof­itabil­ity and the breakeven are achieved as quickly as pos­si­ble. We in­tend to break even in the next 3 years.

What about the cus­tomer base?

There are 6 mil­lion cus­tomers who trans­act through the Fino plat­form to­day. Fino Paytech was al­ready there and had a re­mark­able cus­tomer base. Some of these cus­tomers have al­ready been con­verted as cus­tomers of the bank while some are still cus­tomers of Fino Paytech. We are slowly con­vert­ing all of them as bank cus­tomers be­cause there are cer­tain for­mal­i­ties to be ad­hered to. For ex­am­ple, the bank needs to fol­low the re­quire­ment of min­i­mum bal­ance in sav­ings ac­count. We have fixed this at `1000.

What are the plans for the branches, es­pe­cially in ru­ral ar­eas?

The idea is to have 60% to 70% of our branches in the ru­ral ar­eas. Hav­ing said that, there are pock­ets in ur­ban ar­eas where we have cus­tomers - like in Dhar­avi and Go­vandi in Mumbai and Ra­bale and Turbhe in Navi Mumbai. Fino as a pay­ments bank is tar­get­ing cus­tomers who have in­come of say `2 lakh to `6 lakh a year span­ning ru­ral and ur­ban lo­ca­tions. That is the mass mar­ket cus­tomer seg­ment rather than ran­dom cus­tomers. We will con­tinue to be very ac­tive in the ru­ral as well as ur­ban side to ac­quire and ser­vice cus­tomers.

Do you have tie-ups with other fi­nan­cial ser­vices in­sti­tu­tions?

We al­ready have mul­ti­ple tie-ups. On the tech­nol­ogy side, we work with FIS for the back­end sys­tems. We have others like ICICI Bank for part­ner­ship bank­ing, In­dusInd Bank for BC lend­ing and ICICI Pru­den­tial, ICICI Lom­bard and Ex­ide Life for ban­cas­sur­ance. In ad­di­tion, BPCL is

there for the dis­tri­bu­tion net­work. All these are big-ticket tie-ups.

You have a ma­jor hand­i­cap in that you can­not lend.

Pay­ments Banks are al­lowed to be BCs for other banks. This en­ables us to un­der­take BC lend­ing. Through this, we will be fo­cus­ing on cer­tain cus­tomer seg­ments. One is joint li­a­bil­ity groups, sec­ond is in­di­vid­ual lenders who have mi­grated from JLGs and the third is MSME busi­nesses.

Do you pro­pose to of­fer higher in­ter­est rates in or­der to at­tract de­posits?

We are pay­ing only 4% in­ter­est. We do not in­tend to in­crease the in­ter­est rates. Our cus­tomer seg­men­ta­tion re­quires more ser­vice ori­en­ta­tion rather than in­ter­est ori­en­ta­tion.

How would you rate the com­pe­ti­tion? What are your ad­van­tages?

Four pay­ments banks have started op­er­a­tions. It is only six months now and I would say we have to see next 3 years, be­cause right now ev­ery­one is set­tling down, set­ting up the sys­tems, es­tab­lish­ing net­work, get­ting the pri­or­i­ties right. Our ad­van­tage is that we have been in this busi­ness for more than 10 years. We have gained ex­pe­ri­ence, we have an in­sight into the mar­ket and we un­der­stand the cus­tomer seg­men­ta­tion. We had mod­eled our busi­ness on the way bank­ing is done. Be­sides, we have a good team and we had adopted a phy­gi­tal ap­proach. And our cost struc­ture is lower than others. We do busi­ness with 100% com­mit­ment. We also have com­mit­ted dis­tri­bu­tion part­ner­ships in place.

How would you see the role of the bank in a sce­nario where the gov­ern­ment is push­ing for less cash?

If you look at the data for the last one year, there has been roughly more than twice the growth in bank­ing mo­bile apps. In wal­lets alone, there has been a growth of more than 50% to 60%. There is a def­i­nite move­ment to­wards dig­i­tal and peo­ple are com­fort­able us­ing bank­ing re­lated apps. How­ever, cash con­tin­ues to be there in the sys­tem, so there is the in­vis­i­ble cost of cash from a cus­tomer point of view. But it’s the new gen­er­a­tion that is fast adopt­ing dig­i­tal plat­forms for con­ve­nience. To that ex­tent, the dig­i­tal ef­forts the gov­ern­ment is pur­su­ing are be­com­ing more and more pop­u­lar. These are early days of the en­tire ef­fort but I am sure the gov­ern­ment will ac­cel­er­ate the dig­i­tal trans­for­ma­tion.

The only prob­lem I see is that when we talk about dig­i­tal, we talk about In­dia and not about Bharat, the real In­dia that re­sides in ru­ral ar­eas. Bharat is some­thing which we are very keen to look at and my own trips to ru­ral In­dia gives me the con­fi­dence that the cus­tomer will move to dig­i­tal al­beit lit­tle slowly. But, over a pe­riod, they will im­bibe dig­i­tal ap­pli­ca­tions and prod­ucts in as good a man­ner as any other cus­tomer has done. It is a mat­ter of time.

I am sure ev­ery­where, in­clud­ing in the ru­ral ar­eas, the mo­bile will be the driv­ing fac­tor. First, the phys­i­cal ser­vices will come in and later these will be trans­formed into dig­i­tal. Peo­ple who are lit­er­ate will move quickly to dig­i­tal and others will also move over, over a pe­riod.

You have just an­nounced that Fino Pay­ments Bank will be col­lab­o­rat­ing with fin­techs. What is the plan?

As a bank, there is tech­nol­ogy which we can cre­ate and grow on our own. But, there is a fin­tech revo­lu­tion hap­pen­ing all over the coun­try. Many fin­techs that have come up over the last few years pro­vide spe­cial­ized ser­vices like data pro­cess­ing and an­a­lyt­ics around var­i­ous plat­forms like IUX or API bank­ing. We will be look­ing at some of the fin­techs as­so­ci­ated with the de­vel­op­ment of these prod­ucts, some of which we are al­ready us­ing.

We look at bank­ing as a huge op­por­tu­nity. Ev­ery player is try­ing to tar­get the same cus­tomer through dig­i­tal chan­nels. Our aim is to get to cus­tomers who need bank­ing, be­cause I feel those cus­tomers al­ready ser­viced by banks are over­banked. Our fo­cus will be on those who need good qual­ity prod­ucts and ser­vices. We feel we need to pro­vide bet­ter prod­ucts, bet­ter ser­vices and bet­ter ac­cess to these prod­ucts and ser­vices. Even­tu­ally, we want to be­come a one-stop shop for all our cus­tomer tar­get seg­ments where we can pro­vide them a whole range of ser­vices.

As a per­son who have watched the bank­ing sce­nario for a long pe­riod of time, where ac­cord­ing to you would the pay­ments banks go from here? Would they grad­u­ate to be­come uni­ver­sal banks?

That is an im­por­tant ques­tion for us. I do not know what will even­tu­ally hap­pen. What I see is that some­where pay­ments banks scale up to the lev­els where they are prop­erly and ef­fec­tively reg­u­lated and they be­come full-fledged banks. RBI may come up with guide­lines and spe­cific reg­u­la­tions, which may prob­a­bly make both pay­ments banks and small fi­nance banks into one en­tity - in­stead of two dif­fer­en­ti­ated banks - like for ex­am­ple, a re­tail bank. As a re­tail bank, one can do sev­eral things. That is where the en­tire ben­e­fits to the cus­tomers will come. This may hap­pen, but I do not know when and how. This is my own vi­sion. There would be lot of reg­u­la­tory re­quire­ments for these en­ti­ties to ful­fill. How­ever, ev­ery­thing will de­pend on the reg­u­la­tor. This is my per­sonal view.

Rishi Gupta is aim­ing to make Fino Pay­ments Bank the first prof­itable pay­ments bank and he in­tends to have 100,000 touch points

Fino Pay­ments Bank will be an all dig­i­tal bank

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