‘Payments Bank Investment is Small, But Opportunity Huge’
Bharti has 25 crore active customers, meaning people who use a mobile. If customers do even a single transaction a week, we are talking about 100 crore transactions a month
profits or not is the trial and error part. But there is opportunity, customers are there.
Will volume translate into profits? If you look at a simple metric, Bharti has 25 crore active customers, meaning people who use a mobile. If customers do even a single transaction a week, then we are talking about 100 crore transactions a month. Whether that makes money for the bank is secondary, but transactions are for real. And out of this 100 crore, 50% are by unbanked people. So, can I make it bankable? Of course, I can. Is there an opportunity? Of course, there is. Will I make money? Who knows? But, at least, I need to explore it.
If you think that profit in this venture is not certain, then why invest? Because the investment is insignificant and the opportunity is huge. (RBI governor) Dr (Raghuram) Rajan moves the interest rate by 25 basis points, the amount of profit you make is all the amount of investment that you do in this venture. It’s not that you are betting the store, it’s a small part of the total share.
With so many payment fintech start-ups popping up, what is the future? It’s early to say. There is a lot of equity chasing the space. So, when there is equity chasing the space, people will pour money into this. Consolidation may happen but today people are burning money. As a bank, I cannot afford to burn money. I can’t afford to lose ₹ 1,000 crore every year. A Paytm will manage to do that because that’s its only business. As I said, it’s 1/20th of our total business, or for any bank for that matter. But, for a payment bank, it will be a predominant part of its business. There will be some amount of meandering that will happen.
Telcos have big distribution networks. Will they have an upper hand? Yes, there will be a relative upper hand because they have a customer base. Like I said, Bharti has 25 crore customers, Vodafone has 18-19 crore customers, it’s easier to convert a part of those into customers of the payment bank. So, that is the advantage that telcos have.