Players Get More Teeth

Payment bank licenses from RBI have come as a big booster for the mobile payment players, who have hitherto been limited to wallet services.

Mobile payment may be seen as a VAS that has the potential to truly and directly become a growth engine for telcos. However, due to regulatory reasons, the scope has largely been limited to mobile wallets, which have had their own sets of limitations. Most significantly, there has been little incentive for users to keep money in their wallets as there would be no interest earned. On the other hand, providers earn very negligible net amount since they have to pay one to two percent of transaction charge to the bank from which the wallet is being recharged, even though they are able to earn a commission of around 1.5 percent on each transaction made by the customer. Add to this the fact that mobile wallet players need to incentivize users through discounts and cashbacks, which further trims down their margins.

No wonder, as many as 41 players had applied for securing “payment bank” licenses from RBI. With the central bank recently granting approval to 11 of them and indicating it could be issuing more licenses in future, there is heightened interest in the segment now.

Payment bank licenses would enable the players and the users to potentially do away with the need to recharge their wallets from a bank account and thus obviate the obligation to pay a commission to the bank. Moreover, the payment bank license could meaningfully increase the number of subscribers who would be using the account for a whole lot of banking and financial transactions other than just the wallet.