It’s a success story that has been built in many small steps, over almost a decade. FINO, or Fino PayTech, was set up in 2006 to provide technology services to banks. Later that year, when RBI approved the creation of business correspondents (BCs), FINO began taking the financial products and services of banks to rural customers. Today its network of over 25,000 agents and 10,000 retail points are spread across 28 states. After bagging the payment banking licence in August, FINO is readying for a new innings in the financial inclusion space. CEO Rishi Gupta spoke to BLink about the company’s plans to bank the unbanked in an increasingly competitive market. Edited excerpts:

What are the factors that helped FINO PayTech bag a payment banking licence?

It has been a gradual process. We got into micro-insurance and slowly migrated to owning the customer and getting his retail fees. We set up a non-banking financial company for microfinance business and now disburse over $100 million every month. We then began providing remittance services, besides recharges and top-ups for mobiles. We also got into electronic benefit transfer for government schemes like NREGA. What worked for us was the knowledge of business, products, customers and having a distribution set-up in the financial inclusion system for many years. We have set up a low-cost banking system and are working with the target segment to understand their requirements. Our learning was instrumental in getting us the RBI licence.

How will you leverage your existing network of business correspondents and retail points to promote payment banking?

We will move some of the existing BC points to the FINO payment bank, as it is allowed under RBI guidelines. We will continue to service existing customers besides entering new geographies. FINO will leverage the existing infrastructure, products and technology to make it a bank, which can serve 150 million people who don’t have complete access to financial products. We are looking at not only savings account but also financial inclusion.

How do you perceive financial inclusion?

I look at financial inclusion as financial freedom. To me, financial inclusion is creating an ecosystem around a customer where he can freely do a financial transaction. He understands what he is buying and gets into the habit of saving and spends only when it is required. Since unbanked customers don’t have a place to keep the money, they spend it unnecessarily. Financial inclusion is when he can save and, whenever he requires, his money is five minutes away from his home or place of work. All financial products should be available to people from all income groups.

What changes will FINO make in its business model to offer the payment banking services?

We have already started work on enhancing our infrastructure both on the rural and urban side. We had tied up with multiple entities for relevant products, such as Yatra for travel services and Billdesk for bill payment. If a customer wants to book a ticket, he can go to our touch-point and book through Yatra. He doesn’t have to queue up to pay any bill either. Now we will venture deeper into geographies and make it a more inclusive programme.

What kind of investments will FINO have to make for payment banking?

We are working on the numbers. Our initial estimate is that $60-80 million will be required in the first phase… There has to be investment on technology, compliance and manpower. People were always interested in partnering with us and that interest has grown. In the next month or so, we will start more serious discussions around partnerships.

How do you plan to comply with foreign shareholding requirements for payment banks, given that foreign investors (including Blackstone and Intel Capital) hold the majority stake in the company?

I don’t think it is a challenge to bring in domestic investors; foreign investors will dilute the stake. We have multiple banks in our portfolio. We have to be compliant (in the next one-and-a-half years) before applying for the formal licence. I am confident of doing it.

What are your current sources of revenue, and how will that mix change once you start offering payment banking services?

We were looking at transformation already. Retail business was bringing in just 5 per cent a couple of years ago; now it will become 30 per cent, and we will continue to build that platform. We will do three things now — have our own product, own channel and own customer. So the ownership of the product will move to us. As a payment bank, I can decide what product to sell in which geographies.

What was your revenue and profit in the last fiscal? When do you expect to break even with the new services?

We have been clocking revenues upwards of $60 million for the past few years. We achieved break-even in 2010 and have been profitable since then. Now, we will have to make more investments, and there will be a rise in operations cost as well. As a payment bank, we hope to break even in about four years after starting operations.

What is the future of payment banking in India, where dozens of public and private sector banks as well as new payment banks are scrambling for the same pie?

The market out there is very big. We are a cash-heavy economy and need payment banks to make it less cash-heavy. We need to create a full ecosystem, as you cannot give customers limited choices. In India, the euphoria is more on the digital space and, over the next few years, non-digital space will create new opportunities and a big market. The entire payment ecosystem is in a nascent stage and it will be the biggest disruption in the next few years.

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