Payment bank services to improve telcos’ revenues

Telecom companies including Bharti Airtel, Vodafone India and Idea Cellular can expect to garner more revenues by setting up payment banks if the Reserve Bank of India’s draft guidelines goes through.

Last week, RBI announced draft guidelines that permitted telecom companies and supermarket chains to set up a payment bank. While none of the telecom companies want to disclose their plans officially, insiders said that it was a natural progression for them.

M-Pesa, started in April 2013 by Vodafone India, has more than 60,000 outlets in the country. Airtel Money, provided by Bharti Airtel, has more than 1.3 million active subscribers as of December 31, 2013. Under the new RBI guidelines, these players will be able to offer services without having a tie-up with a bank.

Rajan Mathews, Director General, Cellular Operators’ Association of India, said: “This is something which the telecom industry has been asking for a while. There will be interest among operators for sure but too early to say who will finally take a licence.’

According to Jaideep Ghosh, Partner, KPMG in India, payment banks will augment mobile operator’s business by complementing its own mobile money platform, offerings and leveraging wide geographical reach.

“Considering the number of unique mobile subscribers is much higher than bank account holders, mobile operators can play an important role to enhance financial inclusion by providing payment and remittance services to the un-banked,” he said.

Nearly half of India’s population doesn’t have a bank account and are dependent on the informal channels such as money lenders. India has about 100 million migrants spread across the country, with most of them relying on carriers to remit money back home.

“The objective is to promote financial inclusion and create banking access to the un-banked. What is now needed is to create an infrastructure and access points. Mostly, telecom companies would be interested in setting up payment banks and infrastructure such as access points to enable money transfers,” said Pramod Saxena, founder of mobile wallet service provider Oxigen Services India.

Telecom operators have presence across majority of the six lakh villages in the country, with presence to sell cards and services. The country has already issued 650 million Aadhaar cards, a possible verification document in these villages.

But there are challenges. Many retail and telecom companies have ventured into insurance sector and that experience has not been successful. “Financial services business is not for all telcos and retailers. I think as far as customer access goes, it can be an advantage for some of the telcos,” said Monish Shah, Senior Director at Deloitte India.

“Selling a financial product is not as easy as a selling a SIM, as the customer needs to be educated. This becomes even more difficult in a rural area,” said Pradeep Sampath, Chief Operating Officer with Mobi Wallet Payments Systems Ltd, a wholly-owned subsidiary of Tata Teleservices.

He, however, added that it was premature to comment as these were only draft guidelines.

“Telcos are mainly into network and data management, and opening up the financial sector should be watched with utmost caution. RBI has to tread the ground cautiously,” opines Vishwanath Alluri, Founder and Executive chairman with IMImobile.

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