Payment bank licence will be a huge enabler: Vodafone

Vodafone’s mobile banking service in Kenya, called M-Pesa, is usually cited as the biggest success stories of mobile banking services globally.

But with 85,000 banking agents, Vodafone India has already overtaken the Kenyan operations in terms of number of agents.

The telecom company has recently applied for payment banks licence and has plans to ramp up mobile banking services in the country in a major way. BusinessLine recently met Suresh Sethi, Business Head, M-Pesa, Vodafone India, to know how the company plans to roll out services aimed at bringing banking and payment services closer to consumers. Edited excerpts.

Why do you think a telecom company like Vodafone is relevant when it comes to banking services?

In India, there are only 1 lakh plus bank branches. In rural areas, for every 1,000 km there are 33 branches. Penetration is only 5 per cent.

As a mobile company we are in distribution and we have 1.7 million outlets. We have 8,000 exclusive outlets.

Vodafone in India is already 50 per cent rural.

We are strong in both distribution and mobile penetration and we have the ability to give banking services on mobile.

How do you compare yourself with other channels like the Post Office when it comes to money transfer services?

Post Office network is tried and tested. It has a rural presence. But there’s a cost to it and its not real time. It takes time for the money to reach the recipient.

Also, when money is sent to a villager through the postal network everyone, including money lender gets to know who is receiving money. On the sender’s side, we know workers and labourers keep the money with themselves in their pocket because they do not have anywhere else. Sometimes they keep it with contractors, which is not safe and he charges. We are saying — put money in your mobile wallet. We have the capability to transfer money real time 24/7. We also charge almost like a bank account charge; so it’s a cheap, transparent proposition. We are charging a total of 3 per cent commission. Banks are lower at 1.5-2 per cent but there are other costs like travelling 30 km to the bank branch.

What are the challenges?

The biggest challenge is education. Awareness around mobile money transfer is limited. About 70 per cent of domestic money transfer, estimated to be around $40-60 billion, is moving through informal channels in cash.

How do you get over this?

When we started we started by mapping the migrant worker corridor — Bihar, Jharkhand and West Bengal. We first created the points where money can be received and then we developed our network in the urban centres like Delhi and Mumbai from where money is sent by workers.

We are today pan-India but we have used telecom data to see where are the STD calls going. So we have mapped areas where we can break distances in terms of availability of bank branches. Today, 60 per cent of our concentration is in rural.

So you addressed both urban and rural markets?

Urban is the sending point and rural is the receiving point for money transfers. We are addressing both markets. We created awareness on the receiver side. We have done a lot of hard campaigns to build trust.

We have created capability to rope in agents who belong to a particular migrant’s village.

For example, we have had cases in Kerala where a Bengali worker wanted to send money back to his village but our agent there could not speak Bengali. So we connected this customer with an agent near his village to explain the product in his language.

How many more agents will you add?

We should cross 1 lakh agents by March-end. The build up has happened over the last 18 months.

We should soon have more number of agents than the total number of bank branches in the country. Scaling up is not an issue.

Are you talking to the Government for driving financial inclusion projects?

We have pitched for Government subsidy schemes to be routed through M-Pesa.

We have the capabilities to use our network to deliver money in schemes like the National Rural Health Mission and NREGA. The Government can monitor real time reports on the disbursements on our network.

We have already done some pilots and are hoping to expand it further with other States.

Have you made investments in developing your platform to meet the demands?

We have made huge investments in our platform. We had initially started with what we had in Kenya. But we have now revamped it. We have moved to a TCS platform, which is a core banking platform. Our platform, in fact, has more features than what a bank platform has. We are introducing a mobile application shortly.

Is mobile banking a viable proposition?

The entire business model becomes viable when we get into the merchant space. While money transfer is positive per transaction, the investments we are making now will take 4-5 years before we see net positive cash flows.

We are spending a lot on agents, brand and awareness campaigns. When you look at the overheads, we will have to invest for another 5-6 years.

How will a payment bank licence help?

It allows cash out without having a bank at the back end. It also allows us to take decisions on governance end. At the moment because of RBI guidelines, only a bank is allowed to make decisions on setting up the network. We also don’t have to depend on a bank for KYC.

For example, a bank’s compliance policy may not okay e-KYC while we want to implement it.

So I can put in place a network based on my assessment. Payment bank licence will be a huge enabler.

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