Bharti Airtel and Kotak Bank team up for Payments Bank foray

The entry of payment banks will lead to collaborations between existing banks and potential payment banks with Kotak Mahindra Bank already announcing its intent to partner Airtel M Commerce Services, subsidiary of Bharti Airtel, which is among the biggest telecom operators in India.

After the announcement, Dipak Gupta, Joint Managing Director, Kotak Mahindra Bank spoke to Hindu Business Line on how the partnership will help reaching out to a low value-high volume customer segment thereby widening its distribution network to the unbanked regions.

The last day to submit the application at the RBI for payment bank licence is February 2.

Excerpts:

Can you explain the reason behind this deal?

Basically, it’s an opportunity for us to service and work on our different customer market segment. It’s an inclusive segment, which as a traditional commercial banker we would have taken some more time to service. So, a payment bank is an attractive opportunity that the central bank is offering us and telcos are a great partner because they have phenomenal reach and they already service these underbanked customers.

What is the deal size you are looking at?

It’s not a deal as yet and just an intent to invest once the licence is received. But if you look at the regulations for the payment bank, it requires Rs 100 crore and we will put in our proportion of share accordingly in the bank.

Is it strategic or just a financial investment? What kind of cross-selling opportunities would you look at?

Those are semantics… But too early days. We first need a licence but those are opportunities that we will explore going forward. Ultimately, the intent is to partner with Bharti to reach out to an inclusive customer segment. We offer payment services anyways but as of now we don’t reach out to that customer segment as there is no wherewithal at this stage with a commercial bank to reach out to this segment, so it is difficult.

Why Bharti? What changes are you looking at in the management and the bank?

Firstly, they (Bharti Airtel) are our customers of ours. Secondly, if you look at Bharti, they have probably the largest distribution and customer base. Hence, they are an appropriate partner. On the senior management front, again these are very early days to discuss that. The payment bank will look at investment in technology. Also, there could be possibilities of referral arrangements or partner as a Business Correspondent or lending services, etc.

Right now, we are just applying and post bagging the licence, we need to sit down and see how to structure and work the entire process. Basically, it is a Bharti venture and we are just partners if they get a licence.

How do you think the industry will change with the payment banking licence coming into fray considering a lot of interest has been generated?

I think a lot of things are required including distribution, customer base is required then technology, right products and the pricing has to be appropriate and so many parameters come into play... It’s a different product market play from traditional banking and this is more of the low value-high volume economics at play.

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