For telecom operators, winning a payments bank licence opens the doors to an array of opportunities, such as foraying into the financial inclusion sector, additional revenues, improved customer loyalty and stickiness. Though it’s unlikely to be a smooth ride, many of the service providers are entering the fray, confident their experience in the mobile payment services will help.
“For the operators, this is an opportunity to foray into the financial inclusion space. Further, it would provide them enhanced customer loyalty and stickiness for the range of services they already provide,” said Kamlesh Bhatia, Research Director at Gartner India.
“Importantly, the service providers are not looking at creating new capabilities but leveraging on the existing infrastructure,” Bhatia added.
The telecom companies are banking on their distribution network that reaches the farthest corners of the country to offer payment services. Together, they have a network of more than three million outlets servicing about 935 million telecom users.
“Compare this with the total of about 117,000 bank branches in the country. Additionally, payments banking is lucrative as it is a high-volume and low-margin business,” said Hemant Joshi, Partner at Deloitte Haskins & Sells.
“Already about 750 million Aadhaar cards have been issued for the total 1.2 billion Indians. So, now the next step is to link these cards with bank accounts,” Joshi added.
Vodafone India, which provides mobile payment services (money-transfer and utility bill payments) under M-Pesa, now has more than 80,000 banking service agents. Bharti Airtel, the country’s largest mobile services operator, provides mobile payment services under ‘Airtel Money’.
“Mobile payments are a terrific consumer proposition and telecom operators want to optimise on this service, mostly riding on the infrastructure already in place.
“This is a long-haul (game) and for operators it will bring in additional revenues, though over a longer period,” said Pankaj Mohindroo, National President at the Indian Cellular Association.
However, there are many who think that telecom companies are not the right ones to start payment bank services.
Operators not ready“A majority of their retailers are not tuned to deal with these kinds of high transactions that would be in the range of about ₹3,000-4,000. These retailers are only used to providing small value top-ups and not financial inclusion,” said Pramod Saxena, CMD of digital payment company Oxigen Services.
“Further, there are also issues on infrastructure as the regulations specify biometric authentication, which these companies don’t have now,” Saxena, whose company has also applied, said.