 "Some banks have approached us for partnership: Rishi Gupta")
FINO PayTech, which recently got a payments bank licence from the Reserve Bank of India (RBI), is busy chalking out its launch plans. Rishi Gupta, managing director and CEO, talks to Nupur Anand about the plans. Edited excerpts:
You already have ICICI Bank and some public sector banks as partners. Would you be tying up with any of the existing partners or could it be a new bank?
We already have ICICI Bank, Union Bank, Corporation Bank etc as our partners, but it is not necessary that we have to tie up with them. We can tie up with somebody new also depending on where the synergies are coming from. As of now, five to six banks have expressed interest for tie-ups; out of them, most are from the public sector.
There have to be a lot of synergies. For instance, the bank has to help us in compliance issues and addressing customer grievances. Then the bank's spread of branch network will also be a key factor. Other things such as cash management services and the lending services will also have to be provided by the bank.
By when are you likely to start operations?
We are already in the business and we had set up the Fino Money Mart and we have a strong agent network of 20,000 business correspondents. We also have some 30,000 point of transactions. So operationally, we can start soon. But we need to make some structural and regulatory changes. For instance, we'll have to set up an entity with a Fino Payments Bank; then we'll have to raise capital plus we will have to work on the products. So it will take around 12 months or so to get the work done.
How much capital do you think will be required?
Our initial estimate is that we will need $60-80 million (Rs 390-520 crore) and there is a lot of interest that is already there from both strategic investors and private equity players.
After submitting the application, had RBI asked for more details?
Yes, RBI had asked us emailed questions on the network and operational capability. There were also questions on transactions, volumes, products and on our legal entity. There were queries also to ascertain the fit-and-proper criteria.
Considering that a lot of unbanked people have been covered under the Pradhan Mantri Jan-Dhan Yojana (PMJDY) scheme, do you see that as a challenge?
There are different stages in banking. The first stage that has been covered under the Jan Dhan scheme is to get people to open bank accounts but the most important thing is to get people to transact. So now, the payments banks can complement what PMJDY has done by getting these people to transact. Therefore, the focus will not be on opening more accounts but on making these accounts more active. We also believe a lot of these customers who do the micro transactions will move from universal banks to payments banks as our cost structure will be more competitive, products will be designed for them etc.
Banks have been saying they will face stiff competition from payments banks. What is your view?
There will be competition but it will be good for the system and consumers. Moreover, players begin to adapt themselves as new disruptions come. As a result of competition, there will be more innovations, better services and products. So it will be good for customers.
Profitability is going to be a key challenge for payments banks. How many years would it take to break even?
We already have a business in the past nine years and we will leverage on it. Therefore, from an opportunity point of view, we will get a head start. Our initial estimate is 3-4 years from the day you start operations, but for a new player it might take even longer.
Apart from profitability, what are the other key challenges that you see?
Ensuring seamless transactions will be the most important. For which, connectivity can become a challenge, especially when you go into deeper geographies. Another important thing is finding the right people with the required skill set.
How many people are you planning to hire?
We will not have a very corporate heavy structure. We will have more people on the field. We will be hiring about 3,000 people in the next three years.
You already have ICICI Bank and some public sector banks as partners. Would you be tying up with any of the existing partners or could it be a new bank?
We already have ICICI Bank, Union Bank, Corporation Bank etc as our partners, but it is not necessary that we have to tie up with them. We can tie up with somebody new also depending on where the synergies are coming from. As of now, five to six banks have expressed interest for tie-ups; out of them, most are from the public sector.
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What are the synergies that you look at in a partner?
There have to be a lot of synergies. For instance, the bank has to help us in compliance issues and addressing customer grievances. Then the bank's spread of branch network will also be a key factor. Other things such as cash management services and the lending services will also have to be provided by the bank.
By when are you likely to start operations?
We are already in the business and we had set up the Fino Money Mart and we have a strong agent network of 20,000 business correspondents. We also have some 30,000 point of transactions. So operationally, we can start soon. But we need to make some structural and regulatory changes. For instance, we'll have to set up an entity with a Fino Payments Bank; then we'll have to raise capital plus we will have to work on the products. So it will take around 12 months or so to get the work done.
How much capital do you think will be required?
Our initial estimate is that we will need $60-80 million (Rs 390-520 crore) and there is a lot of interest that is already there from both strategic investors and private equity players.
After submitting the application, had RBI asked for more details?
Yes, RBI had asked us emailed questions on the network and operational capability. There were also questions on transactions, volumes, products and on our legal entity. There were queries also to ascertain the fit-and-proper criteria.
Considering that a lot of unbanked people have been covered under the Pradhan Mantri Jan-Dhan Yojana (PMJDY) scheme, do you see that as a challenge?
There are different stages in banking. The first stage that has been covered under the Jan Dhan scheme is to get people to open bank accounts but the most important thing is to get people to transact. So now, the payments banks can complement what PMJDY has done by getting these people to transact. Therefore, the focus will not be on opening more accounts but on making these accounts more active. We also believe a lot of these customers who do the micro transactions will move from universal banks to payments banks as our cost structure will be more competitive, products will be designed for them etc.
Banks have been saying they will face stiff competition from payments banks. What is your view?
There will be competition but it will be good for the system and consumers. Moreover, players begin to adapt themselves as new disruptions come. As a result of competition, there will be more innovations, better services and products. So it will be good for customers.
Profitability is going to be a key challenge for payments banks. How many years would it take to break even?
We already have a business in the past nine years and we will leverage on it. Therefore, from an opportunity point of view, we will get a head start. Our initial estimate is 3-4 years from the day you start operations, but for a new player it might take even longer.
Apart from profitability, what are the other key challenges that you see?
Ensuring seamless transactions will be the most important. For which, connectivity can become a challenge, especially when you go into deeper geographies. Another important thing is finding the right people with the required skill set.
How many people are you planning to hire?
We will not have a very corporate heavy structure. We will have more people on the field. We will be hiring about 3,000 people in the next three years.