Payments Banks are those banks that are registered as public limited companies under the Companies Act, 2013. They are licensed under Section 22 of the Banking Regulations Act, 1949 and broadly regulated by the Reserve Bank of India (RBI). According to the RBI, the words “Payments Bank” must be suffixed by the company’s name to differentiate it from other banks.
A typical Payments Bank is set up to further financial inclusion by providing small saving accounts and by providing payments/remittance services to migrant labour workforce, low-income households, small businesses, other unrecognized entities, and other users.
Although Payments Banks can accept deposits, they are prohibited from undertaking lending activities. The operations of such Banks are fully networked and are technology driven right from the beginning, conforming to the standards and norms of supervision by the RBI.
As of now, there are as many as six Payment Banks operating in India and these include Airtel Payments Bank Ltd, India Post payments Bank Ltd, FINO payments Bank Ltd, Paytm Payments Bank Ltd, Jio Payments Bank Ltd, and NSDL Payments Bank Limited. Out of the six Payments Banks mentioned above, FINO Payments Bank is the first Payment Bank to go for an IPO.
FINO Payments Bank IPO
The FINO Payments Bank is the first in the herd to go public for share sale. Its 1200 Crore IPO was open for subscription between 29th October and 2nd November. The Initial Public Offering comprises Rs 300 Crore of fresh funds to be raised directly from the public and Rs 900 Crore to be raised through secondary share sale by promoter Fino Paytech. The objective of the issue was to augment the Bank’s Tier-1 capital base to meet its future capital requirements for expansion.
The growth story of FINO Payments Bank
The FINO (Financial Inclusion Network Operations) was originally started as a technology company to develop technological solutions. In September 2015, Fino PayTech received in-principle approval from the Reserve Bank of India to set up a Payments Bank which commenced operations in June 2017. FINO Payments Bank follows the Phygital, a combination of physical and digital model. It collaborates with local merchants who act as the business correspondents who offer FINO’s banking products and services. The local merchants are able to gain the trust of customers in this low-cost digital banking. They assist customers to get the right banking product. The Bank has widened its network through collaborations and partnerships with corporates like BPCL to use their outlets as digital banking points. The Bank’s digital kiosk acts as a last mile service point in the underpenetrated regions of the country.
FINO Payments Bank is present in 94% of India’s districts with over 6.41 lakhs banking outlets. They have fifty-four bank branches and one hundred and forty-three customer service points. With 2,50,000 Micro ATMs, they command over 55% of market share in the Micro ATMs creating doorstep Banking.
The Total income of the Bank has increased by 113% for the financial year from 2019 to 2021. In fact, there is a turnaround in the loss-making Payments Bank for the financial year ending 2021. It reported profit for the period ending 31/03/2021 amounting to Rs 204.74 (millions).
Opportunities and challenges
According to the CRISIL, the digital payments are expected to grow at CAGR of 16-18% between financial year financial year 2020 and 2025. The very many favorable factors for digital payments like younger population, rising smartphone penetration, increasing mobile internet users, convenience of transacting digitally, and booming e-commerce sector are bound to create opportunities for the FINO Payments Bank in the years to come.
On the downside, a significant portion of FINO Payments Bank’s merchant distribution network is in these States i.e. Uttar Pradesh, Bihar, and Madhya Pradesh. Hence, any adverse changes in those States may affect their financial condition and results of its operations.
The Bank must keep pace with new technological advances, emerging banking and consumer trends. It must develop innovative and cost-effective products and services to cater to the niche markets. They must differentiate themselves to face the high competition in the BFSI (Banking and Financial services Industry) from the Large Banks, small Finance Banks, Micro Finance Institutions, Non-Banking Financial Companies and Foreign Banks & FinTech Companies.
World renowned technology majors like Google, Apple, Microsoft, Twitter, and Facebook and e-Commerce majors like Amazon, Flipcart etc have a major share in the growing digital consumption in India. Similarly, digital platforms Google and Jio are constantly evolving through start-ups innovations and are committing huge investments towards developing affordable smartphone Platforms too. Amidst intense competition, banks are joining the fray alongside FinTech companies as enablers of digital finance. Although several factors like financial literacy, lack of trust in technology, inadequate payment infrastructure and poor network connectivity have hugely restricted the expansion of digital finance. With the rapid digital transformation that’s happening today, Payment Banks like the FINO are set to create value to the stakeholders by providing sustainable financial solutions to the un-served and underserved segments of the society besides serving the MSMEs especially in rural areas where more than 60 percent of our population lives. Factors like collaborations, differentiated products, trusted assistance to customers and technology will help them to win. Payment Banks like the FINO Payments Bank are bound to contribute in copious measures to create sustainable livelihoods for many.
