Payments banks in India have one
of the sweetest fortunes for the coming 2021. We are eagerly waiting to witness
the biggest challenge of the decade thrown by the payment banks to the traditional
bank once the payment bank gets a license. The battle is no longer between Jio payment
bank or Phone Pe or between other payment banks, but it is between traditional
Indian banking and the new digital-driven payment banking industry once they
get the license. We were all focussed
towards which corporate will come up with a banking license and we also witnessed an as huge round of debate by Raghuram Rajan (ex-governor of RBI ) on the topic
but we all ignored to identify the progress already achieved by the payment banks
in the Indian economy. We find that the
whole fintech,wealth-tech and payment bank industry will find significant deals
and growth in 2021 backed by Indian corporate and less by VC or PE funds. Rather
VC and PE funds will exit and make billions in the next 2 years.
They will scale their business and growth at an exponential level. Very soon debit card and credit card will be a matter of past. Your wallet is about to become free and might be your phone too. Biometric banking payment banking system will change the landscape of the business model. Private equity will jump in into the Payment banks and large ones will expand inorganically in 2021-22. Payment banks will be operating either as Neo Banks or like the Brick & Mortar banking model but they have a huge opportunity. Well prior to that we all should be ready that by 2021-22 FY we will see few payments banks getting into banking license. Those who are thinking that payment banks will take significant time to grow and scale their business; it might be a wrong calculation. The next challenger of the Indian private banks will be the payment banks.
The private bank history and modernisation of the Indian economy does not need any introduction. The market is now much advanced hence the speed of growth for payment to get into banking and expansion will be a matter of lightening. The Popular payments banks are already into third party product distribution like Insurance, MF, Gold sale etc. Now all these small Kirana shops, every SME, wholesaler, retailer etc have registered with payments banks and they are actively working also. The recent number speaks a lot for the same where it is being found that Google Pay, PhonePe account for 86% of UPI transactions by value and PayTM accounted for about 11% of the market in Oct as per NPCI.
Payment banks have filled the gap of unbanked as well as freed the nation from login into banking server and swiping of cards. The data said Now a payment bank when gets banking license the account opening becomes easier and faster as they are digitally enhanced compared to the era of the old banking system. They have a ready database of clients and they have a ready trusted user of their platform. We all know that in banking trust is a big factor and UPI transaction itself creates educated users (as they learn how to use smartphones).
Now getting deposit into the savings and current accounts becomes easier and much user friendly for the users of the payment banks. These small Kirana shops, every SME, wholesaler, retailer etc becomes both savings as well as current account holders. On the other hand availability of other financial products and their ease of operation create a significant opportunity for the wealth side business of these payments banks. Yes, payment banks wealth vertical and Robo advisory becomes a big opportunity. Education for investment at the lower end of the society is the opportunity hidden to be explored by the payment banks.
The cost of acquisition of clients and the time frame for building the book size of Fixed Deposit and CASA will be a much faster speed which will be challenging to the traditional banking industry.
Payment banks can be even brought by the Indian corporate and through the inorganic way they can become payment bank holder along with buyout of a fintech company. This means that India will witness significant deals in fintech, payment banks and wealth tech platforms for the race towards banking license and economies of scale. Substantial profit opportunity and faster break-even will be the key trigger behind the industry to grow. The business has been already created by the payments banks and hence the banking growth in India will be a revolution.
The business is already in place and now only the regulations need to be supportive so that job creations happen and financial inclusion in India gains space. 5G will be a key boon of growth behind the payments banks and their mode of operation. By 2023 India will have a substantial user of 5G and the current 4G network will also be much cheaper once the 5G comes in which leads to significant banking activities. The biometric model is where you don’t need to get into ATM or carry your phone. You can do your transaction of money using your biometric alone.
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