Mumbai: Aditya Birla Idea Payments Bank, which is set to roll out a fully functional branch by the first half of this year, is relying on scale and brand name to lure customers. The payments bank is a 51:49 joint venture (JV) between Aditya Birla Nuvo Ltd (ABNL) and telecom major Idea Cellular, respectively.
The bank will start operations with over 1.5 lakh touch points, an in-inbuilt United Payment Interface (UPI) solution and will look at distributing loans of other financial institutions. According to Reserve Bank of India (RBI) norms, payment banks can accept deposits and open current and savings accounts, but are not permitted to lend or issue credit cards.
“It is clearly a scale game unlike traditional banking. In traditional banking you can put up one branch and still do well. Here, it is scale since technology platform is the same which has to accommodate many transactions. So more the transactions you accommodate, more benefit you can give to the customers,” said Sudhakar Ramasubramanian, chief executive officer (designate), Aditya Birla Idea Payments Bank.
Unlike other companies like payments banks of Airtel and Jio, Idea is yet to announce a tie-up with any financial institution. It is currently exploring partnerships with institutions depending on the “intensity of transaction and size of population”. The Aditya Birla payments bank is, however, confident that with a network of 180 million telecom customers, its reach is unparalleled.
According to Sudhakar, Idea has both online and offline scale. Out of its total customer base, 60-70 % have feature phones. Not everyone except State Bank of India has this customer base.
“India Post has access to people, but does not have as many customers. We are the organisation where we have done the Know Your Customer (KYC) and two million retailers is the network which we have. Also 15% of India is our existing customer base and 200 million of 8 billion is like 3% of the world’s population,” added Sudhakar.
Aditya Birla Idea Payments bank is one among seven companies to get a final approval from the banking regulator. Airtel Payments Bank Ltd was the first payments bank to start operations in January followed by India Post. FINO PayTech, Jio Payments Bank, PayTM and National Securities Depository Ltd are the other companies who have received the final licence for payments banks.
“Aditya Birla will ultimately convert lot of their conglomerate business into e-commerce on retail side. They will leverage the ecosystem that they have across various businesses and do payments through its bank,” said Abizer Diwanji, partner and head-financial services at EY.
Having had the first mover advantage, the Airtel Payments Bank has already added more than 1 million customers since its launch in November. The bank offers a rate of interest of 7.25% on its savings account compared to 3-4% offered by conventional banks. However, Sudhakar is not quite sure if this model is sustainable.
“It is simple logic. Money can be invested in government securities… Company that has big credit rating which is given lower interest rate and other company that has low credit rating that is giving higher interest rate. What is the trust level? Do you want same level of interest for different levels of bank,” he added.