India Post Payments Bank Ltd’s managing director and chief executive officer Ashok Pal Singh wants to keep it simple. The bank will offer payment solutions for recurring transactions, index funds, term plans and small loans. The bank will provide only index funds in the mutual fund space to avoid misselling. In insurance, the bank will sell term plans but not endowment plans. Edited excerpts from an interview:
Who is your target customer? How do you plan to roll out business across the country?
We are targeting three segments with a bottom-up approach. The first is the 250 million people who don’t have mobile phones and are typically the DBT (direct benefits transfer) beneficiaries. The second is the middle layer, the 500 million people who have feature phones. In terms of products, the focus will be on recurring expenditure such as school fees, electricity bills, phone bills, healthcare expenditure and conveyance. If you look at state transport corporations, the transactions are all cash-based. We want to introduce electronic payment in remittances. We are also targeting “unreserved” railway ticketing. The third segment is the 250 million smartphone users. We will simplify a lot of payments which are common for both smartphone as well as feature phone users. Additionally, we plan to offer very simple third-party products such as life insurance, equity products and credit largely based on smart analytics. That is how we plan to cover the entire spectrum. The focus will be on payment solutions and not on banking solutions. Every household has a bank account. The way the regulator has structured the business of a payments bank is that there is no skin in float. So we are going to make a living out of transactions. Within this space, our private sector competitors will be looking at all kinds of applications in the private sector. We will typically focus on the government and public sector undertakings space where we have natural affinity in terms of being an acceptable payment service provider. We have a commitment that by September-end access points in post offices across the country should go live.
What kind of third-party products do you plan to offer? How will you ensure there is no misselling? Will you have exclusive partners for third-party products?
We would largely look at mutual funds. Within mutual funds, probably just index funds because I don’t have a sophisticated sales force. Also, I don’t think I have a sophisticated customer and we don’t want to missell. We will go to the market and make initial forays with standard and simple products. In insurance, we are interested only in pure life term insurance and nothing else. Life insurance companies’ core competence is insuring and not necessarily investments. In terms of making a correct sell, it is very simple for me to deal with my customers and tell “look, what we are proposing is a life cover: nothing less, nothing more”. For everything that we do, there are two non-negotiables: one is competition and other is choice. If we are going to take on any service, including a third-party product, it has to be on competitive basis. And my customers will always get a choice. We will deal with organizations on a non-exclusive basis. I will do some simple standardizations For instance, in case of life insurance, it will be group insurance because that is where I can negotiate the best rates.
What kind of loan products will you offer?
Credit will take some time because an analytics engine has to be put in place based on transaction history of our customers. We will have to work with a third party for a format to offer instant unsecured loans. We will be looking at small-ticket loans. For instance, if an account holder comes to the post office and needs a Rs20,000 loan, we should be able to given him this at a click of a button. I should be able to tell him these are the five providers who are willing to offer it with terms and conditions. We will simplify and standardize it. The guy can take a pick, we disburse it and take a mandate for EMI (equated monthly instalment).
You have partnered with Punjab National Bank. How will this help you?
Punjab National Bank is helping us on interim technology solutions. We will be happy to dispense their products within the framework that we intend to operate. Everything is on a non-exclusive basis. Nobody has a head-start and nobody is a laggard. When I say interim technology, a standard CBS (core banking solution) is not really designed for high volume payment transactions. We are just using Punjab National Bank’s platform to test the technology with our kind of customers.
Compared to Airtel Payments Bank, you offer a lower interest rate on savings deposit.
I can only largely invest in government securities. Currently they give you about 6.1% before tax. I am not in a position to give anything higher than that for sure. Any economics beyond that does beat us but we don’t levy transaction charges on our customers for deposits. Charges are for door-to-door transactions. Other payments banks are taking a transaction fee. Ultimately, no corporate pays from its pocket. There are no free lunches. Either you levy an upfront charge or you do it on whatever other way.
How do plan to train your employees to provide digital services?
I am afraid that they can’t do anything complicated. And that is why I intend to use Aadhaar (the unique ID dispensed by the Unique Identification Authority of India). Biometrics enabled transaction is the only thing that will work. I just have to keep it simple which is also an operational necessity. Simplicity hurts no one.
Do you plan to tie up with fintech companies for payment solutions?
I think we will have to reach out to fin-tech companies while having sufficiently enabled in-house ability to deal with technology. The plan is to use open systems, APIs (application protocol interfaces; essentially bits of software that can fit right into larger programs), developing apps with the help of trusted partners and developers and opening the payments space for whoever needs it. We don’t need a lot of partners but (need) the right one.
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