New Delhi: One97 Communications Ltd founder Vijay Shekhar Sharma, one of the 11 recipients of a payments bank licence, said on Monday that he plans to start the bank with an initial capital of 300 crore and will launch the business before November.

The entity, Paytm Payment Bank Ltd, is expected to become the second biggest revenue source for the parent firm after the core payments business in about two years.

Three out of the 11 recipients have already withdrawn their applications, raising concerns around the business model of payments banks, but Paytm is eyeing a break-even in three to five years.

“It is not an easy business and is a long-term game. It should take any payment bank three to five years to make money. If you have enough volumes, you could reach there faster," said Sharma in an interview on Monday.

“The company (One97) and I will continue to keep funding the bank till it is profitable," he added. Paytm Payment Bank will be 49% owned by One97 and 51% by Sharma.

In the first year, the bank will look to grow its business in 12 cities in north-east and central India. Smaller markets such as parts of Bihar, Madhya Pradesh and Uttar Pradesh will be high on the agenda, Sharma said.

Because payments banks can’t lend, they will make much of their money by cross-selling banking products.

Indeed, Paytm Payment Bank expects loans, insurance and wealth management to drive most of its revenue.

“A common person’s savings is the money kept in his savings bank account. He does not have the luxury of wealth management… we will bring some incredible wealth management tools and we will create a money market fund here, which will not have any lock-in period or any penalty for breaking the bond," said Sharma, as he sought to explain the innovative products his company would launch.

Some of these products could entail investments as low as 10; its insurance products too will be priced affordably, he said.

Paytm Payment Bank will partner with non-banking finance companies, banks and insurance firms to offer these products. Sharma declined to disclose the names of partners.

Paytm Payment Bank has set itself the target of 200 million accounts, across mobile wallets, current accounts, savings accounts, within 12 months of launch. It aims to touch half a billion accounts by 2020.

Paytm already has close to 130 million wallets, so it expects a net addition of 70 million accounts in the first year.

“All these accounts will be effectively run on our core banking software run by Infosys and Wipro, who are our tech partners," said Sharma.

The Paytm marketplace currently claims to have an annualized GMV (gross merchandise value or in this case value of total transactions) of around 20,000 crore based on its current run rate.

According to Sharma, Paytm’s daily GMV is about 55 crore on a no-promotion basis and it expects to touch a GMV of 40,000 crore by March 2017.

Sharma plans to roll out financial services which will be linked with its marketplace business.

“Imagine buying insurance on products that you purchase at our marketplace. Bundling products and services can be lucrative… we are still exploring this," Sharma said.

Recently, three firms including Tech Mahindra; Sun Pharma promoter Dilip Shanghvi and his partners IDFC Bank Ltd and Telenor Financial Services; and Cholamandalam Investment and Finance Co., withdrew their applications, highlighting concerns over the economics of payments banks in the country.

Telenor’s withdrawal came in as a surprise as the firm was seen as the front-runner having experience of running mobile banking services in countries such as Pakistan, Thailand, Hungary and Malaysia. The company even runs a bank in Siberia.

Close