Airtel Payments Bank is in its fifth year of operation with 50 million active users. A year from now, it will complete five years of operations, which will make it eligible to apply for small bank licence. The company's MD and CEO Anubrata Biswas spoke to Mint on the viability of payments banks and Safe Pay, a security feature for UPI transactions that is believed to help the bank grow its customer base. Edited excerpts:
How did the covid-19 pandemic impact business?
In covid-19, consumers resorted to digital transactions in a big way. We always had a robust digital presence and saw our business grow dramatically.
It was difficult for the traditional banks to keep all their bank branches open through the usual working hours. A lot of financial institutions and companies that deal in cash started using our services dramatically in rural and urban areas. Our banking points were open on weekends and late in the night.
Many urban migrants went back to their towns and villages. There was a considerable demand for deep rural services, mainly because the government was releasing subsidies. At that time, it was a big issue for people to travel to get the subsidy. We have a deep rural presence across the country and saw our business accelerate during the pandemic.
Will you apply for the small finance bank licence and do you think a payments bank is a viable business model for the long term?
I can't comment on whether we will apply for the small finance bank license. However, we are excited about the payments bank model. Our revenues year-on-year have been growing rapidly.
The big problem in the country is that people don’t use bank account regularly. There are 340 million Jan Dhan accounts. Around 48% of them are inactive. The accounts have about 1,40,000 crore funds.
The question is how you make consumers use their bank accounts at an affordable cost of service? Payments bank is a low-cost model. We don’t have a branch infrastructure. To put it in perspective, 75% of the retail banking cost is the branch cost, and it takes anywhere between three years and five years for those branches to break-even.
There are 200 million people not using digital payment. About 300 million people in rural areas don’t use banking services. It’s a massive opportunity when you put these data points together.
Can you explain the security feature and why you think it will help grow your customer base?
Typically, the defrauding happens when the account owner discloses OTP (one-time password). Sometimes the fraudsters pose as bank officials and use different ways to make the person share the OTP.
At times, the bank account owner is told that the money is being credit to his bank account. The account owner doesn’t realise that he’s transferring money to the fraudster.
Our solution prevents such frauds. Even if a fraudster gets the OTP, the account owner has the option to decline the transaction. The account owner receives a notification asking to confirm the transaction after the fraudster enters the OTP.
It’s the third layer of security that we have added besides the two that come with UPI (Unified Payment Interface). The notification provides the detail of the transactions and asks the account owner to confirm or deny it.
We expect the security feature to substantially accelerate digital inclusion because consumers will get a lot of confidence to do digital transactions.
There was a third-party survey done around two-three months back. It highlighted that 47% of all respondents from tier-1 cities are scared of digital fraud. They don’t want to expose their primary banking relationship that may have significant funds in it.
The security feature would help us to be known as a neo-bank. The neo-banking thesis is built around simplicity and value.
In India, neo-banking must have a third pillar, which is security. For simplicity, we have video KYC (know your customer) and banking on the phone. We have security through the Safe Pay feature.
Then we have a value-driven digital bank account branded as Rewards 123. It’s built on global best practices. Customers get 1% cashback when they load money, 2% cashback when they shop using the account and 3% cashback on telecom bills.
With these, we expect many to upgrade to Airtel’s payment proposition.
Can’t others replicate your security feature?
It is built on complicated technology. That’s why this product took a long time to develop. It involves the telecom network and works only on Airtel network.
You don’t have high UPI payment volumes. Do you plan to launch a separate app for payments bank to capture those?
We have seen that there is a significant uplift of services when there is a close integration of services between telecom and banking. Many customers sign up for payments bank account when they come to Airtel Thanks app for a recharge. During this time, they are exposed to our offerings.
If 100 people are coming on the Airtel app, a third transact is using the bank account. The same may not happen if we have a separate app.
We don’t focus on capturing all the value within the ecosystem. We are, therefore, fine without a high number of UPI transactions through our bank if we can provide value to customers.
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