In August last year, RBI approved licenses for technology companies to open a payments bank. A payment bank can only accept deposits, not lend any money. This does have profitability issues, but a few companies went ahead with the idea.
Airtel has already launched its payments bank in India, while the other players are still working on this. Vodafone’s largest competitor is already in the business, and it is still discussing on the policies and licenses.
“We are in the final stages but haven’t applied for the final license yet. Our plan is on track for launch by March,” said Sunil Sood, Managing Director at Vodafone India. Vodafone only has its own M-Pesa mobile payment service, a mobile wallet which its users can use for payments.
UPI has the potential to kill mobile wallets, which is why companies are now looking to invest in payment banks, that have lower margins, but can attract a large chunk of population. They are easier to maintain and make payments through.
Sunil Sood added, “As we build the digital ecosystem, it will become profitable. Cost is also high as we are converting digital money into cash but as the velocity of it decreases and most payments happen via digital medium it will become profitable.”
Vodafone thinks that it has enough customer base and name in the market to launch a successful payments bank. Airtel registered over 1,00,000 accounts opened in just 2 weeks of the launch, which speaks volume of the potential of a payments bank.
Airtel has a bigger customer base than Vodafone and also started way early in the business. Vodafone has a lot of catching up to do, as it lags both in terms of implementation as well as reacting to market changes.
Vodafone launches M-Pesa Pay App for merchants
To facilitate easy transactions between customers and merchants, Vodafone has launched the M-Pesa app so that there is a cashless transaction between two people. Any merchant can register himself/herself on the M-Pesa Pay app to get started.
“M-Pesa Pay is a new feature which we’re adding on to M-Pesa to enable ease of transactions between merchants and customers. M-Pesa Pay is really a merchants’ product,” Sunil Sood told the reporters.
Retailers and merchants must download the Pay app and register themselves as merchants before receiving payments. Merchants can request money from customers, which will be received through a notification on the customer’s app. On tapping the notification, customer will be able to make payment directly to the merchant.
Users of M-Pesa can make payments for utilities, do transactions such like bill payment, recharges and remit money to family and friends. Retailers and merchants can ask customers for cashless transactions through this Pay app.
It is good to see companies working on the merchant side of the business and launching services that will help both the parties. Unfortunately, we don’t know the future of mobile wallets in India, as payments banks have become the next big deal that might wipe out these digital wallets.