It seems Paytm will actually race ahead all others to become India’s first Payments Bank. Founder Vijay Shekhar Sharma has categorically stated that their Payments Bank would be launched before November.
As per unconfirmed reports, Paytm is aiming for a Diwali launch.
Last year, after RBI approved Payment Bank (in principle) to 11 entities including Paytm, Airtel, India Post and other, right now, only 8 entities remain in the race. Tech Mahindra dropped out last month; Dilip Shanghvi and their JV of IDFC Bank and Telenor has already opted out and Cholamandalam had quit the race in April.
Now, among the remaining players, Paytm is the prominent one which has announced a date for their launch.
Airtel Money-Kotak Mahindra JV is another prominent player, as they have already received the first full fledged RBI license for opening their own Payment Bank; but till date, they have not announced any date for launch.
India Post is another big player, whose payment bank operations is expected to make a dent in the market.
Paytm’s Plan for Payment Bank
Paytm’s payment bank would launched with an initial capital of Rs 300 crore, and they are planning to create 20 crore new bank accounts within the first year.
Interestingly, this new Payment Bank would be 49% owned by One97, the parent company behind Paytm, and 51% of the share would be owned by Vijay Shekhar Sharma himself. They are looking at a period of 3-5% for breaking even.
Vijay said, “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. The company (One97) and I will continue to keep funding the bank till it is profitable,”
For the first year, Paytm will expand into 12 tier-2 cities across North East India, Bihar, Madhya Pradesh and UP.
Earlier, we had reported that Paytm will spend Rs 400 crore to promote their Payment Bank; and hire 300 to manage operations. They expect to bring in Rs 10,000 crore as deposits into the bank in the 1st year.
Monetization Strategies
As Payment Bank cannot lend money, they will depend on selling financial and banking products to generate income. Products from insurance, wealth management and loans can be considered as monetization strategy for Paytm.
Wealth management products starting from Rs 10 would be introduced.
Vijay also said, “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,”
Earlier, Paytm had partnered with Wipro to develop core-banking solutions for their Payment Bank.
[…] we had reported about Paytm’s ambitious plans to launch their Payment Bank as they are planning to open 20 crore new bank accounts within a year. […]