Four telecom companies — Vodafone India, Bharti Airtel, Idea Cellular and Reliance Jio — are set to benefit from the Reserve Bank of India’s (RBI) decision to grant in-principle approval either to their subsidiaries or their parent/group companies to open Payment banks in India.
Eleven out of 43 applicants were on Wednesday granted Payments banks licenses thus opening a new chapter in financial inclusion in India.
While Vodafone m-pesa Ltd. is the mobile money transfer and payment services business of Vodafone India, Airtel M Commerce Service Ltd. is the mobile money business of Bharti Airtel.
Reliance Industries Ltd., which has got a license, owns telecom operator Reliance Jio that will commence operation by the end of this year. And, Aditya Birla Nuvo Ltd., which has bagged a licence, will set up the payment bank with 49 per cent equity participation from group telecom firm Idea Cellular.
Aditya Birla Nuvo is also the largest promoter shareholder of Idea Cellular.
According to analysts, the licences to operate payment banks will open up new revenue streams for these telecom companies.
“The telecom companies have the large number of existing customer base and they also have the last mile connectivity. The Payment banks licence will be their one more revenue stream and they can offer a host of services and make money,” said Daljeet S. Kohli, Head Research, IndiaNivesh Securities.
Since telecom firms are facing headwinds due to declining revenue from voice and messaging services, the payment bank service will provide them with alternate source of money. “They will earn revenue from the mobile wallet service and also charge a fee for money transfer. They can offer so many services and in the process make money,” said Mr. Kohli.
Sunil Sood, Managing Director and CEO, Vodafone India, said: “The Payments Banks licence will allow us to do a lot more than what a semi closed wallet licence does. It allows you to do both cash-in and cash-out, it allows you to bring in international remittances and it allows you to sell third party products like insurance and other semi-banking products.”
“So being a Payments bank, it gives us the big edge in terms of having the faith and trust of our customers. The combination of being a bank plus a mobile company allows us to reach out to the masses,” Mr. Sood said.
Vodafone distributes its products through 1.8 million retail outlets across the country and 60 per cent of them are in the rural belt. Thus, Vodafone believes that it can run a successful payment bank backed by the mobile company. Analysts are not sure about the profitability of these ventures.
