[The Big Interview] The poor will take to digital, it is the well-to-do who benefit from the cash economy - Shinjini Kumar, CEO of Paytm Payments Bank

Barely a quarter after becoming the head of Paytm’s proposed payments bank, Shinjini Kumar says she is enjoying setting up operations. After spending 17 years at RBI and following stints with Bank of America and consulting firm PwC, Shinjini took on the reins of Paytm’s payments bank business a few months after the wallet company got the regulator’s nod. In an in-depth conversation with YourStory, Shinjini spoke on what’s exciting about setting up a payments bank along with some of the challenges when it comes to breaking new ground. Edited excerpts:

YS: What’s the update on the Paytm Payments Bank? When is the launch?

Shinjini: We’re still progressing with all the three work streams. One is regulatory approvals, which is not yet done and is still under process. The second is technology integration. The whole app development is ours, data analytics as well. Third is the exciting part. This is where we travel and search for people who would like to partner with us as we journey. It’s the whole business and product development part. So, there’s work going on in all three processes simultaneously and hopefully, we’ll go live before Diwali.

YS: Which part is to the most important among the three?

Shinjini: The regulatory and the tech part are the most important because we can’t go live without them. Business development is the exciting part and is also completely under our control, because of which it is happening faster. For technology, we’ve already announced that Infosys and Wipro are our partners. The app is in-house. There are some minor modules, which are vendor-driven. Largely it’s a matter of integration. We are on-track on the regulatory part as well. But there are dependencies present.

Also Read: Can Paytm really be a game changer in the payment banks space?

YS:  In terms of partners, what are you looking for?

Shinjini: There are two categories of partners. One is financial services partner, through whom we can offer services and products, that we can’t do ourselves, like lending, insurance and mutual funds. Within lending itself, it could be microfinance and NBFC for examples. That’s one category of partners who we’re targeting. We have decided to start with a simple set of partners and not to complicate at the beginning itself. The second set of partners whom we’re targeting are those where we think they have a natural affinity for our business. So they may have a digital agenda that benefits them and they’re willing to be partners in. We could have a situation where they’ll be using our infrastructure or it’ll be like we using their infrastructure. And between us maybe we can create a common value proposition for a certain type of customers. For example, retail. So if they’re already an e-commerce company, we will obviously have a natural affinity towards it. These are our natural partners.

The third category, we might not even call them partners but will be service providers to them. But to succeed in the task that we want to do we need a deeper level of commitment from people who want us to implement these programmes. And this is primarily related to the inclusion agenda. For example, places where we think even data connectivity is a problem. So we might have to solve this problem using feature phones. So, who are the people there? Lots of people want us to solve the problem prevalent in that space. These might be agri-input companies, collecting insurance premium or companies that disperse premium rates or companies selling agricultural equipment. These are companies that are making small payments to the rural people or are collecting payments from them. Bringing the entire village into the financial services ecosystem will increase these companies’ value a lot. So the task of opening an account and sending money is not that difficult. The difficult part is the usage of it. The usage of it can be either digital or it can be physical. Most probably it might be physical at the beginning and slowly become digital, as the infrastructure develops. That’s a long term journey. As we have a long term vision and work towards it, we require partners as well who’ll share the same vision and have long term goals in mind.

YS: So who are these partners?

Shinjini: In terms of the partners whom we are talking to or exploring, it should be more of a philosophical agreement between us of what we want to do. Essentially we want to create a financial service ecosystem. Where we’re receptive to new people. People that could be effective users of financial services for the first time. They might have a bank account but they might not be really active users. Or they might also be active users with the bank, but might not have tried mutual funds or buying an insurance. Most of the users will be first timers. So partners need to be equally receptive to the idea of access, partners need to be open to the idea of ease of process, transparency and simple structure of communication. One of the challenges in financial services is that there’s too much fine print. We want to proceed with the assumption that the consumer either doesn’t understand or doesn’t have time to read. Just because I’ve communicated something to him is not a protection for us. Therefore, in reality our communication has to be of a certain type. Our behaviour, our attitude certainly needs to be of a certain type. When we’re selecting our partners, I think these qualities of the partner are very important to us. The partner should be ready to co-create, to experiment. Because a lot of this is based on futuristic assumption and testing ideas that’ll work. So the partners should also have an equal amount of faith on the project as you. There’s also a lot of scepticism present. A fair question to ask for everyone is, if no one could do it so far then why do you think you can do it? It’s a very good question.

YS: Three players who got bank licenses have already dropped out.

Shinjini: For some people it’s a matter of saying this cannot be feasible or if it’s feasible it’s at a cost structure that’ll not make sense to them. It’s not about good or bad. It’s about your own business focus.

YS: How to build a sustainable business with these many restrictions and when the profitability seems to be uncertain?

Shinjini: You have to think about what do you have, what are you getting and what are you losing on starting this new business. Everybody will make their judgement for themselves. Because the starting point itself is different. Our starting point is that we’re a wallet company and we have a large base of consumers. Our ability to do things for them is somewhat low. However, we are growing and building upon it. But with a bank account, our ability to grow increases greatly. In addition to that we get an opportunity to get more number of consumers. Therefore, it’s only additive to us. It doesn’t take anything away. The only thing that it takes away, in terms of challenge is that it creates a regulatory compliance. Which we don’t mind, because we just want to be fair and transparent to our customers. The only thing that we need to get sorted is the paper vs digital. The only place where we think the alignment between the existing regulatory thinking and our thinking is not 100 percent there is that we consider digital to be a very powerful tool. When you had normal cameras you waited to look perfect before taking the photograph, but in the digital world you don’t need to wait. You can take 100 photographs and know which one is the good one and which ones are bad. The regulators are still coming from the physical camera position, where there’s lots more comfort with forms and paper. So, those will be our areas of concern. Currently, we are working on the guidelines to make it more digital-friendly.

YS:When you launch, will it be immediately a pan-India service?

Shinjini: As far as our product is smartphone-driven, the geography doesn’t really matter. What it takes is that the user should be digitally literate and should have network connectivity. Good thing about Paytm as a product is that while all other wallets took the route of converting cash into digital for the purpose of usage, Paytm left it to the customer to figure out. Which means that there’s a good amount of digital discovery. And that’s across the country. We definitely do not want to lose it and want to continue on building that. We want to improve on the customer engagement part. We have also taken the platform from online to offline space. In the offline part, we could start with 20 cities at first and then move to 60-70 cities. When it comes to our own effort, like going to rural areas and convert people, we are quite focused that is should be under banked areas so that would have to be East and Central India.

Also Read: Finance and technology – a tango over the decades

YS: Everyone’s been talking about payment banks. We know what the RBI has said these banks can do and not do. But, on the ground, what will Paytm payment bank look like?

Shinjini: Our company’s vision and core is mobile-first, pay through mobile. That’s the core proposition. Even after we become a bank, the mobile-first proposition will remain. Mobile continues to be at the core of what we do. The technology helps us to achieve a positive infrastructure at which we can scale. The second thing that we emphasise on a lot is conversion of cash to digital and including new people into the ecosystem. Just because we became a bank, we won’t lose focus of these two goals, as these two are an integral part of our company. We want to create an ecosystem which is digitally more simple and friction-less, because the pull of the wallet from the pocket is also a form of friction in money transactions. On the other hand as a bank, if I am going to draw people into the ecosystem and their cash is going to be withdrawn back as cash, then the money is entering the cash ecosystem again. These two are really important because the customer who I’m targeting is invisible to the formal financial system. I want to create a platform where the customer will be able to exercise his choices.

YS: What do you think of your competition?

Shinjini: We don’t think much of competitors. Our real and only competition is with cash. Cash constitutes for 97 percent of transactions and cash has some inherent unfair advantages. Cash is generally subsidised by the government but when it gets electronic there’s no subsidy. Then what is happening is that the whole infrastructure of cash is hugely biased against the poor. Because the privileged people have nothing to lose because the poor live in a cash-dominated environment. The privileged have bank accounts and they have created a layer of agents and intermediaries. The most interesting case is households. The urban households, especially, owe more money to the poor. The people that work for us, we never pay them on time. They’re all giving us credits. They’re not able to pay because we have to get money from bank account. We are living off their credit.

It’s working for us and therefore if this changes (money changing from cash to digital) we say, then there’s some problems. We start thinking that let’s say the poor people start using Paytm, then how will he/she maintain a password and so on. All of us migrated from cash to digital and learnt lots of new things. Recently I saw this movie “Catch Me if You Can”, where the main character forges cheques and it’s based on a true story. It’s not like there was no forging of cheques or the counterfeiting of cash in the present. However, in digital there’s low vulnerability for cheating. We see lots of government schemes today and there’s an e- version for all of it. But all of us require it in physical like a physical passport.