100M saving accounts. 350M wallets – behind Paytm and its ambitious payments bank business

Paytm Payments Bank – which restarted onboarding process for new customers in January after RBI nod – is already setting some ambitious targets for the year ahead. The payments bank expects to more than double its savings accounts base to 100 million accounts before the end of this year, its MD and CEO told YourStory.

Paytm Payments Bank (PPB) MD and CEO Satish Kumar Gupta outlined his plans to cement a market leading position for the payments bank. This, he says, will be augmented by the complete bouquet of services the bank offers on a single app – from ticket bookings to utility payments to investments in financial instruments, among others.

But competition is heating up for Paytm’s bank.

India Post Payments Bank, which was launched amid much fanfare by Prime Minister Narendra Modi in September, claims to be leveraging its network of over 155,000 post offices as access points with 300,000 postal service workers, which provide doorstep banking services.

In addition, Reliance Industries has begun live beta trials for its Jio Payments Bank and is testing services among its employees, replicating a strategy it employed with Reliance Jio Infocomm three years ago.   

And yet, Satish Kumar, who took over as CEO in October, believes it is Paytm Payments Bank’s motto – ‘No fear. No greed. No entitlement’ – that serves as a key differentiator in winning over customers. This, coupled with the bank’s zero-balance-offering and no-cost digital transactions, is expected to steer the payments bank to stay ahead of competition, particularly as it grows its customer base in rural and semi-urban areas.

Here are the edited excerpts of YourStory's interview with Paytm Payments Bank MD and CEO Satish Kumar Gupta:

YourStory: What are the some of the initiatives that Paytm Payments Bank has been working on since it restarted onboarding in January? And what are your focus areas going forward? 

Satish Kumar Gupta:  Under our payments bank offering, we have various products that include the wallet and saving account services. At present, we are focusing on the money transfer and cash management services that we provide customers in rural and semi-urban areas through our banking correspondents.

Recently, Paytm Payments Bank also received approval from the Reserve Bank of India (RBI) to market and cross-sell financial products to our customers. These include mutual funds and pension funds. We will introduce these products in the first quarter of the current financial year.

Also read: Paytm Money opens up to over 42M customers as it integrates with Paytm Payments Bank

YS: Paytm Payments Bank was ordered to suspend new account enrolments in July last year. How did that affect the business?   

SKG: There was a business impact and we weren’t able to grow as fast as we expected. Despite that, in my opinion, we did fairly well and met our targeted numbers in the last quarter.  

Incidentally, just weeks after we had to suspend onboarding of new customers, the Supreme Court’s judgement on Aadhaar came into effect. This impacted the entire industry, creating a roadblock for onboarding newer customers. So overall, the industry didn’t do that well. 

But all I can say is that there were a lot of learnings, which will help us grow in the future.

There were reasons around compliance and digital KYC, among several others, (that were cited for the suspension). Unlike other emerging banks, we are grateful that the RBI accepted our submissions and didn’t impose any penalty.

YS: We are given to understand that the regulator raised certain concerns about the proximity between promoter Vijay Shekhar Sharma of One97 Communications and Paytm’s payments bank. How did you handle this?

SKG: Yes, these were some of the reasons why RBI chose to pause adding of new customers for PPB. But we gave multiple submissions to state that Paytm’s payments bank business has its own processes and operations which continue to be separate from the parent company.

Further, PPB has independent operations from its parent. We are glad that the RBI accepted our submissions.

Also read: Profitability is over-rated, companies are only as powerful as their free cash flow, says Vijay Shekhar Sharma

YS: What are your expectations from the regulator on policies that could help spur growth in the payments bank segment?

SKG: We have a strong reach and presence across the country and we believe that there is a big opportunity for us to do more. We hope that the regulator will introduce new rules in areas such as allowing us to increase the limit of deposits from the current level of Rs 1 lakh, introduce fixed deposit products, and foray into lending.

I believe that Paytm Payments Bank has created financial inclusion, since more than 25 percent of our customers are from rural and semi-urban areas.

YS: Can you give us a sense of the growth trajectory that Paytm’s payments bank business has seen so far and your expectations for key growth metrics, going forward?

SKG: We have 44 million saving bank accounts and this is expected to grow to 100 million by the end of 2019. At present, we have more than Rs 400 crore in deposits in our saving bank accounts and Rs 1,700 crore in deposits for our wallet.

Further, we have Rs 25,000 crore being transacted on our payments bank platform on a monthly basis. We expect this number to cross Rs 50,000 crore before the end of this fiscal. 

We currently have 250 million wallet accounts and expect this to grow to 350 million by the end of this fiscal year. We estimate that we might reach most of these numbers this fiscal year.

Also read: Interoperability triggers a tussle between digital wallets and payments banks

YS: How much investments are you looking to be injected into the payments bank business over the next few years?

SKG: We are adequately funded by our operations and will shortly announce our roadmap to profitability. At present, we are growing well. Though digital transactions are free for our customers, we earn commissions on the cross-selling of financial products.

YS: How is Paytm Payments Bank creating a strong differentiation against competition?

SKG: Our motto is ‘No fear, no greed, no entitlement’, which means we want to deliver services without a sense of entitlement or greed. Therefore, we don’t have any balance restriction for our customers and they can continue with even zero-balance in their accounts.

Another differentiation we have is that all digital transactions are free for our customers on the payments bank platform. But our competitive edge lies in the fact that we offer a complete bouquet of services on a single app; these range from utility bill payments, ticket bookings, as well as other services.

Today, we have grown to a network of 200,000 business correspondents in more than 650 districts across India. And this number is only growing. So, our outreach is expected to grow bigger than some of our competition in the payments bank space.

Also read: Paytm Payments Bank now offers current accounts to businesses