Payment banks in India

Abstract

The purpose of this study is to understand the Payment Banks in India, as part of the new initiative by the Reserve Bank of India, in providing provisional licenses and in-principle approval to 11 non-banking sector companies to set up payment banks in the country. The study looks at the payments industry in India, the challenges involved and the requirement for Payment Banks in the country. It then analyses the current payment systems in place in the country, and also learnings from institutions in other developing countries such as Brazil and South Africa, whose models could be imitated by firms in India. There is an analysis on the different customer segments for payments banks, and the potential target segments. Business models and motivations of some of the licensees are studied in brief, and an in-depth study of the telecom sector and its foray into the Payment Banks industry is conducted. A comprehensive analysis of Vodafone’s M-Pesa is done, and an interview with the Payment Banks project team of Vodafone provided insights on their vision, business model and scale of operations for the project to be implemented in the next 18 months all over the country. The potential challenges for implementation of Payment Banks are also seen, and recommendations are provided for M-Pesa, and the telecom sector, in particular, to successfully implement the project. The study is concluded with a short summary on the growth and future potential for Payment Banks, and its impact with financial inclusion in the country. In the last part of our CCS, we have looked at the role of National Payments Corporation of India and its products and services, namely RuPay card and Unified Payment Interface.