Aditya Birla Idea Payments Bank, which is set to roll out a fully functional branch by the first half of this year, is relying on scale and brand name to lure customers. The payments bank is a 51:49 joint venture (JV) between Aditya Birla Nuvo Ltd (ABNL) and telecom major Idea Cellular, respectively.

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The bank will start operations with over 1.5 lakh touch points, an in-inbuilt United Payment Interface (UPI) solution and will look at distributing loans of other financial institutions

“It is clearly a scale game unlike traditional banking. In traditional banking you can put up one branch and still do well. Here, it is scale since technology platform is the same which has to accommodate many transactions. So more the transactions you accommodate, more benefit you can give to the customers,” said Sudhakar Ramasubramanian, chief executive officer (designate), Aditya Birla Idea Payments Bank.

According to Sudhakar, Idea has both online and offline scale. Out of its total customer base, 60-70 % have feature phones. Not everyone except State Bank of India has this customer base.

Banking on the power of m-commerce from its Idea’s existing customers, Aditya Birla would want to convert their conglomerate business into e-commerce on retailer side, doing payments through its bank.

Let’s have a look on what these payments banks are up to

  • Airtel Payments Bank

It became the first payment bank to start operations in November. The bank is offering 7.25% interest on savings account compared to 3-4% offered by conventional banks. It is charging a fee of 0.65% on all cash withdrawals from the account and providing one minute of mobile talk time for every rupee deposited at the time of opening an account. It plans to invest Rs3,000 crores to convert at least 100 million out of its 270 million Airtel customer with the bank.

  • India Post Payments Bank

After Airtel, it became the second entity to start operations in the country. It is offering 4.5-5.5% on saving account. The government has so far allocated Rs500 crore. The bank plans to open 650 branches by September 2017.

  • Paytm Payments Bank

Paytm Payments Bank has received investments of Rs 220 crore from Vijay Shekhar Sharma and One97 Communications. Paytm targets to reach a customer base of 500 million by 2020.

  • Fino Pay Tech Ltd

Fino Paytech has received the final license from the Reserve Bank of India to set up its payments bank operations. It is seeking help from ICICI Bank to set up its payments bank venture and is aiming to launch the new entity within two months. The ICICI Group owns a 20 per cent stake in the bank. It indicates to keep the interest rate on its savings bank deposits within the current market range of 4-5%.

  • Vodafone m-Pesa Ltd

It received equity infusion worth Rs 47,700 crore from its parent company. It hasn’t yet defined its plans for operating in the public domain.

  • Jio Payments Bank

Jio Payments Bank, a joint venture between Reliance Industries Ltd (RIL) and State Bank of India (SBI), has received the Reserve Bank of India’s final go-ahead to start operations. RIL could offer banking services to its existing and new customers by leveraging on its retail network, merchant tie-ups, neighbourhood Jio retailers and e-tailers. RIL holds a 70% stake in the venture and SBI owns the rest.

The effect in financial inclusion

RBI’s main objective behind payments banks is to achieve financial inclusion of millions of people, particularly in the remote areas of the country. It has issued that 25% of a Payments Bank’s branches must be in the unbanked rural area. Payments Banks will play a crucial role in implementing the government’s direct benefit transfer schemes where subsidies on healthcare, education and gas are paid directly to beneficiaries’ accounts. Besides, it facilitates the huge remittance market of migrant workers.

Technology is changing banking paradigms. A payments bank gives a vantage point to view these changes much better than any FinTech. It can tactically leverage their existing customer base and distribution channels to quickly acquire critical mass.