Exclusive Interview | No hurry to become SFB, says Fino Payments Bank MD

You can say that not only are we growing in revenue, we are also growing our profit after tax and the return on equity is also there, so our focus on growth and profitability continues in this year… we are in a growth momentum and our profitability has also grown substantially. We expect to continue with the same momentum as well as profitability in this quarter and future quarters.

We have 8.6-8.7 lakh merchants currently. We add around 60,000-70,000 merchants on a quarterly basis and we expect to continue with the same rate.

Could you tell us about new products in the pipeline?

We started as a payments company and added multiple products recently. We have received Reserve Bank of India approval for international remittances, so international remittances will get launched in Q1 of FY23. We are going deeper into Aadhaar payment systems, we are joining Aadhaar Pay as we speak, we are also looking at growing Employee Pension Scheme deposits on the payments ecosystem.

On liabilities, our subscription product is doing exceedingly well. We expect that we will continue growth on those liability products, especially on savings accounts. We have launched a new product on current account called Sampann, where similar to what we offer in savings accounts, we are offering current accounts on a subscription basis, albeit at a higher price and we are seeing good traction in terms of usage of these current accounts as well. We are awaiting approval from the regulator on recurring deposits and fixed deposits, where we have partnered with another bank for support.

On the credit side, we have started doing pilots on consumer lending as well as merchant lending, plus we also do gold loans with NBFCs and a bank. We will continue to expand on credit for our customer segment and hopefully in the next two-three quarters we will see higher growth.

On mutual funds, we are again awaiting approval from the regulator… We have also started to pilot digital gold as a savings within the investment domain.

As your product basket expands, will you be able to sustain the double-digit gross margin that you currently earn?

We were at 30-32 percent margin as of December end and we expect to be rangebound in that margin as of now. Margins might change a little bit, depending on the product mix but within the current product mix, we do not see too much of a downward or upward trend. We expect the margin to be in the range of 30-32 percent.

You are lending via partnerships, accepting deposits up to Rs 2 lakh, and cross-selling products to existing customers. What’s holding you back from applying for a small finance bank licence?

SFB has its own advantages. It broadens us on the liabilities side. We don’t have those restrictions of Rs 2 lakh, we can do more products like recurring and fixed deposits, but it has other cons in terms of priority sector lending. Credit is something which we are experimenting with right now with a couple of partners who understand how this entire credit ecosystem will work for our customer segment as well as for our merchant segment and it is a little too early for us to have a better sense in terms of how credit will eventually work.

Having said that, I am seeing in the last couple of years, maybe because of Covid-19 and otherwise, credit (quality) has seen some negative impacts. I would wait for some more time to see how it evolves and then take a call and for that we will also have to build up our scale and team. There is no real hurry for us to convert into an SFB because as a payments bank we are doing quite well. We will become eligible after June 30 this year but we don’t have any plans right now to convert into a SFB or to apply to RBI. Even if you do apply for a licence to the RBI, it is a one-and-a-half-year to two-year process to convert into an SFB.

Your shares are trading at almost half the price at which they listed in November. Why do you think this happened?

I can only control my performance – and my fundamentals are solid. Our profit grew 95 percent on a YoY basis and last year too was a very substantial growth year for our profitability as we turned around from a lossmaking to a profitable entity… our revenue has grown by 29 percent, so we are one of the very few fintechs that are profitable… but the market is looking at all fintechs with the same lens. Over a period of time, as our profitability numbers and as our performances are seen in the market, I would personally hope that people would start to differentiate between Fino and other fintechs and see that the Fino model is profitable, sustainable and growth-oriented.

Secondly, I think the general negativity around technology IPO stocks, not only in India but globally also, has affected (our share price), which has resulted in many foreign investors taking money out. Not only is new money not coming, even existing money is going out… The recent meltdown is largely on account of the ongoing crisis (Russia-Ukraine).

You said market participants are viewing all fintechs with the same lens. Has the BharatPe founder-vs-board tussle played any part?

I would desist from talking on company-specific matters and person-specific, I would rather not comment on this. But I can say that this does not impact the sector per se – definitely it impacts the startup ecosystem more… This is a public matter between a company and a founder, so let them sort it out… the sooner they can sort it out, the better it is for the entire startup ecosystem.