Moneycontrol Be a Pro
Get App
Last Updated : May 24, 2016 11:12 PM IST | Source: CNBC-TV18

Vijay Shekhar Sharma: Are payments bank dead on arrival?

In an interview with CNBC-TV18, Vijay Shekhar Sharma, founder of the wallets firm and payments bank licensee Paytm, discussed what the decision means and whether it will impact the success of the payments bank model.


Tech Mahindra today announced it had decided to not go ahead with the launch of its payments bank, becoming the third licensee to drop out of the race after Cholamandalam and Telenor.

Tech Mahindra CEO CP Gurnani blamed "changed market conditions" for the move and said a payments bank will not be able to make money for at least three-five years.

In an interview with CNBC-TV18, Vijay Shekhar Sharma, founder of the wallets firm and payments bank licensee Paytm, discussed what the decision means and whether it will impact the success of the payments bank model.

Below is the verbatim transcript of Vijay Shekhar Sharma's interview with Ronojoy Banerjee on CNBC-TV18.

Q: What is this big hullabaloo? There was a lot of optimism, this was that big opportunity to increase financial inclusion and bring in the unbanked people. Why are suddenly companies developing cold feet?

A: It is the most important opportunity for India to build financial inclusion. It will remain as one of the key things that India gives to the world - a banking model where the deposits are not risked in credit. Payment banks are built on a fundamental premise that consumers deposits can't be used to lend the money. That is exactly the reason that people are having little bit of cold feet because they probably have a business model approach which has been traditional but payment bank offers an incredible new opportunity of building a business model based on transaction, based on lower cost of distribution and I fundamentally believe it is one of the biggest opportunities for India to build inclusion at a mass level.

Q: So, you are saying the issue here is that these players are approaching this through a traditional business model. What you really need is something radically different because this is a radically different concept?

A: I truly believe that this is a radically different concept. It requires business model that has to be updated. It can't be built on same business model that traditional banks have been built. The very fact that traditional banks start from high value customers and they go to the smaller value customers whereas payment bank starts from the person whom nobody would have got banked and then goes towards the new customer base.

At Paytm we are today doing 126 million users who are Paytm users. Last year we had 75 million people who were transacting and this year when we start payment bank we are targeting 200 million bank accounts to be opened by  Paytm Bank in the first year itself. I truly believe that once we are live which is what we are working very aggressively on, I don't think it will be looked at as right now as it is looked at.

Q: 200 million you will do by August 2017 because you have said August this year is when you will launch your bank?

A: This is what we are keeping as our moonshot.

Q: So, that is going to be almost as much as what the government's Pradhan Mantri Jan Dhan Yojna (PMJDY) has done. They have opened 220 million accounts in the first year.

A: Jan Dhan accounts, Aadhaar and mobile technology is incredible opportunity for India. The PMJDY programme opened the door and showed the door that you can take this to a level too. At a payment bank level by bringing private institutions like everybody who has been assigned there is an opportunity and there is a viable business model.

We are actually feeling that this is an opportunity not just for us as Indians but also as a world at large because this is a time when banking needs to rediscover itself thanks to the Smartphone penetration we have.

Watch video for full interview....

The Great Diwali Discount!
Unlock 75% more savings this festive season. Get Moneycontrol Pro for a year for Rs 289 only.
Coupon code: DIWALI. Offer valid till 10th November, 2019 .
First Published on May 24, 2016 10:29 pm
Loading...
Sections
Follow us on
Available On
PCI DSS Compliant