Payments bank tailor-made for telcos: CRISIL

CRISIL Research believes there is a strong business case for payments banks in India because a sizeable portion of the country’s population remains outside the ambit of formal banking. We believe telecom operators are the ideal candidates to set these up, given their significant customer base in rural areas and wellentrenched distribution networks. Moreover, they are already offering mobile wallet (m-wallet) services for remittances. The value of transactions through m-wallet has more than tripled in the last two years to over Rs. 27 billion in the last fiscal, indicating the huge business potential. Setting up a payments bank also makes strategic sense for telecom operators as it would help them improve the ‘connect’ with customers, and also, over a period of time, obtain a greater share of their wallet.

The business is, however, unlikely to add significantly to the topline of telecom operators. Even five years after launch, we expect the contribution of payment banks to their overall revenues to remain at less than 1%. While telecom operators are likely to capture around 15% of the domestic remittances market by then, luring deposits is another ball game altogether because they will have to invest in brand building and gain the trust of depositors. As a result, we forecast payments banks will have a minuscule share of less than 0.5% of the current and savings account (CASA) deposits of the Indian banking system five years after launch.

Yet, we believe telecom operators will be interested in a payments bank licence because of the opportunity it offers to increase customer touch points apart from potential upsides to revenue in the long term. The other aspirants for a licence, we believe, will be India Post, large business-correspondent companies, and pre-paid payment instrument providers. But all of them will have to incur a much higher cost – compared with telecom operators – to set up competitive distribution networks and gain customers.

Disclaimer: This report (Report) has been commissioned by the Company/Investor/Exchange and prepared by CRISIL. The report is based on data publicly available or from sources considered reliable by CRISIL (Data). However, CRISIL does not guarantee the accuracy, adequacy or completeness of the Data / Report and is not responsible for any errors or omissions or for the results obtained from the use of Data / Report. Opinions expressed herein are CRISIL's opinions as on the date of this Report.  The Data / Report are subject to change without any prior notice. Nothing in this Report constitutes investment, legal, accounting or tax advice or any solicitation, whatsoever. The Report is not a recommendation to buy / sell or hold any securities of the Company. CRISIL especially states that it has no financial liability, whatsoever, to the subscribers / users of this Report. This Report is for the personal information of the authorized recipient only. This Report should not be reproduced or redistributed or communicated directly or indirectly in any form to any other person or published or copied in whole or in part especially outside India, for any purpose.

CRISIL Limited. All Rights Reserved. Published under permission from CRISIL"

Source:

Read More