We have a 5 to 7 times spike in applications for online payments bank accounts since Jan 31: Anubrata Biswas, CEO Airtel Payments Bank

“We have just scratched the surface,” said Biswas in an interview with Moneycontrol, while refraining to comment on its peer, Paytm.

Edited Excerpts:

Let’s talk about the third quarter numbers. How has the user growth been so far?

We clocked a revenue of Rs 469 crore, up 47 percent YoY in the October-December quarter, with a 120 percent YoY jump in net profit at Rs 11 crore.

We see a large number of users from Tier 2 and 3 areas coming organically. On the urban side, we are seeing a rise in demand as the users want a safe second account for their everyday payments. They don’t want to expose their main bank account for these daily transactions or digital frauds. We are now adding close to a total nine lakh users every month.

Have you seen a spike in this number, in the wake of RBI’s diktat on a competitor (Paytm) firm?

We don’t want to comment on anyone. But our digital offerings have seen a sharp demand in the last few days. There is an average 5 -7 times spike in new account opening applications (including for FasTAG).

On the rural side, we continue to open a large number of accounts. We have more than four lakh active banking points and are India’s sixth largest bank in the mobile banking. The business in terms of user growth is now coming to scale. Revenues, consequently, are peaking. We are still at the early stages and investing in the bank to prepare it for the future.

A lot of issues have come to the fore with respect to KYC. Is it a big challenge, especially in tier-3 cities and below or is it different for payments banks?

Every bank in the country follows the KYC to the T. There is a master direction and a publicly published circular. If you're a bank, you must abide by those rules. It's as simple as that.

But there are cases where people have found their Aadhar linked to multiple accounts…

You can’t do that. It’s not possible. There is a UCIC (Unique Customer Identification Code) regulation, which means that every customer must be unique in your system.

We can’t comment on something (about Paytm) that we don’t know about.

Speaking of the future, do you plan to tap the merchant side, with new products like soundbox and POS machines. You already have a large network on the ground…

We will look at building an integrated play sometime in future. Having said that, we have the opportunity to get a quarter of a billion users on the consumer side and we are still relatively under penetrated. Existing services, including payments, deposits, remittances, insurance etc., will result in revenue growth.

Many in the industry have written off the whole idea of payments banks altogether, on the back of limited banking services and thin margins. Do you think there is still a case for payments banks, from a growth and scale perspective, in India?

Of course. If you look at Airtel Payment Bank, it is growing at a CAGR of over 40 percent. The revenues have grown 47 percent year-on-year. Profits are, of course, growing even faster. I can tell you with confidence that our Q4 is going to have similar growth rates.

The second thing is the despondency or the sentiment thesis (of using a payments bank). Is it spilling over to consumers? Like I mentioned earlier, online applications today are rocketing, which is a very telling indicator of consumer sentiment.

But doesn’t the argument of limited revenue streams still hold?

Let me give you another data point. Our bank deposits are growing 50 percent, which is faster than our revenue. We see this trend continuing even in Q4. I agree with the argument that merchant spaces have potentially higher margins. But you need to give them products that add value. The bank will look into this in future. But as of now, growing consumer base will drive revenues.

Could you share with us the current revenue breakup?

Two-third of our revenue comes from transactions. This includes B2B payments, cash management services (for over 3,000 partners, including 200 large MSME partners), recharges, remittances and so on. About 26 percent is from fee income we earn from cross selling products like insurance. The remaining 8-9 percent is earned from deposits.

If you go three years back, 90 percent of our revenue was from transactions and the rest from deposits. We have well diversified this over the years.

Does UPI (zero MDR) play a spoilsport for revenues?

We don’t count any UPI person-to-person (P2P) transaction in our GMV. So that gives you a sense of the volume of “monetisable transactions” we have on our system.

What about lending by payments banks? Has any progress been made on the application to allow payments banks to do credit?

The pitch has been ongoing for quite some time. I'm very sure that the matters are being discussed at appropriate forums and we'll wait to hear back.

What I can tell you is that there is certainly an interest in discovering what the payment bank can do more for India, especially bringing people into the formal credit system.

Without lending or a small finance bank license, is the whole model scalable?

Yes. The opportunity to serve just in terms of user expansion will give enough growth rates for the next few years. There is a huge opportunity just on the consumer side, and enough market out there organically for payments banks to serve both digital India and inclusivity.

But how we think is that lending will allow us to service more needs and ensure that consumers in India are served better.

Speaking on profitability and low cost, it does give you a leg up to have the backing of a large telecom entity (Bharti Airtel) …

If you go back to the whole genesis of a payments bank, the idea was to set up a very low-cost efficient infrastructure or a bank, which could deliver a ‘low cost to serve’. So, the thought was - can existing physical infrastructure like telecom points be rewired to offer banking services and drive down the costs?

Of course, everything is appropriately ring fenced, you have to have the right compliances and independence.

It’s a model that builds over time, and now we are seeing the benefits of that in terms of new consumers.