Payment banks to be new revenue stream for India’s telcos

Monday, July 28, 2014

Analysts expect all telcos to join the race; a liberal policy could boost revenues by 7-8% for the sector

The recent announcement of the Reserve Bank of India (RBI) permitting telecom operators to serve as payment banks is likely to attract both incumbent and newer cellular operators, as this would ensure a new revenue stream for the debt-laden sector.

According to analysts, telecom operators can leverage their large customer base as well as wide reach across the country, especially in the semi-urban and rural areas. As a payment bank, telcos will be able to accept deposits and remittances but they cannot lend.

Bharti Airtel and Vodafone India, the country’s top two cellular operators by subscriber base, already offer payment instruments – Airtel Money and Vodafone M-Pesa. However, these companies can’t offer transactions that involve cash transfer owing to regulatory restrictions.

“The licence to operate as a payment bank solves this problem. These two companies just need to extend their existing service. Both Airtel Money with 1.7 million users and M-Pesa with 1.2 million subscribers did not take off properly so far as there was no real cash transaction. These companies already have the network and infrastructure in place. They just need to get the licence to operate as payment banks,” said an analyst with a management consulting firm.

Source: Business Standard (link opens in a new window)

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banking, Base of the Pyramid, financial inclusion, financial innovation, mobile money