Payment systems: India - Revision history

Jyoti: /* 2017-19 */

2022-02-28T20:04:32Z

‎2017-19

Jyoti: /* Performance */

2022-02-28T20:04:12Z

‎Performance

Jyoti: /* Performance */

2021-07-28T19:02:04Z

‎Performance

Jyoti: Jyoti moved page Payment banks: India to Payment systems: India without leaving a redirect

2021-07-28T10:44:13Z

Jyoti moved page Payment banks: India to Payment systems: India without leaving a redirect

Pdewan: /* How they came into existence? */

2021-02-20T18:03:45Z

‎How they came into existence?

Jyoti at 09:06, 9 February 2021

2021-02-09T09:06:32Z

Jyoti: /* How will they function? */

2021-02-09T09:01:26Z

‎How will they function?

Jyoti: /* The Establishment of new banks */

2021-02-09T09:01:06Z

‎The Establishment of new banks

Jyoti: /* November 2016: Airtel Payments Bank */

2021-02-09T09:00:54Z

‎November 2016: Airtel Payments Bank

Jyoti: /* Establishment */

2021-02-09T09:00:29Z

‎Establishment

@@ Line 190: / Line 190: @@
-==2019: losses swell to ₹626 crore
+==2019: losses swell to ₹626 crore==
 [https://epaper.timesgroup.com/Olive/ODN/TimesOfIndia/shared/ShowArticle.aspx?doc=TOIDEL%2F2019%2F12%2F25&entity=Ar02516&sk=E15B644F&mode=text Dec 25, 2019 ''The Times of India'']
 Payments banks — including those floated by Paytm, Reliance Jio, Airtel and Fino — saw their aggregate losses mount 21% to Rs 626 crore during fiscal 2019 from Rs 516 crore in the previous year. “The limited operational space available to them and the large initial costs involved in setting up of the infrastructure imply that it may take time for payments banks to break even as they expand their customer base,” the RBI’s report on ‘Trend and Progress of Banking in India’ said.
@@ Line 205: / Line 206: @@
 [[Category:India|B PAYMENT BANKS: INDIAPAYMENT BANKS: INDIAPAYMENT BANKS: INDIAPAYMENT BANKS: INDIAPAYMENT SYSTEMS: INDIA
 PAYMENT SYSTEMS: INDIA]]
 [[Category:Pages with broken file links|PAYMENT SYSTEMS: INDIA]]
 =YEAR-WISE DEVELOPMENTS=

← Older revision		Revision as of 20:04, 28 February 2022
Line 188:		Line 188:

	Payment banks cannot extend any kind of loan, neither can they take deposits of more than `1 lakh. They were expected to make money from transactions, but PE-funded fintechs are providing free payment options. Also, being banks, they are subject to a high level of compliance requirements unlike digital wallets. In the absence of an assured revenue stream, many feel that a business case for payments banks may not be feasible.		Payment banks cannot extend any kind of loan, neither can they take deposits of more than `1 lakh. They were expected to make money from transactions, but PE-funded fintechs are providing free payment options. Also, being banks, they are subject to a high level of compliance requirements unlike digital wallets. In the absence of an assured revenue stream, many feel that a business case for payments banks may not be feasible.
		+
		+
		+	==2019: losses swell to ₹626 crore
		+	[https://epaper.timesgroup.com/Olive/ODN/TimesOfIndia/shared/ShowArticle.aspx?doc=TOIDEL%2F2019%2F12%2F25&entity=Ar02516&sk=E15B644F&mode=text Dec 25, 2019 ''The Times of India'']
		+
		+	Payments banks — including those floated by Paytm, Reliance Jio, Airtel and Fino — saw their aggregate losses mount 21% to Rs 626 crore during fiscal 2019 from Rs 516 crore in the previous year. “The limited operational space available to them and the large initial costs involved in setting up of the infrastructure imply that it may take time for payments banks to break even as they expand their customer base,” the RBI’s report on ‘Trend and Progress of Banking in India’ said.
		+
		+	Interest income of payments banks increased 45% to Rs 255 crore from the previous year, while other income (including commission on transactions) doubled to Rs 2,093 crore this year from earlier. There are seven payment banks currently operational in India, up from five in the previous year.
		+
		+	Another positive was that remittances through payment banks increased 23% to Rs 1.10 lakh crore in fiscal 2019 from Rs 89,653 crore in fiscal 2018. An interesting trend was “UPI taking over from e-wallets as the most prominent channel for inward and outward remittances in terms of both value and volume for payment banks”, the report noted. The number of UPI transactions increased to 499 million, worth Rs 57,219 crore that accounted for 70% of total transactions. E-wallets had only 18.6% of the total transaction pie.
		+
		+	Payments banks saw their deposit base double in FY19 to Rs 883 crore from Rs 438 crore in FY18. These banks are not allowed to collect more than Rs 1 lakh as deposit from customers. They also saw liabilities and provisions nearly double to Rs 4,363 crore year-over-year. This pushed up total liabilities including deposits by 45% to Rs 7,114 crore from the year-ago period, the report said.
		+
		+	[[Category:Economy-Industry-Resources\|B PAYMENT BANKS: INDIAPAYMENT BANKS: INDIAPAYMENT BANKS: INDIAPAYMENT BANKS: INDIAPAYMENT SYSTEMS: INDIA
		+	PAYMENT SYSTEMS: INDIA]]
		+	[[Category:India\|B PAYMENT BANKS: INDIAPAYMENT BANKS: INDIAPAYMENT BANKS: INDIAPAYMENT BANKS: INDIAPAYMENT SYSTEMS: INDIA
		+	PAYMENT SYSTEMS: INDIA]]
		+	[[Category:Pages with broken file links\|PAYMENT SYSTEMS: INDIA]]

	=YEAR-WISE DEVELOPMENTS=		=YEAR-WISE DEVELOPMENTS=

@@ Line 189: / Line 189: @@
 Payment banks cannot extend any kind of loan, neither can they take deposits of more than `1 lakh. They were expected to make money from transactions, but PE-funded fintechs are providing free payment options. Also, being banks, they are subject to a high level of compliance requirements unlike digital wallets. In the absence of an assured revenue stream, many feel that a business case for payments banks may not be feasible.
-[[Category:Economy-Industry-Resources|B PAYMENT BANKS: INDIAPAYMENT BANKS: INDIAPAYMENT BANKS: INDIA
+=YEAR-WISE DEVELOPMENTS=
-PAYMENT BANKS: INDIA]]
+==2020-21==
-[[Category:India|B PAYMENT BANKS: INDIAPAYMENT BANKS: INDIAPAYMENT BANKS: INDIA
+[https://epaper.timesgroup.com/Olive/ODN/TimesOfIndia/shared/ShowArticle.aspx?doc=TOIDEL/2021/07/16&entity=Ar02304&sk=9AB1CEB8&mode=text  July 16, 2021: ''The Times of India'']
-PAYMENT BANKS: INDIA]]

@@ Line 109: / Line 109: @@
 -They can also offer card acceptance mechanisms to third parties such as the ‘Apple Pay.’
-=How they came into existence?=
+=How they came into existence=
 ==11 entities authorised to set up payment banks by RBI==
@@ Line 143: / Line 143: @@
 Going forward, the RBI said, it intends to use the learning from this licensing round to revise the guidelines and move to giving licences more regularly, virtually “on tap”.
 =Impact=

@@ Line 6: / Line 6: @@
 |}
-[[Category:India |B ]]
-[[Category:Economy-Industry-Resources |B ]]
 =What is a payment bank?=
@@ Line 176: / Line 176: @@
-[[Category:Economy-Industry-Resources|B PAYMENT BANKS: INDIAPAYMENT BANKS: INDIA
+[[File: The performance of payment banks, 2017-19; Their status in 2019.jpg|The performance of payment banks, 2017-19 <br/>  Their status in 2019. <br/> From: [https://timesofindia.indiatimes.com/india/why-payment-banks-have-failed-to-take-off/articleshow/70569129.cms  August 7, 2019: ''The Times of India'']|frame|500px]]
 PAYMENT BANKS: INDIA]]
-[[Category:India|B PAYMENT BANKS: INDIAPAYMENT BANKS: INDIA
+[[Category:India|B PAYMENT BANKS: INDIAPAYMENT BANKS: INDIAPAYMENT BANKS: INDIA
 PAYMENT BANKS: INDIA]]

← Older revision		Revision as of 09:01, 9 February 2021
Line 34:		Line 34:

	3. Analysts expect tough competition to drive down charges for fund transfers and other transactions.		3. Analysts expect tough competition to drive down charges for fund transfers and other transactions.
		+
		+	===The Airtel Payments Bank case, 2016===
		+	[http://www.thehindubusinessline.com/todays-paper/tp-info-tech/airtel-payments-bank-disruption-at-a-cost/article9383675.ece ''The Hindu Business Line''], November 25, 2016
		+
		+	Radhika Merwin
		+
		+	''' ''Telecom major’s payments arm may incur a loss of close to 1.25% on each deposit'' '''
		+
		+	Ever since the RBI doled out payments bank licenses to various entities — from mobile operators and niche NBFCs to deep-pocketed corporates — the industry has been keenly awaiting the interest rate that these players would offer on their deposits.
		+
		+	The speculation was put to rest, when Airtel Payments Bank (subsidiary of Bharti Airtel) — the first to commence operations — set the rate on its savings deposits at 7.25 per cent, far higher than what most banks offer as in November 2016. The payments space hitherto consisting of prepaid cards and mobile wallets, has also been shaken up as the money you load in these wallets, does not earn you any interest.
		+
		+	But Airtel Payments Bank will have to pay a price for such disruption. A back-of-the-envelope calculation shows that Airtel may incur a loss of close to 1.25 per cent on each deposit.
		+
		+	'''No lending'''
		+
		+	As per the RBI guidelines, payments banks are allowed to take deposits up to Rs. 1 lakh per account. Such niche banks can provide payment and remittance services through various channels and can issue debit cards. But these banks cannot lend money or issue credit cards.
		+
		+	The income of these banks will mostly consist of interest from its investments in safe government securities and fee income that it can earn by distributing simple financial products such as mutual funds and insurance. These niche banks need to invest 75 per cent of their deposits in government securities with maturity up to one year and the balance 25 per cent can be parked with commercial banks.
		+
		+	Currently, yield on one-year G-Sec is quoting at about 6 per cent. This means that for every say Rs. 2,000 deposit, on which Airtel Payments Bank pays 7.25 per cent interest, it will incur a loss of about Rs. 25 per annum or Rs. 2 per month. This is a ball park figure and the actual loss can vary depending on other factors. But it is evident that the bank will be paying some price to rope in customers in the initial period.
		+
		+	'''Why?'''
		+
		+	Entities that provide payment services through prepaid cards, mobile wallets and online platforms have been infringing on banks’ turf. The RBI paving the way for new format banks has intensified the competitive landscape. To take on competition many large banks, particularly private ones, have been making significant leaps into the digital arena.
		+
		+	The one advantage that new payments bank have over traditional banks, is their far lower operating cost structure, giving them leeway to offer higher interest rate on their deposits. This can help them garner a pie of low-cost deposits. Following the deregulation of interest on savings account from Oct 2011, YES Bank and Kotak Bank, being late entrants, chose a similar strategy to build their deposit base — offering higher rates on savings deposit to catch up with the biggies. The strategy has paid off to a lot extent.
		+
		+	For payments bank, a much higher capital adequacy ratio of 15 per cent against the 9-odd per cent that traditional banks have to adhere to, also works to their advantage. While payments bank do not carry any lending risk, the extra capital can help absorb losses, if any, in the initial phase of ramping up distribution network and business.
		+
		+	'''Retaining customers'''
		+
		+	While the payments bank operations may incur a loss in the initial period, for Bharti Airtel, the promoter of Airtel Payments Bank, the value-add that it can offer its customers through this differentiated banking services, can help lower its churn of customers.
		+
		+	The cost of acquiring a customer is high and incurring a Rs. 2 loss per month to retain a customer may not seem like such a bad proposition. Telecom is a near 40 per cent EBITDA margin business for Airtel. The operating guidelines for the new format banks that was released recently by the RBI, has also offered more flexibility. In case of payments banks promoted by a telecom company, the RBI has allowed a seamless transition of mobile users into bank customers, if the KYC norms are already met.
		+
		+	[[Category:Economy-Industry-Resources\|B PAYMENT BANKS: INDIAPAYMENT BANKS: INDIAPAYMENT BANKS: INDIA
		+	PAYMENT BANKS: INDIA]]
		+	[[Category:India\|B PAYMENT BANKS: INDIAPAYMENT BANKS: INDIAPAYMENT BANKS: INDIA
		+	PAYMENT BANKS: INDIA]]

	==Authority and powers==		==Authority and powers==

@@ Line 136: / Line 136: @@
 =The Establishment of new banks=
-''' ''Telecom major’s payments arm may incur a loss of close to 1.25% on each deposit'' '''
+[[Category:Economy-Industry-Resources|B PAYMENT BANKS: INDIA
-−
-Ever since the RBI doled out payments bank licenses to various entities — from mobile operators and niche NBFCs to deep-pocketed corporates — the industry has been keenly awaiting the interest rate that these players would offer on their deposits.
-−
-The speculation was put to rest, when Airtel Payments Bank (subsidiary of Bharti Airtel) — the first to commence operations — set the rate on its savings deposits at 7.25 per cent, far higher than what most banks offer as in November 2016. The payments space hitherto consisting of prepaid cards and mobile wallets, has also been shaken up as the money you load in these wallets, does not earn you any interest.
-−
-But Airtel Payments Bank will have to pay a price for such disruption. A back-of-the-envelope calculation shows that Airtel may incur a loss of close to 1.25 per cent on each deposit.
-−
-'''No lending'''
-−
-As per the RBI guidelines, payments banks are allowed to take deposits up to Rs. 1 lakh per account. Such niche banks can provide payment and remittance services through various channels and can issue debit cards. But these banks cannot lend money or issue credit cards.
-−
-The income of these banks will mostly consist of interest from its investments in safe government securities and fee income that it can earn by distributing simple financial products such as mutual funds and insurance. These niche banks need to invest 75 per cent of their deposits in government securities with maturity up to one year and the balance 25 per cent can be parked with commercial banks.
-−
-Currently, yield on one-year G-Sec is quoting at about 6 per cent. This means that for every say Rs. 2,000 deposit, on which Airtel Payments Bank pays 7.25 per cent interest, it will incur a loss of about Rs. 25 per annum or Rs. 2 per month. This is a ball park figure and the actual loss can vary depending on other factors. But it is evident that the bank will be paying some price to rope in customers in the initial period.
-−
-'''Why?'''
-−
-Entities that provide payment services through prepaid cards, mobile wallets and online platforms have been infringing on banks’ turf. The RBI paving the way for new format banks has intensified the competitive landscape. To take on competition many large banks, particularly private ones, have been making significant leaps into the digital arena.
-−
-The one advantage that new payments bank have over traditional banks, is their far lower operating cost structure, giving them leeway to offer higher interest rate on their deposits. This can help them garner a pie of low-cost deposits. Following the deregulation of interest on savings account from Oct 2011, YES Bank and Kotak Bank, being late entrants, chose a similar strategy to build their deposit base — offering higher rates on savings deposit to catch up with the biggies. The strategy has paid off to a lot extent.
-−
-For payments bank, a much higher capital adequacy ratio of 15 per cent against the 9-odd per cent that traditional banks have to adhere to, also works to their advantage. While payments bank do not carry any lending risk, the extra capital can help absorb losses, if any, in the initial phase of ramping up distribution network and business.
-−
-'''Retaining customers'''
-−
-While the payments bank operations may incur a loss in the initial period, for Bharti Airtel, the promoter of Airtel Payments Bank, the value-add that it can offer its customers through this differentiated banking services, can help lower its churn of customers.
-−
-The cost of acquiring a customer is high and incurring a Rs. 2 loss per month to retain a customer may not seem like such a bad proposition. Telecom is a near 40 per cent EBITDA margin business for Airtel. The operating guidelines for the new format banks that was released recently by the RBI, has also offered more flexibility. In case of payments banks promoted by a telecom company, the RBI has allowed a seamless transition of mobile users into bank customers, if the KYC norms are already met.
-−
 [[Category:Economy-Industry-Resources|B
 PAYMENT BANKS: INDIA]]
-[[Category:India|B
+[[Category:India|B PAYMENT BANKS: INDIA
 PAYMENT BANKS: INDIA]]

@@ Line 135: / Line 135: @@
 Payment technologies have proved hugely popular in other developing countries. In Kenya, the most cited success story, Vodafone’s M-Pesa is used by two in three of adults to store money, make purchases and transfer funds to friends and relatives.
-=Establishment=
+=The Establishment of new banks=
 ==November 2016: Airtel Payments Bank==
 [http://www.thehindubusinessline.com/todays-paper/tp-info-tech/airtel-payments-bank-disruption-at-a-cost/article9383675.ece ''The Hindu Business Line''], November 25, 2016
@@ Line 170: / Line 170: @@
 The cost of acquiring a customer is high and incurring a Rs. 2 loss per month to retain a customer may not seem like such a bad proposition. Telecom is a near 40 per cent EBITDA margin business for Airtel. The operating guidelines for the new format banks that was released recently by the RBI, has also offered more flexibility. In case of payments banks promoted by a telecom company, the RBI has allowed a seamless transition of mobile users into bank customers, if the KYC norms are already met.