2014 was about the wallet, 2015 about Payments bank and 2016 being all things UPI. Wallets have unraveled and Payments Bank are seeing some withdrawals. Can 12 months change the view? it shouldn’t, as long as someone has understood the requirements and clearly defined the business model. Wallets struggled against the card networks to create a business proposition and now Payments Bank are seeing the stress.
Having been close to the happenings of the Payments Bank, I can say a lot changed from the time Governor Rajan announced his intentions of launching differentiated banks to the actual formal notification. In its initial days Payments Bank was mooted as a model to address the inefficiencies of the payments and settlements systems and make it faster. However, what came out as a final version was effectively a new name for business correspondent and remittance business. Everyone has known for the longest time that the business correspondent and remittance business in India hasn’t taken off from a revenue generation stand point and most of these organizations are today barely remaining afloat. It was difficult to understand why RBI would want to create a “Payments Bank” model to just rename a very difficult business. To make matters difficult RBI also put in the usual financial inclusion requirements on the payments bank applicants.
So, suddenly from a vision of redefining payments and making it digital, payments bank became more about deposit collections, financial inclusion and business correspondents. Even large banks like SBI haven’t been successful in this model. Its important that new initiatives don’t create small incremental changes over the last but should disrupt the status quo. A payments bank vision around making money movement faster, taking India cashless and making retail businesses digital would be truly disruptive. One of the key reasons that credit has not flowed in India has been due to the cost of delivering the credit. Payments bank can be a great answer, if allowed to do so. The future of payments is digital and RBI would best serve by looking at business models which convert paper based financial transaction to electronic.
The present scenario of payments bank applicants dropping their campaigns is not unexpected. RBI needs to move fast and address their long term vision and what they want to achieve from this new concept bank. They need to encourage digital and promote models which truly help in revolutionising the payments experience for the consumer and also the businesses.