By Gaurav Gupta

In my previous article (click here), I categorized all 11 payments bank license holders for easy comprehension. I also walked you through the DNA of each category. In this article, I have individually compared each of these 11 players.

All eleven players are not on equal ground. Some of them have capabilities and assets available from their other lives which give them a huge competitive advantage – and also shave off a couple of years in the break-even time frame.

There are five dimensions on which existing capabilities can give the license holders competitive advantage in the beginning.

  • Distribution Footprint – Including Both Physical Footprints and a Mobile Platform

The success of a payments bank, at least theoretically, is based on a large transaction base. The availability of a large physical distribution footprint provides a strong foothold and a quick expansion capability for those payment bank players. Existing capability in mobile technology, or the presence of a mobile platform adds to this advantage. Bank of America’s Merrill Lynch estimates that mobile banking may rise to 10% in seven years,  from its current percentage of 0.1%. [A] Some of the telcos with a pan India presence are front runners in this game. Paytm, with an existing mobile platform, stands ahead. FINO and India Post, both which have a strong rural reach, are also considered to be in advantageous positions.

  • Captive Customer Base

A quick and cost effective conversion of an existing customer base could bring in huge gains for incumbent players. Amongst all license holders, NSDL and Tech Mahindra have a limited customer base, which is going to make the climb for them even steeper.

  • Technology Infrastructure

Innovative solutions using technology can actually shift large numbers of existing banking customers, who transact using digital media, to these new payments banks. All license holders are yet to fully exploit the promise of technology; Chola and NSDL particularly are lagging behind at the moment.

  • Sales and Service Ecosystem

In the absence of credit issuance, payments banks are likely to operate with wafer thin margins. The existing ecosystem of sales, service agents and distributors will help lower customer acquisition costs.

FINO has about 45,000 transaction points (agents) with experience in the sale and service of financial instruments [B]. India Post, with 2.6 lakh dak sewaks [C], has started weekly literacy camps under which post office employees are undergoing structured training programs developed by banks for financial literacy.

  • Partnership & Alliances

Existing partnerships and alliances that can be extended to the banking model have the potential to make a huge difference to the success of license holders. More than 23 players[D] including World Bank, are courting India Post for partnership. At the other end it emerges, based on published statements of Chola leadership, that they are yet to actively scout for partners. Although a larger alliance base does not give immediate success, it definitely increases the probability of making a mark.


Based on these dimensions, I have rated each of payments bank license holders.


  1. Airtel & Vodafone – The Front Runners

Both the telcos have a huge captive customer base, an existing mobile money business,  and a huge network, making them the front runners.

  1. India Post – The Dark Horse

The unglamorous India Post has been silently getting things ready, from technology infrastructure to partnerships. It is going to be a formidable challenge, not only for payments banks license holders, but also for PSU banks in rural spaces.

  1. Fino – The Underdog

FINO has expertise in selling financial products in a rural space, and now needs to use that expertise for its own brand.

  1. Paytm – The Loaded

With the ‘profits not bothered’ strategy, bolstered by capital steroids, and backed by the technology capability of Alibaba, Paytm is fully loaded for the game.

  1. Nuvo/Idea – The Conservative

A steady play from the Aditya Birla group is what can be expected from this player.

  1. RIL + SBI – The Big Bull

The coming together of the largest bank and the largest corporate creates a mammoth on paper. However, the infidelity of SBI to approach India Post, and RIL’s focus on the telecom business may delay the promise of this entity.

  1. IDFC + Telenor – The Concoction

Mr. Dilip Sanghvi (of Sun Pharma fame) has ambitiously brought IDFC and Telenor together.

  1. Tech Mahindra – The Cautious

This technology giant can put technology to good use. However, more would be required from partnerships for distribution and service.

  1. Chola – The Undecided

Chola is looking for technology partners, customer – acquisition partners and banking partners; it may remain a niche player focused on the MSME sector.

  1. NSDL – The Confused

NSDL will have to start from scratch in a lot of areas required to set up the payments bank.


The Rural Play

The biggest promise of Payments Banks is the expected penetration of banking in rural areas. The assumption is that these banks could greatly transform the rural remittances market. The table below highlights the players who have the stamina for this, and who are focused on two distinctive consumer segments – urban and rural.


Bank The Unbanked (Rural India) – Where Could Telecom Players Start

Telecom players are spread across both rural and urban segments but not all rural areas provide similar banking opportunities. Also, different telecom operators lead in various circles in terms of a rural GSM subscriber base. If unbanked states are overlapped with telecoms’ rural subscriber base, it gives a strategic direction to telecom players on where to begin their rural campaigns.


CRISIL’s ‘Inclusix’ indicates the level of financial inclusion of Indian states. The index covers branch, deposit and credit penetration with four levels of high, above average, below average, and low. The colour coded map depicts the level of financial inclusion for each state, as per the index value. Rural belts exist in a majority of states in India; some of these states have relatively low financial inclusion index values.

These ‘below average’ states present a good initial opportunity for the telcos payments banks to launch aggressively.

Overlapped on this map are the telecom players in terms of rural subscriber base. The coloured circle with alphabets inside shows which operator has the maximum rural subscriber base in that state. [E]

Airtel has the maximum rural subscriber base of 96.18 million (May, 2014). However, Airtel will be better off if it focuses more on Rajasthan, Uttar Pradesh and Jharkhand as part of its rural push.

Likewise, Idea could start with Chhattisgarh and Madhya Pradesh.

The Beginning

The RBI has initiated an interesting financial experiment with these payments banks. It has been smart enough to keep regulatory prudence simple for these banks, while at the same timing limiting the burden of NPAs with no right to issue credit. The choice of players, some with a reach to the remotest parts of the country, clearly indicates that the RBI wants this to be about transactions and financial reach.

Although all 11 players had some advantages to begin with, their success will depend on innovations which can keep costs down and yet keep the proposition smart for customers in the long run. The challenge may not be just from within the players in the payments bank space, but also from incumbent financial players who might evolve in the wake of a competitive threat.

It will be a long journey to profitability for payments banks and break-even times could vary from 4 to 7 years. But short term goals should include getting ready within the 18 month deadline.

Gaurav Gupta is an alumni of IIM Ahmedabad. He has extensive experience helping companies transform businesses using digital. He can be reached at






[E] CRISIL Inclusix: Rural Subscriber data –

Posted by The Indian Economist