India’s largest commercial bank and largest telecom operator are joining forces: State Bank of India and Bharti Airtel have announced a joint venture to offer customer mobile money transfer, mobile payments and cash-in, cash-out remittances across India. The incorporation of the JV, likely to be called SBI-Airtel, is expected to be completed by 31st March, 2011; Airtel will hold 49%, while SBI will hold 51% stake in the venture. While, the CEO will be from SBI, Airtel will nominate a COO. According to SBI Chairman, OP Bhatt, this tie-up will be an exclusive one and other telecom operators wont be approached by SBI. Both companies will invest Rs 100 crore in the business, and they’re targeting 3-4 million customers in the first year.
JV Will Become Banking Correspondent Of SBI
The JV will become a Business Correspondent of SBI and enable new and existing customers to open regular and no-frills account and avail of other banking products and services at Airtel’s 1.5 million retailers who will act as Customer Service Points (CSP) all over India. The launch will be extended to all regions in a phased manner. MediaNama readers might recall that in September 2010, the Reserve Bank of India allowed telecom operators to sign up as Banking Correspondents, following which Idea Cellular tied up with Axis Bank.
SBI-Airtel service will be available for all service platforms including USSD, SMS and Voice; the customer will get a SIM card which will have the service integrated with it. It will work on a cloud model and start with remittances, money transfers and cashless spends and later extend to insurance and credit cards.
On the return on investment, Bharti Airtel CMD Sunil Bharti Mittal said that although the business is expected to break even, the focus of the JV will be to extend banking facilities to the ones who have not been included so far, and that 55% of Bharti Airtel’s prepaid base is unbanked. Profitability will come through volumes as the service is expected to be receive a good response. Bhat added that profitability will be through volumes.
Hope this doesn’t mean that Airtel customers will have limited access to mobile banking services from other banks, or for that matter, that SBI customers will only have the option of signing up with Airtel for mobile banking services. Frankly, Airtel didn’t need a joint venture to be a banking correspondent for SBI.