mpesa

By Raidarmax (Own work) [CC BY-SA 3.0], via Wikimedia Commons

Vodafone has filed an application with the Reserve Bank of India (RBI) for the Payments Bank licence. The company said its exploring options for partnerships and would look to leverage its telco experience in the mobile payments space. Note that RBI’s deadline for accepting payments bank applications ended on the 2nd this month.

Previously, Vodafone subsidiary Vodafone M-Pesa Limited (VMPL) has received a three year renewal of its prepaid wallet license in November last year. Prior to this, Vodafone had a two-year license through its subsidiary Mobile Commerce Solutions Ltd which expired the same month. The company will have to merge its prepaid wallet business  if it gets a  payments bank licence.

In November, M-Pesa had reported around 0.37 million active users for the quarter ended September 30, 2014, a modest 23% growth from 0.3 million users in the quarter before. In terms of registered users, it claimed to have 2.1 million registered users for that quarter as against 1.5 million registered users in the previous quarter.

Vodafone India had also signed a strategic partnership with Bharat BPO, a Spice Digital* group company to integrate M-Pesa as one of the payment options for Bharat BPO’s SMS railway ticket booking service in September last year. Following this partnership, Vodafone M-Pesa customers could send in their booking details either via SMS or through the 139 Railways Reservation app on Android or Java and enter their ‘M-PIN’ to authorize the transaction. More on that here.

Other Payment bank applications: The RBI yesterday said that it has received 41 applications for a payments bank licence. Here are some of the players who have applied:

– Airtel’s mobile commerce subsidiary Airtel M Commerce Services Limited (AMSL), which operates Airtel Money applied for a payments bank licence and added that if it gets a payments bank licence from the RBI, Kotak Mahindra Bank will pick up 19.90% stake in AMSL.

– India’s largest private sector company, Reliance Industries Limited (RIL) has submitted a joint application with the country’s largest bank, State Bank of India (SBI), for a license to set up a Payments Bank on the 2nd of February.

– Alternate banking channel provider FINO PayTech also announced that it will be applying for a payments bank licence.

– Telecom operator Idea Cellular also said that it submitted an application to the Reserve Bank of India to form a payments bank. Aditya Birla Nuvo Limited, the promoter group and largest shareholder of Idea Cellular, will hold 51% equity in the payments bank while Idea Cellular will hold up to 49%.

– Other than this digital payments companies, Paytm and MobiKwik have also said that they would apply for a payments bank licence. Paytm’s vice president for business Amit Lakhotia had said that the company, which has a user base of 20 million, is not looking to partner with any other scheduled commercial bank for the payments bank licence.

Telecom and banking 

Note that earlier in 2011, Airtel and SBI had come together to form a joint venture for financial inclusion but the partnership fell through after the Reserve Bank of India expressed its apprehension and said it was felt allowing a telecom player a JV with a bank may lead to the back-door entry of a non-banking entity in banking.

Current RBI Governor Raghuram Rajan reiterated this in a speech last February and said that the banking regulator has made a consciously adopted a bank led mode for financial inclusion despite the potential for mobile banking as a delivery channel.

We also wonder if there could be a more strategic alliance with ICICI Bank and Vodafone for the payments bank licence. Remember, the Reserve Bank of India’s guidelines for payments bank say that 25% of the funds in a payments bank can be invested in timed deposits in scheduled commercial banks . Considering this, Airtel  and RIL which have partnerships with Kotak Mahindra Bank and State Bank of India respectively might have an edge on managing their funds.

Also read

RBI releases draft guidelines for allowing Telcos, Wallet co’s to set up Payment Banks

RBI releases final guidelines for setting up of Payments Banks

Mobikwik’s Mrinal Sinha on their Payments Bank application, strategy and financial inclusion

Trends & key developments in the digital payments segment in 2014

Image source: Wikipedia