Telecom operator Bharti Airtel has launched its Payments Bank pilot, becoming the first among Payments Bank licensees to go live: around 10,000 Airtel retail outlets in Rajasthan will operate as banking points, allowing customers to open Payments Bank accounts, and deposit and withdraw cash.
Account opening is powered by the Aadhaar e-KYC (digital “know your customer” authentication, for collecting customer details), and doesn’t require any documents. We don’t know what kind of KYC Airtel has done for its telecom subscribers, but it’s unlikely to be bank-grade authentication. Telecom operators are allowed to transfer KYC info from the telco business to the Payments Banks business, as per the operating guidelines. This gives telecom operators a distinct competitive advantage over others, if they’ve done the KYC right. Also note that Reliance Jio has been authenticating users using Aadhaar, and retailers are also signing up users for the Jio Payments bank at the same time.
Mobile number is bank account number
What’s particularly interesting is that for Airtel, the “customers Airtel mobile number will be his/her bank account number“. So what happens when a user ports out of Airtel to, say, Idea Cellular? Looks like there won’t be much change, except in terms of availing of services digitally: while Airtel customers can access services via the Airtel Money app, through USSD by dialing *400#, and IVR by dialing 400. Both the USSD & IVR options are available in Hindi and English. Non Airtel customers can access Airtel Payments Bank’s services by dialing 8800688006.
Airtel will allow free money transfer from Airtel to Airtel numbers within Airtel Payments bank accounts, which suggests that charges will apply if you’re on another telecom operator with an Airtel Payments bank account. Of course, given that it’s a Payments Bank, Airtel Payments Bank allows money transfer to any bank account in India.
The company is offering an interest rate of 7.25% per annum on savings account deposits, and is giving a personal accidental insurance of Rs 100,000 with every savings account. Note that accounts can only hold Rs 100,000 as of now. Also, Airtel makes no mention of current deposit accounts, which it is also allowed to open.
It intends to expand the network of merchants across Rajasthan who accept digital payments to 100,000 by the end of this year. Note that Airtel has a retail distribution network of over 1.5 million retail outlets across India. Payments bank are required to have at least 25% of physical access points in rural centres.
Who else has payments bank licenses?
Apart from Airtel, Vodafone, Reliance Industries, Idea Cellular, Paytm, FINO Paytech, India Post and National Securities Depository Limited all have Payments Banks licenses. Today, while announcing that Paytm is integrating a payment gateway into their application, its CEO Vijay Shekhar Sharma mentioned that they don’t have a date for the launch of their Payments Bank, since the launch has been deferred fairly often. In that context, we’d heard that Airtel was also expected to go live with its Payments Bank in September, but got delayed as well.
Note that Kotak Mahindra Bank has invested 19.9% in Airtel Payment’s bank. This relationship would prove very useful as payments banks can make arrangements with other commercial banks if it crosses the limit of Rs 1 lakh, to be swept into an account opened for the customer at that bank. This arrangement should be activated with the prior written consent of the customer.
In addition, Airtel can invest 25% of the deposits it holds demand and timed deposits with other commercial banks which will help keep its operations afloat considering there are not many other avenues for revenue.
Note that Airtel as company would be extremely helpful in build a credit profile and credit information bureaus have asked the RBI to make payments banks members to that they can share data on transactions.
More updates shortly