Fino Payments Bank launched two months ago and Rishi Gupta, CEO, spoke to MediaNama on how the bank is targeting the mass market segment. Gupta also spoke about how the bank wants to be the D-Mart of banking as they want to provide banking services at an affordable price. Excerpts from the interview.

Read our earlier interview on Why Fino Payments Bank will not be a digital-only bank.

On mobile banking features

“We will also come up with a virtual debit card as we go along. But it’s not right now and it may take a few more months to come.”

On the type of loan products offered by the Fino Payments Bank  

“Right now we have tied up with IndusInd Bank. On the NBFC side, we have multiple tie-ups such as Reliance Capital. We have a tie-up with State Bank of India and a host of public sector banks. Going forward we are looking at tying up with ICICI Bank also for such products. Our focus is on people who have Rs 1.5 lakh to Rs 5 lakh household income levels. With that focus, we are going to provide them with all kinds of services whether it is banking, lending, insurance, bill payments or remittances.

Right now we are offering Joint Liability Group (JLG) products which will be around Rs 50,000 to Rs 25,000. And for merchants, we are tying up for MSME loans, products which are Rs 2-3 lakh. We have our branches in rural India we form a group on behalf of the bank and disburse the loan. And the liability is borne by the group jointly where if someone defaults on the loan, the other pays for him. This was a product which was founded by Grameen Bank and is part of the microfinance institution (MFI) business.

With Fino, the MFI business used to be handled in cash. Now everyone is opening an account and the money will be sent to those accounts and they will save some money. They will use that for some digital payments as well with the debit cards. And people having smartphones will also use mobile banking app for transactions. So the idea that, in that customer segment, there are roughly about 100 million households in that Rs 1.5 lakh to Rs 5 lakh per annum. We want to be in that customer segment. I would say that we want to be the D-Mart of banking where we provide that kind of service for that kind of customer at very affordable price. We want to keep the product simple and convenient.

I will give you an example. Our account opening takes only four minutes and we issue debit cards instantly. It will be a completely paperless bank and inside the branch and it will be completely digital from a process point of view.”

Costs related to operation of ATMs and cash withdrawal

“Those costs are budgeted as far as we are concerned. We expect that the customer will build up a relationship where we will cross-sell products and through that sale, we will make some money from the customer. Out of that money, there will be some card usage costs. While the costs may be high right now, over a period of time, when the card will be digitally accepted at merchants as well.

I will give you an example. My driver used to get his salary in cash. I told him that I will not give him cash and opened a bank account and I used to transfer money to his account. And now I’ve seen a change in his habits when he goes to buy medicine he is swiping his debit card. If he wants to buy groceries, largely from D-Mart, he swipes his card. Whenever there are kirana shops which accept cards, he is swiping his debit card. Around 15 lakh POS machines also have been added post demonetization. So a lot of small merchants have started going towards digital. This will happen over a period of time.

Some of our branches are also keeping ATM machines. We have a tie-up with ICICI Bank and in the future, we will also provide some branches with our own machines. The cost of ATM transaction will come down.

So we have three ways a customer can withdraw cash other than an ATM. One is through our branches. Second is through our feet-on-street which is our customer relationship officer. Rather than a customer going to an ATM, they will visit the geography where he is carrying cash and he can pay. And third is our merchant points or banking correspondent points, which also has a cost but it is little lesser than ATM costs. Gradually, we want people to move to digital means of payment and this will reduce our costs on ATM withdrawal.”

Costs related to a physical branch

So our branches are very small – around 200 square feet. In rural areas of the branches is around 450 square feet. Traditionally, banks have branches around 800 square feet. And there are only two people in the branch and who also move around outside. The costs will be for the rent for the branch and the two people. Out of the two, one will be expected to go around to get transactions.  For us, branch cost is minimal as compared to a normal bank. We are very lean on staff and size. And since everything is digital there is no paper involved. We’ve built an entire application on a tablet. So the teller, the branch manager or the customer relationship officer can actually use the device and do the same amount of business from multiple channels.”

Expansion plans

“Our initial focus was on the transformation to Fino Payments Bank from the earlier business. That has been largely been taken care of in terms of technology and operations. Our focus will be now to see how much business we can drive to our own network and through third-party networks and build more customer acquisition points. We will also focus on growing the balances in customer accounts.

We are also working on ensuring that there is profitability in the bank. Fortunately, we come with a lot of experience as far as this customer segment is concerned. We have very big customers on the corporate business side. We are also working with BPCL to get their points to do financial transactions as well.

In the next few months, we will launch the mutual funds product and build on that. Right now we are only looking at liquid mutual funds and we are not looking at equity mutual funds.  The customer segment which we are targeting may not completely understand equity mutual funds. So if a customer wants small savings, he can do it through the bank account. For a very long period of investment, they can look at the insurance products. If he wants to keep an extra liquidity kind of system he can invest in the mutual funds. These mutual funds will probably give a return of around 6-7% per annum.”

On micro-ATMs as business

“Micro-ATMs will be a good business model for us where a lot of customers will come to us for withdrawal of money. It is just like an ATM machine but the only difference is that you have a machine and person rather than just a box. Capital costs of the machine will start coming down. There is a huge demand for micro-ATM products in our branches and our BPCL outlets.

So other bank customers can also use the micro-ATMs where cash withdrawal can be done through RuPay and the Aadhaar Enabled Payment System (AEPS).”

Also read: Fino Payments Bank, NABARD will deploy 5k micro ATMs for rural banking

On the Bharat Bill Payment System (BBPS)

“The BBPS is still yet to come and the payments bank will be part of the system. I think it will be a good business opportunity because then people can go to the BBPS and pay their bills digitally rather than standing in the line. The thing here is when will India become more digitally advanced? And I see that there is some kind of interest and aspiration from those customers to adopt digital like anybody else.”

Correction: An earlier copy mentioned that Fino Payments Bank branches are 800 squarefeet. The copy now reflects the correct size of the branches.