Excerpts from the discussion:

Mr. Madhav Nair, Country Head at Deutsche Bank

According to Mr. Nair, Payment Banks need not be disruptive. They should use technology to lower cost of operations to become competitive with traditional commercial banks since they would take five to six years to break even. They have to offer rates higher than four to six percent. That, along with the use of additional services and selling of financial instruments can help them stabilize and position themselves as a small bank in the years to come. It can also help them collaborate with large banks. He also mentioned that the telecom players like Airtel and Vodafone have an advantage of connectivity to rural India which cannot come overnight for commercial banks due to the high amount of capital costs which are required.

Mr. Bharath Shastri, Head – Risk Modelling at HDFC Bank

Mr. Shastri was of the opinion that banks need to offer better services to customers to attract them rather than reduced interest rates. Discount offers and mobile wallets can bring in more customers rather than conventional banking methods or the cash system. He spoke of how analytics has become a very important part of this generation and how customer experience can be made better through better analytics. When asked about the primary risks faced by payment banks, he spoke of online security and technology related risks. He also mentioned about money laundering and questioned the effectiveness of Aadhar cards as a part of Know Your Customer (KYC) norms.

Mr. Saurabh Sharma, Product Head at National Australia Bank

At the outset he firmly believed that there is a requirement for payment banks in the Indian banking sector. He believed that the three main objectives of payment banks would be to provide safety to depositors, reduce the cost of operations and widen the distribution network. He felt that RBI had awarded licenses to companies who could reach out to a large proportion of the population particularly in the semi urban and rural areas. In this regard he was of the opinion that telecom companies had certain advantages and it reflected in the licenses awarded as four of the eight remaining players had telecom capabilities. He expressed the possibility that companies like Paytm could utilize their technological platform to enable vertical integration of their existing business. He believed that apart from the three defined revenue streams i.e. Net Interest Income, Cross Selling of products related to mutual funds, insurance and Transactions based income, companies would primarily use the payment bank as a way to complement their primary business. On a cautionary note he admitted that the Universal Payment Interface (UPI) launched by the RBI could dilute the advantage of a payment bank.