Idea may start payments bank operations in June

Mumbai: Idea Cellular has set itself a June target to launch payments bank operations, and is signing up retailers who sell its telecom services to also double up as banking touch points to allow customers to carry out transactions.

The company recently received the Reserve Bank of India’s (RBI) final approval to open its payments bank. It is in the process of integrating its systems with those of the National Payments Corporation of India (NPCI) and the RBI. Joining the network will allow it to facilitate interbank electronic transactions. The company hopes that a significant part of its telecom subscribers enroll for the banking services.

“We have an existing customer base of 20 crore (for telephone services) hence we start off with a huge potential customer base which is a big positive for our payments business,” said Sudhakar Ramasubramanian, the chief executive designate of Aditya Birla Idea Payments Bank. “We will also convert our 20 lakh retailer base across the country into banking touch points to take financial services to the rural areas,” he said. Payments banks aren’t allowed to lend, but can take deposits, facilitate remittances and dispense payments to recipients.

The RBI had devised payments banks and small finance banks as tools to take formal banking to the unbanked.

For telecom companies like Idea and Bharti Airtel, this offered a new business opportunity as they already have an extensive network across the country and a huge potential customer base for the banking services in their existing users.

Bharti Airtel, the telecom market leader, launched its payments bank in January. To attract customers, it is offering an interest rate of 7.25% on savings deposits, which is more than that offered by conventional banks. Experts feel that the evolving rate war in the telecom space, where the companies are going through a margin-denting price war, could be replicated in the banking business as well.

“Idea, though, does not intend to enter the game of attractive interest rates,” Ramasubramanian said. “We will offer interest rates along the same lines as the savings account interest rates. But we are open to tying up with various players for hotel bookings, bus tickets, railways ticket booking and c;reate an entire ecosystem to get customers to transact through us.”

Idea Payments Bank has started partnering with e-commerce companies to assist customers, including those who don’t have Internet access or smartphones, to make purchases online and pay directly from their accounts. It expects this to become a major source of revenue.

“We have tied up with ShopClues through which our retailers will be able to sell merchandise available on the e-commerce portal to customers in an assisted manner through the Idea banking platform,” he said. “It will be either on the retailers’ desktop, mobile phone or laptop.”