Wallets Turning Payment Banks- What are the Advantages and Why this Transition ?


The other day, my better half after reading that the Patym is transiting from a wallet company to a Payment bank with a frown on his forehead, came up and asked, is this conversion a start of new trend? Will there more of this? Without a second thought, I muttered yes we will be coming across such similar conversions in a span of 2-3 yrs.

Preferring normal banks he countered my statement asking Why? To which I explained :-

  • Due to high costs normal banks preferred not having branches in the rural areas and far off places.
  • Also, villagers found it difficult and time-consuming coming to the city and bank and hence they remained unbanked.
To bring the unbanked into banking fold the RBI could not have come up a better idea than launching payment banks. Payment banks are banks which involve in only cash deposits and withdrawals and would not be providing loans.

In its search for payments banks, RBI was eyeing for entities that had rural reaches.The Telecom companies, Wallets companies and the Indian Post Office scored a point as they had better mass reach than the others. To those who are following this closely it comes as no surprise that Airtel, Paytm, Indian Postal services and Aditya Birla’s Idea are among them who bagged 11 licenses and are on their way to start operations soon.

Patiently listening to me, he asked what is in it for digital wallets companies in this conversion? Keeping my coffee mug aside, I replied to my dear husband- “Firstly to diversify, secondly to give better service by make use of their customer base. " Also once Wallet companies become payment banks they can offer bank like services ( saving… insurance, loans… and much more...)
Wallet into Payment Banks Transition
Wallet into Payment Banks Transition

In the last one year with so many wallets being launched, it is necessary that the wallet companies diversify to stay afloat or else they would perish. Having technological experience they can acquire customer bases in location where normal banks dare to go because of the cost involved in maintaining a branch and regulations required to be abide by them.

Also since the wallet companies already have customer bases at the places where there are no normal banks, it would be less expensive to work on them than opening a normal bank in such locations. With such diversification taking place in wallet companies there would be a positive growth in their earnings.

Chat on Payment Banks
Chat on Payment Banks

What about the wallet users? pat came the third question from him. Answering his question spontaneously my reply was :–

  • Interest rates going up as high as 14.50% on SB accounts.
  • Cash back and other facilities such as Mutual Funds, Insurance, SIP.
  • Existing wallet balances can become account balances if users prefer opening bank account. Possible for users to use the same for making payments.
  • Self -declared merchants can accept higher amounts as compared to the current Rs 25000 cap.
  • Nil Settlement charges for the transaction made through payment bank accounts.
  • Possible to add more money quickly through single screen.
  • Usage of Biometric passwords for processing transactions would take care of security issues.
  • Cash withdrawal would become easier due to their large distribution networks.
  • Cash transfer through digital means is free of cost.

Seeing my husband’s frown turning slowly into a smile I realized that I was successful in convincing a tough customer. With a twinkle in his eyes he came up and said tomorrow we will discuss “Digital Wallets converted to Payments banks". Our coffee time conversation ended with his words “Now that Whatsapp is the new entrant in the wallet space, soon a day will come when FB/Whatsapp will provide a platform to do banking transactions and solutions to buy utilities”.

References:
Google
Paytm wallet to convert into Payments Bank
Aditya Birla Group gets RBI licence to start payments bank
WhatsApp will reportedly launch peer-to-peer payments in India within 6 months

Author :
Divya

Content Strategist

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