Thursday 23 May 2019

Paytm Payments Bank sees profit, to add more financial services

Paytm Payments Bank has turned profitable in its first full year of operation aided by the e-wallet business, even as questions about the sustainability of this banking model continue. 

Paytm Bank’s MD & CEO Satish K Gupta told TOI the company has managed to clock a net profit of close to Rs 20 crore on revenues of Rs 1,500 crore, even though overall deposits remain low at Rs 500 crore, similar to other payments banks like Airtel Payments Bank.

The Noida-based Paytm bank had deposits of about Rs 194 crore as of May 2018. The bank reported a loss of Rs 20 crore for the financial year ending March 2018 with a revenue of Rs 720 crore, according to regulatory filings. Paytm bank’s latest audited financial numbers or deposit growth are not public yet.

A majority of earnings for the payments bank came from investing deposits in government treasuries and FDs. It also generates revenue from commissions on facilitating payments across its savings bank accounts and e-wallet holders. The deposits typically generate 6-6.5% of interest, Gupta said. 

This is where the e-wallet business becomes crucial as that had deposits of Rs 1,700 crore, according to Gupta. To comply with Reserve Bank of India (RBI) regulations, the e-wallet business was moved to Paytm Payments Bank, which houses the bank. 

“Payments banks are still relatively new, but I see deposits growing by about three times in the next year. Of the 500-600 million transactions taking place on Paytm every month, 30% of them are via savings account holders. These are typically small-value transactions,” Gupta said. 

Although the RBI had granted in-principle approval to set up payments banks to 11 applicants, three dropped out, including Sun Pharma promoter Dilip Shanghvi, as these entities cannot make money by lending. Apart from Airtel and Paytm, Fino and India Post are fully operational payments banks. NSDL Payments Bank, Jio Payments Bank and Aditya Birla Payments Bank (ABPB) are yet to become fully operational with limited presence currently. 

As the Paytm bank completes two years, Gupta said it would now start selling financial services like insurance and mutual funds from next month to create a new revenue stream. “Since lending is a limitation, cross-selling financial services of smaller denomination makes obvious sense. This would be a volume play than value,” said Motilal Oswal Financal Services deputy head Alpesh Mehta.

With e-KYC being allowed to verify user credentials, the bank is aiming to at least double its base of 45 million accounts, which drive about 150-180 million transactions per month. Of the 45 million bank accounts, 15 million are active users who transact at least once in six months.

The Paytm bank offers an interest rate of 4% to its savings account holders while Airtel Payments Bank offers a 6% interest rate. “We are not in an interest rate fight war. Our service and bouquet of products are making people bank with us,” Gupta added. 

Gupta is also looking to on-board corporates to open their staff salary accounts with the bank. Since the payments bank cannot keep deposits of more than Rs 1 lakh at the end of the day, it is partnering with other banks who will turn the additional amount into FDs.

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