If regulators approve its proposal to transform into a small finance bank, Fino Payments Bank plans to make its merchant network its first lending customers, while also using it as loan collection points.
It applied for a small finance bank license in December 2023 and has about 1.8 million merchants providing financial services as agents of the bank. Rishi Gupta, managing director and CEO of Fino Payments Bank, said in an interview that a large portion of these merchants can be used to collect loan repayments.
Gupta added that these merchants will be used as loan collection points and banks will also cater to the credit needs of these merchants. They manage the bank’s touch points and provide services such as opening bank accounts, withdrawing cash, and more. Another target group is one that currently has 13 million customers, he said.
The majority of Fino’s merchants (34%) are located in the east of the country, 32% in the north, 21% in the west and 13% in the south.
A committee headed by former Reserve Bank of India board member Nachiket Mor has floated the idea that payment banks should provide services to the underbanked and unbanked masses, accepting up to $200,000 per customer. The main difference between them and small finance banks is that payment banks cannot lend money. There are six such banks, including Airtel Payments Bank, Fino Payments Bank, Jio Payments Bank, India Post Payments Bank, NSDL Payments Bank and Paytm Payments Bank.
“The RBI has started asking some questions and we are answering them. If the RBI gives us approval, which will be in the form of in-principle recognition, we will have 18 months to actually convert into an operational bank,” Gu said. Puta said. “We hope to change within a year of approval.”
Gupta said the transformation will bring changes in three aspects: team, technology and capital. “We don’t need capital right now because we have more capital than we need. On the technology side we have migrated our old systems to a brand new Finnacle system, and on the team side we have some people who have expressed interest in joining later us.
Gupta also said the bank will form the team required for the loan.
“For collection, we also have vertical cash management services within Fino. We can collect payments from agents, and some customers will also come to our branches to deposit money.” He said that after the Reserve Bank of India approved in principle the transformation into small finance After banking, these teams will be established within 12 to 18 months.
Analysts at Nirmal Bang Institutional Equity said that while awaiting regulatory approval for SFB’s license, the bank is building technology, liability and conducting some pilots around credits such as commercial loans, gold loans and partnership-based credit.
“Management stated that following the conversion to SFB, the bank will continue to derive the majority of its business (approximately 75%) from payments-based services, with the remaining business coming from lending,” they said in a note to clients. 11 January 22nd.
Others said transforming into a small finance bank would allow Fino to expand into lending and cross-sell other financial products. “We modeled loan revenue starting in fiscal 2027 and estimated assets under management to be $1,500 crore,” analysts at Ventura Securities Ltd said in an October 4 report.
Ventura Securities said Fino’s move into the lending business will be cost-effective and smooth, leveraging its established business network and existing technology infrastructure. However, a company like Fino operates primarily through its merchant network, which could be poached by competitors, adding that Fino has built strong relationships with its merchants, so this is unlikely to happen.
focus
- A large part of Fino Payments Bank’s merchant network is available for collecting loan repayments.
- Banks will also meet the credit needs of these merchants.
- Another target group is one that currently has 13 million customers.
- The majority of Fino’s merchants (34%) are located in the east of the country, 32% in the north, 21% in the west and 13% in the south.
- This transformation will bring changes in three aspects: team, technology and capital.