Why Airtel Payments Bank is happy to play second fiddle

Airtel Payments Bank is looking to carve out a niche for itself as a provider of secondary bank accounts for millions of urban Indians reluctant to expose their primary account to everyday low-value transfers through instant payments platform UPI.

The payments bank, backed by India’s second-largest mobile operator, Bharti Airtel, found that over 70% of its new customers from the last three months did not belong to the so-called unbanked category. These customers already had an account with some other bank.

“These customers have a main account elsewhere, so they want another account for payments,” Anubrata Biswas, managing director and chief executive of Airtel Payments Bank, said in an interview. “This broadly is a 100-million user opportunity.”

Payments banks were conceptualised as a separate category in 2015 to reach the under-banked and unbanked masses, accepting deposits of up to ₹2 lakh per customer. But they cannot lend.

There are five such banks apart from Airtel Payments Bank: Paytm Payments Bank (currently under RBI restrictions), India Post Payments Bank, Fino Payments Bank, Jio Payments Bank, and NSDL Payments Bank.

The UPI fraud factor

Many people sign up for a second bank account primarily to handle routine transactions because of the increasing instances of digital payment frauds, said Biswas. 

Frauds involving the Unified Payments Interface, or UPI, more than doubled to ₹573 crore in 2022-23 from ₹242 crore in the year prior and ₹111 crore in FY21, showed Reserve Bank of India data presented in the Rajya Sabha in February. 

According to Biswas, people in urban India are wary of digital payments and do not want to expose their main bank account to UPI frauds. 

Also read | RBI’s action on Paytm Payments Bank raises important questions

“Every direct bank (branchless bank) in the world has had a leading product category to grow it. In India, this safe second account category for digital banking is a very rapidly growing one,” said Biswas, who spent over 13 years at private sector lender ICICI Bank Ltd before joining Airtel Payments Bank in 2018. 

Airtel Payments Bank onboarded 3.5 times more customers in March as compared with December, adding more than a million customers every month.

A partition account

Another likely reason for people wanting a secondary bank account could be to separate the increasing volumes of small-value digital transactions in their monthly statements, as UPI payments increasingly replace cash at store and online counters.

Since its launch in August 2016, UPI has unleashed a digital-payments revolution in India, clocking more than 10 billion transactions a month since August 2023. In April, the number of transactions on UPI stood at 13.3 billion.

“From a consumer point of view, you potentially have a 25-30 page bank account statement every month. So people want to partition their account so that their spends and transactions are from a second account but not a wallet,” Biswas said.

Airtel Payments Bank, which posted its financials last week, reported a net profit of ₹34.5 crore for fiscal year 2023-24, up 60%, as revenue jumped to ₹1,836 crore from ₹1,291 crore. Monthly transacting users surged to 80.4 million from 54.7 million in FY23, and customer deposits were at ₹2,801 crore, up 50% from the year prior.