Small finance and payments banks are growing sustainably: Experts at Mint BFSI Summit

New Delhi: Small finance banks (SFB) and payments banks, constituted under the differentiated banking license policy of the Reserve Bank of India (RBI), have seen sustainable growth throughout their existence, industry experts said at the Mint BFSI Summit and Awards 2024 on Thursday.

“India is fortunate to have differentiated licenses. The regulator Reserve Bank (RBI) has been visionary – there are just seven countries in the world which have differentiated licenses, the United States, Brazil, Hong Kong, Singapore, India and a couple more. Today, small finance banks have 25 million accounts. That means they have touched the lives of 100 million Indians, or 7% of the population, in under seven years,” said Inderjit Camotra, MD & CEO of Unity Small Finance Bank.

Rishi Gupta, MD & CEO of Fino Payments Bank, elaborated on how the payments-bank model helped control their costs, especially fixed costs, while charging the customer for accessibility to services for which they would have otherwise needed to visit a bank.

“We have started to see companies that are very active on UPI and in the payments banks space use data for cross-selling. This is because using only UPI-based solutions makes the path to profitability difficult. So, a lot of payment companies are now looking at how to use the data of the millions of customers who come to them every month. As a company, we have been viable from the fourth year itself. We are probably the first payments bank to become profitable and the first and only one to be listed on the bourses.”

Five out of six payments banks are reportedly profitable as of now, while SFBs, which have a similar business model to traditional banks, have been profitable from early on. Given this, there has been consolidation among SFBs, including the merger of AU Small Finance Bank and Fincare, which Camotra believes is a healthy sign for the industry.

Speaking about Unity Small Finance Bank’s tie-up with a fintech firm, Camotra said, “It’s the best thing for India to have its banking and fintech integrated. Ripl is one of the leading unicorns of India and we are working together in many spaces – the fintech stack, merchant acquisitions, cards, QR codes, etc. I think fintech firms coming together with BFSI firms is the best thing that has happened to India in a long time.”