Transforming into a payments bank
Incubated by ICICI Bank, FinoPaytech is a payments technology company that pioneered biometrics smart card solutions that helped banks, MFIs and other financial institutions identify customers and facilitate financial transactions in remote rural areas. By Q4 2016-17, the company expects to transform into a payments bank.
Incubated by ICICI Bank and incorporated in 2006, FinoPaytech was setup as a payments technology company. The company came out with biometrics smart card solutions that helped banks, MFIs and other financial institutions identify customers and facilitate financial transactions in remote rural areas.
This is also when the RBI introduced business correspondent (BC) model as part of its financial inclusion agenda. Following this directive, the company entered the space as a corporate BC providing last mile delivery channel or agents to banks. It combined its technology business with the delivery channel and offered end-to-end financial delivery solutions – right from technology development, device management to last mile implementation and delivery of services through business correspondent agents.
“What really differentiates us is our capability to offer a wide range of services (banking, Direct Benefit Transfer (DBT) payments, UID enrollment, eKYC, domestic remittance services, lending and large scale enrollment projects); ability to scale up business, team with banking experience, infrastructure and investment in technology,” states Rishi Gupta, MD and CEO of the company.
The company soon intends to transform into a payments bank, which, it claims is a first of its kind concept. In fact, it is in the closing stages of applying to the RBI for the final license and expects to launch in Q4 2016-17. “We are already offerings all the services that a payments bank is supposed to. As a payments bank, we will have our own customers, our own products and we will focus on making them available across both physical and digital platforms. Customer convenience will be key,” adds Gupta.
Filling the gap
Talking a about the fintech industry, Gupta states, “A decade ago more than 50 per cent of the adult population in the country did not have bank accounts and majority of them resided in remote rural areas, where banks had no reach.”The company’s technology enabled BC agents have filled that gap by reaching out to more than 60,000 villages across 28 states.
During this period, FinoPayTech has worked with over 20 public and private sector banks, insurance firms and Government agencies for various projects and has enrolled around 100 million individuals using biometric smart cards. “The steps towards digitization of rural banking were taken a decade ago with Fino at the forefront,” adds Gupta.
While the BC business was corporate and B2B in nature, the company ventured into B2C business through FINO Money Mart outlets, offering domestic remittance, utility bill payments, lending, insurance and other payment services to its urban and rural customers. “These outlets would be converted into payments bank branches when we launch our operations in the future,” adds Gupta.
Taking growth strides
Tracing the company’s growth, Gupta says, “We achieved break-even in 2010 and have been profitable since then.”The company closed more than Rs. 300 crore in revenue, out of which Fino received 60 per cent from corporate business (corporate BC, UID enrolments) and the remaining 40 per cent from its retail business (domestic remittance, utility bill payments, insurance and lending). Its focus currently is on retail business, which it forayed into in 2014, with a current double digit growth year-on-year. The division now has a network of over 10,000 points including 400 company owned Money Marts.
As an organization, the combined network of 30,000 transactions points comprises 20,000 BC points and over 10,000 retail points. This entire network handles around 85 million transactions annually and in the process manages close to Rs 10,000 crores in cash (NREGA, Pension payments under DBT, domestic remittance transactions and utility payments, cash management services and more).
Making strategic moves
Since inception in 2006, Fino raised four rounds of funding- between 2007 and 2011; ICICI Bank was its first investor. Then, Black Stone (Rs. 150 crore) was the last one in 2011. More recently, to initiate a foray into payments bank, it closed funding of Rs 400 crore, including Rs 251 crore from Bharat Petroleum Corporation Limited (BPCL). The freshly raised funds will be utilized for setting up IT infrastructure, branch expansion, marketing and branding.
The emergence of digital platforms have thrown open immense opportunities to improve banking access and financial services delivery in a low cost and efficient manner. Low value and high volume is the nature of payments bank business. Those who are able to crack this code, while keeping their costs low, will grow. “Before we embark on our payments bank journey, we made a new beginning last week. We will move forward with a new identity, new logo, new energy and vigour that will redefine us in the market,” states Gupta.
“When you talk about providing banking access using technology and digital platforms, there has to be supporting infrastructure,” states Gupta. According to him, some challenges that need immediate attention include data connectivity to facilitate financial transactions, availability of PoS machines / micro ATMs, trained staff, awareness among customers about importance of banking and use of technology, willingness to adopt technology and continuity.
However, the growth opportunities are aplenty too. Undoubtedly, digitization is the biggest takeaway from demonetization. It will have a transformational effect not just on banking but on every aspect of our lives where cash is involved. “Our payments bank launch couldn’t have come at a better time when the transformation to digital is taking shape across the country. The awareness generated currently will help people adopt digital platforms faster, which will further boost digital payments,” says Gupta. With rapid changes happening on the technology and business front, the company will be focused on the current business and aims for its agile, low cost technology driven payments bank to completely transform the banking habits of its target customers.
Founders: Rishi Gupta and Rajeev Arora
Concept: Fino Paytech was setup as a payments technology company that came out with biometrics smart card solutions that helped banks, MFIs and other financial institutions identify customers and facilitate financial transactions in remote rural areas. The company is soon transforming into payments bank.
Investors: Since inception in 2006, Fino raised four rounds of funding - between 2007 and 2011; ICICI Bank was its first investor. Later, Black Stone (Rs. 150 crore) invested last, in 2011. The company closed funding of Rs. 400 crore, including Rs. 251 crore from Bharat Petroleum Corporation Limited (BPCL).
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