Paytm, one of the eleven companies to have received license for payments bank last year, is adding a capital of Rs 350 crore to its yet-to-be launched service. The digital commerce platform is planning to launch the service around Diwali this year.

Talking about the primary investment into the payment banks, Shinjini Kumar, CEO, Paytm’s payments bank quoted that,

Our plans show this initial capital is adequate for rolling out a payments bank as we are not looking to open too many branches in one go. We have got separate solutions to address urban and rural consumers as both have different sets of challenges.

Kumar further added that the amount will be used to build the platform’s technology infrastructure and physical branch presence in rural area.

Paytm has collaborated with Infosys to use its Finacle platform for the payments bank and the company is eying more financial service providers to partner with as it targets sale of financial services like insurance and mutual funds to the payments bank’s customers. The selling of such products is prominent for revenue of Paytm as payments bank isn’t licensed to offer loans and earn interest on the amount.

The company is reportedly coming up with a plan of setting up a service similar to debit cards which enables consumer to withdraw money at ATMs, as remote areas still lack the access to internet. A source explaining this said that a sudden change cannot be observed in tier III or IV towns and the team is in talks with various banks and ATM providers to integrate the service for people to withdraw cash. It is adamant on adding offline merchants in such areas on its payment platform so that users can pay for the transactions using payments bank’s money.

Fraud-free Banking

Kumar further added that there is a dire need to make the platform fraud free. The company is struggling with the KYC norms because a mobile number cannot be considered as an person’s Identity proof(and you can guess why!?). It is due to the fact that a mobile number is transferable among people, it may be assigned to someone else.

Currently, many of the wallet services can be utilized after mobile number verification. She said that the payments bank is about taking millions of people to be included into the financial system of the country. So we need a broader more robust system of verification, so as to avoid money laundering and fraud.

Kumar suggested that the industry may use a medium risk KYC where lower risk credit can be given.

People have higher expectation. We will built on that but it is to be understood that a system has to be in place first.

RBI in order to redefine banking in India introduced payments bank last year. The move is seen as a major step to increase financial inclusion of rural areas, poor population, and other non-banking population in the country.

The idea is to reach customers mainly through their mobile phones rather than traditional bank branches. Three out of the eleven companies, namely Tech Mahindra, IDFC Bank and businessman Dilip Shanghvi have already withdrawn their applications for the setup of payment banks.

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