RBI guidelines stipulate that a payments bank more than five years old can apply for a licence for a small finance bank (SFB), Gupta said.
“So the natural migration for Fino from a banking licence point of view will be into a small finance bank. We have started to offer credit in partnerships with other players. We are also building a large customer and merchant base, which will come handy as we decide on SFB.
“Having said that, right now we are internalising it. And once we close that communication and we believe that it is the right path or approach, then we will write to RBI for approval,” Gupta told PTI in an interaction.
However, he said it was difficult to give a timeline as of now, “but we will take another few quarters to decide”. Still, getting the final nod from RBI and the timeline for transition will add to the actual SFB operations, he explained further.
It was in 2006 that Fino started off as a payments technology company and gradually played a crucial role in the financial inclusion journey of India delivering services under the government’s direct benefit transfer (DBT) services to the beneficiaries.
Having launched its domestic money transfer services in 2014, Fino received payments bank licence the following year and launched Fino Payments Bank in 2017.
Fino also distinguishes itself becoming the first profitable payments bank in 2020 and also the first in the space to be listed on bourses in 2021. It has now started off towards ‘Fino 2.0’ with ‘digital banker’ as a mainstay.
“From a strategy and execution point of view, it has been a difficult business model starting as a business correspondent (BC) to a payments bank. We believe we have done quite a good work in laying the foundation across the country which can be used for multiple services,”Gupta said.
Speaking about the current business scenario, he said the momentum has been good and the bank is seeing growth in customer ownership strategy.
“We are seeing good consolidation happening in our cash withdrawal products, Fino is almost a leader in the categories of business we are into. It is the first normal year after Covid and it has been a good year for us so far and we are seeing good growth in business.
“We expect it to continue and are already seeing good momentum in the festival month of October. So we expect that this momentum will build up as we move forward in the second half,” said the official.
Customers now feel the ownership of their accounts as against just a transaction medium as they allow the money to sit in the account for a longer period of time.
“We are a payments company and our primary business is to facilitate transactions. People keep money in their accounts so that they can do transactions. But our average balance has gone up by nearly 50 per cent as people are becoming more comfortable in keeping higher balances. So the transaction led business is now turning to ownership like business such as CASA (current account savings account),” Gupta added.
In the first quarter ended June of the current fiscal year, the bank recorded a 223 per cent jump in net profit at Rs 10.1 crore building on a revenue of Rs 289.1 crore, up by 40 per cent from a year ago quarter.
In 2021-22, Fino Payments Bank had posted a net profit of nearly Rs 43 crore, up by 109 per cent from a year ago. Total income during the year rose by 28 per cent to Rs 1,009 crore.
The bank offers financial services such as direct remittance, doorstep banking, micro ATM/debit card services, CASA, third party cross-sell products such as insurance and tickets.
Gupta said going forward the cross-sell products should have a sizable portion in the bank’s bottomline. It is more like a bottomline (profit) strategy.
“For me cross-sell is a profit product. At Fino Payments Bank, we are already a profitable entity. The cross-sell products are further going to boost my profit”. Fino is also investing big on technology and the bank is building up a digital team.
“We are strengthening our digital footprint by creating an ecosystem. Towards this, we are committed to investing in digital footprints and be ahead of the curve for pushing digital penetration in our target audience. Technology and digital spends in H1FY23 have been around Rs 21 crore and we will continue exploring opportunities,” Gupta said.
Besides, as the rising digital transaction in the country has allowed UPI to become a choice of preference, Fino expects the share of UPI to rise. “UPI transactions are going up substantially. Last year it was 10 per cent of our total volume and I am expecting it to be 20 per cent plus. Digital transactions have built the confidence in the business ecosystem which Fino has created for the customers,” said the MD&CEO of Fino.
At the end of June 2022 quarter, 17.2 lakh accounts were active on UPI. The total number of accounts opened stood at 52.1 lakh. With a typical kirana store owner as a merchant point for Fino to deliver banking services, it had over 11.42 lakh merchants on its network by the end of first quarter of 2022-23.