The government-backed India Post Payments Bank has finally arrived. There are already half a dozen payments banks operational in the market currently and the banking space is already seeing lot of competition as there are different set of players from full-scale banks, universal banks, small finance banks to NBFCs. Given the competitive landscape, the new India Post Payments Bank has to differentiate its offering in terms of technology, faster delivery and building a long term sustainable business model. Experts say that there is a danger of falling into the PSU trap of doing things. Here's how it can avoid it.
Create a long term sustainable business model
The bank offers very attractive proposition of 'no monthly balance requirement' for savings account. The free account opening at doorstep banking is also offered by the bank. The sops are attractive, but the bank should create a long term sustainable business model as 'lending' is prohibited and the scope for generating revenues is in 'payments' and selling third-party products like mutual fund schemes and insurance plans.
Focus on cross-selling
Since the avenues to generate revenues are limited, the bank should focus on cross-selling 'payments' products and 'investment' products to savings and current account holders. In fact, the current account holders offer a good opportunity to sell 'payments' and 'investment' products. For this, they need to create a good advisory desk to outsmart the other market-savvy payments banks.
The bank proposes to open a large network of 650 branches. In the digital age, it should have small-sized branches and a gradual approach of opening new outlets. The banks are increasingly become digital, whether it is about opening or doing payments or buying investment products. Any indiscriminate branch expansion will lead to additional cost, which will impact the cost structure and profitability.
Culture of innovation
The name of the game in the banking industry is innovation. Every bank is focused on engaging with fin-tech world for helping them in cutting edge technology. The bank should also encourage the culture of innovation or engage with fin-tech players to stay ahead of the competition.
More professional board and management
The nine-member board of director is heavily loaded with bureaucrats. The bank certainly needs more expertise in IT, digital, risk management and also payments, which is seeing huge disruption globally.