FINO PayTech (Financial Inclusion Network & Operations)

FINO PayTech (Financial Inclusion Network & Operations)

FINO is no stranger to unbanked India. After all, it started off as a business correspondent (BC) in 2006. BCs are agents who work on behalf of banks to help people perform small transactions like opening accounts, accepting deposits, and making withdrawals.

Around 2006, the number of people out of the banking fold was between 500 million and 600 million. Therefore, BCs were introduced to provide last-mile connectivity in areas that banks couldn’t reach. Incubated under ICICI Bank, India’s largest private lender, FINO dived into the business headfirst.

Fino went on to become the largest business correspondent in the country with 30,000-35,000 numbers of business correspondent with an aim to reach 50,000 BC very soon.

It products including current and savings account, business correspondent lending, remittances and insurance.

Staying with the spirit of financial inclusion, FINO PayTech intends its avatar to reach the unserved and underserved.

Fino Payments Bank (D-Mart of Banking)

Fino Paytech, the holding company of Fino Payments Bank, has started its banking business in July 2017 after getting the nod from RBI on 31 March 2017.

It is a payments technology solutions provider to banks, financial institutions and MFIs. The bank focus on the mass market where households had incomes of between ₹2 lakh and ₹6 lakh a year.

There are four sources of income for the payments bank. Account Balances, Remittance Business, Banking Correspondents / Lending Business and lastly through insurance cross-sell and other cross sales

The bank also offers a bouquet of products related with mobile recharge and bill payments which is currently offered though Fino Money Mart. The bank is still devising strategy on the sale of mutual products via its branches.

It had 422 branches in 12 States like Maharashtra, Madhya Pradesh, Uttar Pradesh and Bihar, among others. It planned to add 200 branches in 2018 and 1000 branches in 3 years.

Bank has seen its operations stabilizing with each of its branches adding 10-15 accounts everyday.

It has witnessed doubling the current and savings account deposits every month.

The bank clocked 4-5 million transactions in October which is 3 times up compared to its starting month.

The company claims to have 28 Mn active banking customers spread across urban and rural areas

The payments bank has already sourced gold loans worth Rs 200 crore for around 30,000 customers, and is targeting a portfolio of Rs 1,500 crore by FY19.

Company has given the guidance of turning profitable within next 3 years

Fino Finance Private Ltd

Fino Finance Private Ltd (Fino Finance), a subsidiary of Fino Paytech having Rs. 100 crore paid up capital, since last seven years, is in the business of providing Joint Liability Group (JLG) based micro-finance in remote rural areas of Madhya Pradesh, Uttar Pradesh, Bihar, and Maharastra.

It has begun offering loans to MSMEs (only to unbanked ones) as part of its strategy to diversify its product mix. It is targeting small business owners such as those running kirana, garment, hardware, local dairy and beauty parlours outlets among others. The MSME loans is a mix of secured and unsecured products. Loan size varies from a ticket size of Rs. 1 lakh - Rs 15 lakh. Upto Rs. 2.5 lakh it will be unsecured loan, beyond that it will be secured loan.

Company is eyeing assets under management of Rs. 1,000 crore for MSME loans in next four-five years. It is hoping to achieve Rs. 250 crore of business in next financial year.

ICICI Group

Fino Paytech has inked a deal with ICICI group companies to distribute insurance products and tied up with Exide Life insurance to sell products via its distribution channel. ICICI Pru acquires 8.41% stake in Fino Paytech for Rs 100 crore. ICICI Lombard took additional shares totalling 10% investment (Rs. 149 Crs) by ICICI Group in Fino Paytech

NABARD

Fino is helping NABARD in digitising Rural bank across Haryana, MP, Bihar, Gujarat and Maharashtra. It plans to provide over 5000 Aadhaar enabled micro ATMs and financial inclusion gateway services to district central cooperative (DCC) banks and Primary Agricultural Credit Societies (PACS) across these states.

BPCL

BPCL picks up 21 per cent stake in Fino PayTech for Rs 250 crore

Petroleum retailing company BPCL which has a huge customer base who uses its petrol pumps (around 1 Cr People) and LPG services (Around 4 Cr People) intends to utilize this partnership with Fino for a complete payments solution which could help it increase customer loyalty and also make payments simpler.

Digitization

Increasing acceptance of digital mode of transaction is the major positive for the company

The digital offerings will include the national assets such as Aadhaar Pay, eKYC and the UPI.

Collectively there are around 150 DCC banks and a multitude of PACS associated with them. At a conservative estimate close to 100,000 Aadhaar enabled micro ATMs would be required that would transform the way rural India does banking.

Fund Raising

In addition to ₹700 crore raised so far (₹400 crore for the bank), Fino Paytech is planning to raise additional ₹200 crore from a clutch of domestic and foreign investors by the end of the financial year to support the growth of its payments bank and NBFC arm

Going Forward

India has only 18 ATMs—and 13.4 bank branches—per 1,00,000 adults, compared to a global average of 43 ATMs. Payment Banks has been introduced by RBI to promote financial inclusion in a country where 40% of the population still does not have access to formal banking services. Among the remaining 60%, several still don’t use formal lending services. “This may be because banks are too far and they (customers) will lose a day’s wage in travelling, or the products are complicated

Market is huge and with Fino’s mission to target the underserved mass market segment, the story of appreciation is waiting to unfold.

It endeavours to use technology to improve banking reach as well as customer convenience and looking to tap the 233 million unbanked Indians with current employee strength of 4,000.

A major challenge for FINO is to boost literacy of financial products because of the socio-economic profile of its customers. With the regular training and financial literacy programmes, it sounds to be achievable target.

Conclusion:

Backed by investors such as Blackstone, International Finance Corporation, Intel Capital, ICICI Bank, and Bharat Petroleum Corporation, it has tied up with Western Union and is also working with National Bank for Agriculture and Rural Development, among others, to expand its network combined with decade long experience in servicing unbanked population having the proven track record

With a turnover of Rs 320 crore for FY2016 and profitable for the past five years, it is the largest BC in the country—it reaches 100 million customers and carries out 80-85 million transactions worth Rs 9,000-10,000 crore in cash each year.

It will look at an initial public offering in 2019 and list before it completes four years of operations.