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Fino Payments Bank will take a call on converting to a small finance bank once it completes five years of operations next year, MD & CEO Rishi Gupta tells Shritama Bose. The bank will retain its focus on the middle 50% of India’s population, offering assisted digital services with a physical presence, he added. Edited excerpts:

Competition has intensified in recent years in the payments space. What is going to make you stand out?

We look at India in a very different way. One solution for everybody will not work. There have to be multiple players, unlike in Western countries. The internet giants, banks, fintechs and big payment companies are focusing on the top 25% of the population, who are on smartphones, have bank accounts with money in them, and are digitised. The next 50% of the population, which is emerging India, comprises people who need a different kind of solution.

They have money, but maybe not in the bank account. They may be earning and spending in cash. Some of them may have smartphones, but they are not comfortable using them for banking transactions. Others may not have smartphones at all. These are the people we are focusing on, with incomes between `2 and 6 lakh. There we have phygital solutions, marrying physical with assisted digital to make it a digital journey for the customer over the next 10 years.

There’s fierce competition for QRs at storefronts. Do you see it coming down to a few players eventually?

The regulator has been saying that you should have just one QR code which is interoperable. That battle for having your QR code versus someone else’s will continue for some time till it moves to a customer-acquiring model rather than a merchant-acquiring model. At least in the bigger cities, the QR penetration is already quite high. In rural areas, it’s not QR codes (that matter), but the ability of a person to pay on a mobile phone and to scan and pay digitally. For that, they need to have money in their bank accounts and they must be able to make that transaction digitally. That won’t be an overnight journey. Being the first-mover with a presence on the ground and providing both the physical and digital legs of the service, we have an edge over the others.

Payments businesses in India eventually turn to credit. Do you intend to turn into an SFB?

So, two things — one is that it’s important to focus on the core business. Our core business is quite robust and sustainable as of now. The cream on the cake is coming from cross-sell and other businesses. We are already offering credit through partnerships with NBFCs and banks. Having said that, the option of converting into an SFB is there with us after we complete five years, which is the middle of next year. At that point, we will take a view on whether to go into credit products or to add more partners on the credit side. There’s too much money chasing a few merchants and customers. We want to be a little more cautious on that side.

What is your revenue mix like? Would you like to change it?

Of our revenues, 30%-odd is remittances. Another 30-35% is the cash withdrawal product, which is micro ATM and AePS (Aadhaar enabled payment system). BC (business correspondent) banking is about 20%. About 8% is current account savings account (CASA) and 4% is the CMS (cash management service) business.

The mix will change marginally because we are entering new products, especially on the cross-sell. They will not significantly change the revenue mix, but the profitability mix will definitely change. On the topline, our CASA offering and our CMS offering will become sizeable, and maybe double, over the next few years.

MDR on UPI and RuPay are gone. With the proliferation of players, is the compensation in the payments market tilting downwards?

Zero-MDR on UPI and RuPay are government decisions. As a business entity, we would obviously like to recover that cost upfront. Specific to our own business in AePS and micro ATMs, the charge (per transaction) has not gone up, unlike in the ATM business. Representations have been made to change that. Remittances anyway is a very affordable product, as compared to the other options with the customer, with a less than 1% fee. In our business since there are multiple angles involved — being a third party, having cash digitisation, cash storage and other costs, I don’t see the transaction remuneration going down for us. It is holding up and, in fact, for some, it has also gone up. We increased our charges for savings accounts from Rs 399 to Rs 449, but we didn’t see a major impact of that on customer on-boarding.