Payments banks have Rs 40K crore domestic remittance market to tap

A Rs 40,000-crore opportunity is in store for payments banks to tap by offering domestic remittance facilities, especially to migrant workers, finds Nielsen.

According to Nielsen, payments banks like Paytm Payment Bank, Airtel Payment Bank, India Post Payments Bank and FINO Payment Bank, can provide a ready solution to the current domestic remittance scenario. Of the 120 million migrant workers, more than 80 per cent are from inadequately connected rural areas and they account for 80 per cent of the country’s domestic remittances. Bihar and UP account for 60 per cent of the remittance receivers and Odisha and Jharkhand are some of the other receiving states.

Domestic remittance in India is valued at more than Rs 90,000 crore per year and of this, rural India’s contribution is over Rs 70,000 crore per year. Traditional channels account for only 40 per cent or Rs 30,000 crore of the rural remittance. The rest of the remittance happens through high-risk non-traditional remittance modes and this is a Rs 40,000 crore opportunity for payments banks to tap.

Payments banks, which offer electronic remittances, financial advisory, online banking and more, offer immediate value to unbanked consumers. Only a fraction of remitters use online modes of money transfer and thereby, present a big opportunity for online remittance players. Payments banks can enable transition to digital modes of transfer using Bharat Interface for Money (BHIM) app and other apps that facilitate remittance. They are designed to help rural users conduct cashless transactions and convenient remittances, finds Nielsen. Digital wallet companies and banks providing credit and debit cards can also facilitate online transactions, but their adoption and growth in rural India is still low.

While announcing the UPI integration with Airtel Payments Bank, Shashi Arora, MD and CEO, Airtel Payments Bank said, “This would allow all our 20 million bank customers to create their personalised UPI handles on the Airtel app, and enable them to make digital payments in both the offline and the online space. Our bank customers would also be able to link their bank accounts on Bhim app and make UPI payments.”

“Payments banks are capable of facilitating remittances and payments to a large user base, especially to underserved area as per RBI’s vision. We foresee significant rise in digital transactions at untapped merchant locations and person-to-person payments space,” Dilip Asbe, chief operating officer, National Payments Corporation of India, said.

Among payment banks, India Post payments bank charges Rs 5 for IMPS transfer while NEFT is free of cost. Online transfers within Airtel payments bank is free of cost and for transfer to other entities, it charges 0.5 per cent of the transferred amount. Online transaction and fund transfer services like IMPS, NEFT and UPI through Paytm payments bank are free of cost.

Sangeetha G.