Rishi Gupta, Managing Director and CEO, Fino Payments Bank Ltd, talks about geopolitical tensions impact on his business, Q3FY22 numbers, the growth trend in the micro-ATMs and AePs, business outlook and competition, small finance bank plans and overall fintech sector among others during a candid chat with Swati Khandelwal, Zee Business. Edited Excerpts:

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Q: Has the ongoing geopolitical tension amid the Russia-Ukraine issue created any challenge in your business?

A: It has not had any impact on our business because Ukraine's challenge falls under international challenges. Our business focuses on the domestic market. In fact, our customer segment has not been impacted by Ukraine and we are growing, our business is growing, profitability is growing, we are also increasing our network and this quarter has been a good quarter for us. Ukraine crisis or the Ukrainian war has had not impacted us.

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Q: Your revenues and the PAT has been quite strong and doubled in the gone quarter (Q3FY22). Tell us about what contributed to your profits and how many merchants were added? 

A: We registered a profit of Rs 14.1 crore in the third quarter, which is a growth of 116% on a quarter-on-quarter basis. Our merchant expansion and hold that we have on our business in rural and the way we have expanded our business in terms of the transaction has helped us to make transactions worth Rs 1 lakh 23,000 crores in the first nine months while transactions of Rs 1 lakh 33,000 crores was made in the whole year last year. So, a quarter is left but we have made transactions that are almost equal to the transactions which were made the last year. So, the transaction volume has increased. Our second focus is on the opening of customer accounts, the saving accounts we are opening is more than 2 lakh accounts per month and we have doubled our growth in the same compared to the last year. So, saving accounts is leading to an increase in the transaction volume as people's money is coming into it whether through remittance or government subsidies. We have also seen an increase in that as well. Our third business is of cash management services in which we are providing cash management payment services to NBFCs, microfinance companies, e-commerce companies and many more companies. We have seen a huge jump in it this year compared to the last year. We have made transactions worth Rs 15,000 crore in the first nine months compared to Rs 12,000 crore that we did in the complete nine months last year. We have some 127 partners in this. Our growth is led by our focus on the rural markets and the increase in the merchant network which stands nearly 8.7 lakh as of December 31, 2021, of which 870 merchants were added in the previous quarter. So, the expansion in the network due to which we are able to offer more products has led to a growth in our profit and revenue.

Q: What is the growth trend in the micro-ATMs and Aadhaar-enabled payment services (AePs)? Also, what was the growth in the CMS?

A: if we have a look at the growth of micro-ATMs and AePs then we did a transaction of about Rs 56,000 crore in the complete year last year while we have already made transactions of Rs 42,000 crore in the first nine months. I feel that the micro-ATM and the AePs business is a stable business and brings a good footfall of our customers, which is converted into saving accounts. So, we are getting consistent growth. Remittances are a different product, which is a domestic remittance product and we did transactions worth around Rs 29,000 crore under it this year we have made transactions worth Rs 29,000 crore in the first nine months. So, the decline in remittance due to COVID has recovered completely by now. In CMS, we have made transactions of about Rs 15,000 crore in nine months compared to Rs 12,000 crore that was transacted last year. Thus, all-in-all, whether it is CMS, remittance or micro-ATM, there has been good growth in all three products. As I have also talked about the savings account then last year, we opened around 11.3 lakh accounts in the complete one year while we have already opened 13.5 lakh accounts in the first nine months. There is a digital push to the business as there is an increase in the UPI transactions and it has grown roughly by 3.50 times this year compared to the last year. At the same time, there is an increase in debit card usage. So, having an eye on the numbers and the trends of the customers that our customer segment as we focus on the rural geographies and a particular segment. Fino has leadership in which it focuses on the income category of customers with an income of around Rs 4-5 lakh and in it, we are seeing that the transactions volume is increasing with the savings account. We are also seeing a growth in the usage of digital products like UPI or debit cards. So, the outlook is quite positive and our growth has been better even in this quarter compared to the last year. Even in terms of profit, we will try to improve it compared to the last quarter.

Q: With competition increasing rapidly in the sector, do you believe you might have to pay additional margins to Merchants' ad. Can it hurt your margins, if yes, how will you protect it? Also, how is the business outlook from the new product point of view and what launches we can see from your end?

A: Competition is a way of life and we have to live with competition and there is no choice. But the hold we have as a group and a company, maybe our bank is just five years old but we are present as a group for about last years. So, our rural penetration and the connection with the customers can be built over a period, it can’t be done overnight. Fino's business is a phygital business in which you are supposed to create a physical network and then create a digital network overall on it and it is built over a period because the customers' trust of and a connection in the banking business of Fino is quite good. As we have the first-mover advantage in this segment of the business of payment and liabilities, however, there is competition and there will be pressure on the margin but as we are expanding our network aggressively and bringing new products.

As far as new products are concerned, we already have many products underpayment, in liabilities, we have a savings product. We also want to bring RD&FD products and regulatory approvals are awaited. Our international remittance business has been approved and we have plans to launch it in the next quarter.

In addition, in the credit segment, we have also tied up with some NBFCs, and have also started offering certain products in the merchant loan, consumer loan segment. We expect traction will be built in it in the next six to nine months. So, international remittance, RD&FD, credit. At the same time, we are also trying to offer mutual funds products to our customers, it will be done as soon as we get the regulatory approvals for the purpose because our customer comes physically to us for cash withdrawal or remittance. We are opening their savings accounts and taking them on a digital journey. So, the ecosystem that we are providing is especially for the segment of customers and there is no parallel competition to it, however, there are few people in a specific product but overall, Fino has a hold and has a multi-product, multi-location, multi-geographies and multi-platform strategy is benefitting us.

Q: Do you have any plans to apply for a small finance bank (SFB) licence?

A: Haven't talked to RBI yet, haven't initiated anything on this. Our five-year period will end on June 30, 2022. As of now, we have traction in payment, liabilities and investments is quite good. In credit, we are working in partnerships with NBFCs as a referral product. After looking at our success in credit over a period of time and building the scale, we will look at applying for SFB but as of now, there is no such plan. We will wait for some time.

Q: The emergence of the fintech sector is looking quite promising but at the same time there are challenges. What kind of CAGR growth you are expecting and how will you play out your unique model? Also, tell us about the margins will be sustained or improved from here?

A: Fintech is a broad technology and is an industry. We have seen that there are specialised as well as general companies, but there is a differentiation in fintech is needed between a profitable business model and an upcoming business model. Fino's business model is a profitable business model, so that is another big differentiation that Fino has. We have been posting profits for consecutive eight quarters and it is improving quarter by quarter. In terms of growth outlook, we are seeing an expansion in the industry and the customers and merchants’ addition. Our CASA and CMS products are growth products and good growth is expected in the same. So, we are eyeing a 28-30% growth and on a consistent basis, we should achieve this growth for the next few years. We are also confident that we will achieve it because our merchant network is expanding and customers are being added and in it, we are seeing a growth in the transaction volumes and business. Both from the profitability point of view as well as the growth of point of view, I think, Fino is a unique company in the fintech industry and fintech world, where you are getting profitability and growth and the business is a sustainable business. I think, with the expansion in the network and also with the customers, we will be able to more cross-sell as well.