SoftBank-backed insurance platform Policybazaar will partner with Paytm and Ola Financial, as well as private sector lender IndusInd Bank and a handful of consortium players to set up a New Umbrella Entity (NUE) to build a national payments infrastructure company. This is as per a report by the Economic Times.
These companies have set up an entity called Foster Payment Network which will front the NUE bid under Reserve Bank of India’s framework, the sources said.
Three Paytm group entities and Mumbai-based Electronic Payment and Services (EPS) are expected to co-promote Foster.
The report quotes a source, “They will own controlling stakes and together hold over 50% of the NUE.”
Paytm Payments Bank, Paytm Financial Services and Paytm founder Vijay Shekhar Sharma are expected to pick up around 10% stake each in the NUE.
EPS, a retail banking infrastructure provider headquartered in Mumbai with global operations in Australia and the Philippines, could pick up a matching stake.
Ola Financial and Policybazaar, along with IndusInd Bank, may each take less than 10% non-controlling stake in the NUE.
The consortium is, however, in the final leg of reviewing its proposal before presenting its bid to the central bank ahead of the March 31 deadline.
Non-bank lender Centrum Finance, Suryoday Small Finance Bank, data analytic platform Think360.ai and fintech Zeta are the remaining consortium players which will have partial stakes in the NUE.
“The NUE will follow a three-tier ownership structure,” a source in the know said. “The notion of diversified owners adds value in the kind of product the NUE can develop as well.”
For instance, a company like Centrum is a specialist in foreign exchange, whereas Policybazaar is a leading insurance distributor. “Different parts of the payment puzzle can be solved through these diverse engagements,” the source added.
“There are two levels to furthering financial inclusion – education and distribution. Through the NUE, one can solve for distribution at all levels…the entity (Foster) can create solutions that revolve around savings behaviour, market behaviour, issuing debt instruments to small borrowers and even distributing life insurance through a common digital rail…there is all the capability,” the source added.
It was reported earlier that Tata’s Ferbine NUE, which is being backed by HDFC Bank, Bharti Airtel, Kotak Mahindra Bank and Mastercard, is also in the fray.
The others vying for a licence include Reliance Industries, Infibeam Avenue, Facebook and Google-backed SoHum Bharat, and another NUE backed by ICICI Bank, Pine Labs, Axis Bank and Amazon.
In a recent interview with ET, Paytm’s founder Sharma confirmed its participation in the NUE along with Ola and IndusInd Bank.
“Our consortium has a big commercial bank, a small finance bank, a payments bank, two NBFCs, a fintech player and an ATM service provider,” Sharma had said. “There is every kind of representation. Our approach will be extremely inclusive, focused on scaling payments in India,” he had said.
The rationale behind its application was to play an important part in India’s retail payments ecosystem which is expected to grow exponentially over the coming years, he had said, adding that the NUE could create solutions in the space of transit, remittance and business payments among merchants.
RBI released its NUE framework in August last year for Indian and foreign firms to set up for-profit NUEs to “de-risk” India’s burgeoning payments ecosystem which in recent weeks has been subject to increased downtimes and mass-outages due to system vulnerabilities.
These NUEs can also set up payment systems to rival Unified Payments Interface, run by the National Payments Corporation of India, and roll out new products in digital payments. NPCI is a not-for-profit undertaking, controlled largely by banks and regulated by RBI.
SoftBank and Ant Financial-backed Paytm has in recent years forayed into lending, insurance and brokerage businesses with ambitions to turn into a full-fledged financial services player. An NUE licence can help the fintech have more autonomy in developing new suites of bundled payment and financial products.
Meanwhile, Ola Financial, the financial services arm of the Noida-based startup, which is incidentally also funded by SoftBank, has expressed its ambition to build a super app backed by a wide range of financial services. The company raised Rs 200 crore from Falcon Edge and Matrix Partners, it was reported in May last year.