Mobile banking is set to be the next big thing in India.
While India’s largest telecom service provider Bharti Airtel and the country’s largest lender State Bank of India announced a joint venture for mobile banking, the country’s second-largest GSM mobile player Vodafone Essar Ltd also announced a tie-up with ICICI Bank Ltd to offer electronic payments.
The venture between SBI and Airtel will be a 51:49 JV, with Airtel holding 49%. The CEO will be from SBI and the COO from Bharti Airtel. The two companies will jointly invest R100 crore in the new company.
“This will be a complete game changer, leveraging SBI’s expertise in the banking sector along with Airtel’s 150 million strong customer base and ecosystem of over 1.5 million retailers and distributors across India,” said Sunil Mittal, chairman, Bharti Airtel. “Together, we will create a scalable operation that will address the banking requirements of millions of Indians through the mobile platform.”
The joint venture will help SBI, which has more than 13,000 branches, to expand its reach in rural areas, whereas Bharti Airtel will benefit from “stickiness” of customers as they get more services on mobile phones, said Mittal.
On responsibilities of the two companies, Bharti Airtel CEO Sanjay Kapoor said the new company will be an independent entity and hence will work in a focused manner. “Core banking belongs to SBI. Know your customer (KYC) and bringing in new financial products will also be SBI’s responsibility. Airtel will bring in large customer network and interface.”
“SBI has always been in the forefront of financial inclusion initiatives. More than 67% of its massive (13,000) branch network is in rural and semi-urban areas. In the last four years, the bank has set up more than 15,000 customer service points of business correspondents as well as 13,000 business facilitators, to increase its outreach,” said OP Bhatt, chairman, SBI.
ICICI Bank chief executive Chanda Kochhar said in a statement that the deal with Vodafone will help the bank in “deepening its base” within the country.