Policybazaar to partner with Paytm, Ola and IndusInd Bank for NUE bid

SoftBank-backed insurance platform Policybazaar will partner with Paytm and Ola Financial, as well as IndusInd Bank and a handful of consortium players to set up a New Umbrella Entity (NUE) to establish a national payments infrastructure company, sources familiar with the development told ET.

These companies have built an entity called Foster Payment Network which will front the NUE bid under the 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.

“They will own controlling stakes and together hold over 50% of the NUE,” one of the sources said, urging anonymity as the discussions are confidential.

Paytm Payments Bank, Paytm Financial Services, and Paytm founder Vijay Shekhar Sharma are expected to secure around 10% stake each in the NUE.

Mumbai- headquartered EPS, a retail banking infrastructure provider with global operations in Australia and the Philippines, could pick up a similar stake.

Ola Financial and Policybazaar, along with IndusInd Bank, may each take less than 10% non-controlling stake in the NUE.

Non-bank lender Centrum Finance, Suryoday Small Finance Bank, data analytic platform Think360.ai, and fintech Zeta are the remaining players which will have partial stakes in the NUE.

“The NUE will follow a three-tier ownership structure,” a source said. “The notion of diversified owners adds value in the kind of product the NUE can develop as well.”

For example, 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.

As stated by another source who refused to reveal details, Paytm’s NUE is focusing on building products that cater to the “lifecycle of the money – from savings to investment.”

“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 behavior, 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.

ET reported in February that ride-hailing services provider Ola through Ola Financial as well as other lenders are expected to be part owners in the consortium.

It also reported 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 competing for a license 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 Vijay Shekhar 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.”

The reasoning behind its application was to play an important role in India’s retail payments ecosystem which is expected to expand marginally over the coming years, he had said, adding that the NUE could build 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 growing payments ecosystem which in recent weeks has been subject to increased downtimes and mass-outages due to system vulnerabilities.

These NUEs can also develop payment systems to rival Unified Payments Interface, run by the National Payments Corporation of India, and launch new products in digital payments. NPCI is a not-for-profit undertaking, controlled majorly by banks and regulated by RBI.

SoftBank and Ant Financial-backed Paytm has in recent years ventured into lending, insurance, and brokerage businesses with aims to turn into a full-fledged financial services player. An NUE license can enable the fintech to have more autonomy in developing new suites of bundled payment and financial products.

Meanwhile, Ola Financial has expressed its desire to build a super app backed by a wide range of financial services. The company secured Rs 200 crore from Falcon Edge and Matrix Partners in May last year.

Paytm Payments Bank was fourth on the UPI remitter charts, processing 149 million UPI transactions in February. IndusInd Bank processed 20.08 million such remit transactions, as per the latest NPCI data.

IndusInd Bank’s digital transaction mix continues to expand, with 89% of transactions happening digitally and 70% requests also processed digitally.