Payments Banks in India: How They Quietly Won 250 Million Users

Payments banks are now serving over 250 million customers across India. This growth happened quietly over the past decade. These specialized banks focus on rural and semi-urban areas.

Their success comes from a unique “phygital” model. They combine digital services with physical, local touchpoints. This strategy has made them a key part of India’s financial inclusion story.

A Model Built on Accessibility and Trust

These banks operate very differently from traditional ones. They use neighbourhood shops like kirana stores as service points. This makes them far more accessible and less intimidating.

Trust is a major factor in their growth. Major brands like Airtel, Jio, and India Post back most payments banks. According to Reuters, these household names help build immediate customer confidence.

Their transaction volumes are now comparable to large regular banks. Three payments banks ranked among the top 20 UPI remitter banks recently. They found success by focusing on specific strengths instead of trying to do everything.

Driving Deeper Financial Inclusion

Payments banks excel at bringing new users into the formal system. They are particularly effective at reaching women customers. In some banks, women make up nearly a third of the customer base.

A network of female business correspondents supports this growth. These agents help users with more than just payments. Customers use the accounts for saving, withdrawing, and receiving benefits.

Another key role is providing a safer entry into digital finance. Some banks promote a “safe second account” for everyday transactions. This separates daily spending from a user’s primary savings, reducing fraud risk.

Payments banks have proven their value beyond just processing transactions. They have become a trusted gateway to finance for millions. Their focused model continues to redefine inclusion in the digital banking era.

Thought you’d like to know

What is a payments bank?

It is a specialized type of bank in India. They accept small deposits and provide payment services but cannot lend. Their goal is to promote financial inclusion, especially in remote areas.

How are payments banks different from regular banks?

They cannot offer loans or accept deposits above ₹2 lakh. Their focus is on payments, remittances, and distributing third-party products like insurance. They rely heavily on digital channels and local agents.

Are payments banks safe for customers?

Yes, customer deposits are protected. The funds are invested in secure government securities. Their promotion of a “second account” for daily use is actually a safety feature against digital fraud.

Why are payments banks popular in rural India?

They use local shopkeepers as accessible service points, which builds trust. Their services work on basic phones and offer services like micro-ATM transactions. This solves the problem of scarce bank branches and ATMs.

How do payments banks make money?

They earn from fees on digital payments, money transfers, and AePS transactions. Revenue also comes from distributing insurance, gold loans, and other third-party financial products.