Yes Bank is set to partner with So Hum Bharat Digital Payments, which will apply for a license to become a new umbrella entity (NUE) for retail payments.
The newly-formed company said that it is in discussion with Yes Bank for a 9.99% equity investment.
The company had also announced last month that payments company Infibeam Avenue is picking up 33.33% stake, joining its entity as promoter and investor.
So Hum Bharat Digital was set up in May this year by payments industry veteran Navin Surya, who was formerly MD at ItzCash, and also backed by Infibeam Avenues.
Entities with an RBI license will be able to set up and operate NUEs, which are umbrella entities for retail payments, having the same powers as NPCI. As of now, NPCI is the sole umbrella organisation for owning and operating a pan-India digital payments network.
NPCI, set up by the RBI and the Indian Banks Association (IBA), was founded in 2008 and developed the Unified Payments Interface (UPI), an instant real-time mobile payments system, in 2016, months before the government’s demonetisation exercise.
An NUE will be able to set up, manage and operate new payments systems in the retail space, comprising of (but not restricted to) ATMs, White Label PoS, Aadhaar based payments, and remittance services. NUEs are further empowered to introduce innovative payment methods, standards and technologies as well as create awareness about these new payment systems.
The RBI has opened up the process of receiving applications to set up new umbrella entities for retail payments. The deadline set by the central bank is February 26, 2021.
The bank has also laid down certain framework for setting up new umbrella entities: the NUE shall have a minimum paid-up capital of INR 500 Cr, no single promoter/promoter group shall have more than 40% investment in the capital of the NUE, and a minimum net-worth of INR 300 crore shall be maintained at all times.
The new umbrella entities can set-up, manage and operate new payment systems, and operate clearing and settlement systems.
Yes Bank currently holds a 1.01% stake in NPCI.
“I have always been impressed by Yes Bank’s success in the Fintech ecosystem driven by innovative and disruptive products and solutions. We at So Hum are proud to partner with Yes Bank and the combined expertise of the two firms will add significant value to this NUE venture through continuous innovation and disruption,” Surya said in a statement.
So Hum currently has 4 individual promoters, 1 corporate promoter (Infibeam).
Fintech advisor and emerging tech evangelist Sharat Chandra told Inc42 that NUEs can take care of risks of monopoly and the protection of the UPI ecosystem.
“The fact that the State Bank of India (SBI) and Tata Group have shown interest in applying for NUE is a good sign. A challenger to NPCI is very much needed to ensure stability and competitiveness for all payment entities,” he said.