Should payment banks appoint non-bankers as CEO?

Paytm is planning to have a non-banker as its CEO:

The company is looking to hire around 600 for the bank, at various levels. As for senior leadership and the CEO in particular, it is searching for non-banking talent. “Our CEO will not be an ex-banker. We do not want more of the same. We want a new, fresh-thought process. However, in departments such as compliance, finance and treasury, we want banking people because this is where the banking core is,” Sharma said.

People who have horizontal experience in multi-sectors work out better, he said, disclosing that the sectors of fast moving consumer goods and telecom were among the hunting grounds for the chief executive. “This is a new business model. So, we need people who are risk takers and want to try new things.”

Currently, a Paytm board member and a top banker, Vivek Mathur, is driving the payments bank project. Mathur was earlier chief of financial matters at Standard Chartered’s global back office in India and also at ANZ Grindlays wholesale bank in the country. An internal team comprising ex-McKinsey people are also working on the project. Many leading consultancies are in the process of making a pitch to handle the banking venture for Paytm.

The way technology has shaped finance and banking, is quite something. Infact technology has always been integral to banking/finance. The earlier technology of  telegram etc was used in banking quite actively. The idea of settling payments in as fast and as efficient a manner has been one of the major objectives of a financial system. So any new technology which eases these processes eventually funds huge application in banks. The recent technology of mobile and internet is shaping banking like nothing before.

This blog has wondered given this emerging scenario, could we have technologists heading banks in future? Come to think of it, most banks are as much about technology as they are about finance. A bank can still work if most of its treasury staff is absent but will just collapse if technology team is missing.

So, does not look like a technologist will head Paytm as of now. Most likely it will be someone from FMCG kind of sector. This reminded me of a similar debate on Mutual Funds space as well. It seems both ex-fund managers and those from sales do a good job as a CEO of a Mutual Fund.

Will be interesting to see how other payment banks react.

Further, the article points to how technology could lead marginal costs of a transaction to zero:

Paytm’s payments bank will start operations with central and northeast India. “We will build our banking correspondent network first and also lead by technology,” according to Sharma. “The cost of a transaction should tend towards zero. When you use traditional banking methods, an underprivileged customer is costlier to serve for a bank, as the interaction is more and technology used is less.”

Hmm..

As Marginal costs equal to zero, will marginal revenue follow as well? How will banks make money then? This actually is also a problem most people see with payment banks as well. How will they make money?

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