'Soonicorns': Cashing in on e-payments surge, Pine Labs eyes Unicorn tag

Pine Labs’ existence goes back to 1998, when dial-in was the most popular way of connecting to the Internet in the country and cash was perhaps the only mode for financial transactions.

But the digital payments company we see today was actually born in 2004 and evolved into its current shape in 2009 after the business model was tweaked several times over the years.

Its business model got a big ratification in 2009 after global venture capital firm Sequoia Capital invested just $1 million into the company. Since then, there has been no looking back.

In May this year, when the Noida-headquartered company raised its biggest funding round so far of $125 million from Singapore’s state investment firm Temasek Holdings, and PayPal, it was valued at $900 million, just $100 million short of making it a ‘Unicorn’. 

Today, over 15 per cent of all the credit and debit card transactions taking place in the country get processed on Pine Labs, making it by far the largest player in the segment. Most of the product equated monthly installments (EMI) promotions in the country are carried out on the Pine Labs platform. 

The firm, which claims to be working with almost every retailer in the country, processes around 450 million transactions worth $15 billion on an annual basis. 

In the next stage, it is looking at doubling its revenues over the next three years by taking the already proven relationship with the merchant outlets to the next level while continuing to grow its point-of-sale (PoS) terminals.

In its early days, the journey was not as easy as it seems today. The company had to really work hard to convince merchants to build the confidence for accepting its payment solutions. “When it comes to payments, merchants trusted banks rather than third parties. Once our solutions started working in the market and people started seeing the benefits, a lot of the business took place through references and word of mouth,” said Lokvir Kapoor, founder and executive chairman, Pine Labs.

According to documents the company filed with the Registrar of Companies (RoC), Pine Labs posted a revenue of  Rs 1.95 billion in FY17 compared to  Rs 1.22 billion in the previous year. It has been growing at 60 per cent for the past two years. 

“Every transaction that happens at PoS is actually an opportunity to engage with the customer. It's not simply a transaction to transfer funds from customer’s account to merchant's account. But it’s an opportunity that can be converted into a marketing opportunity, promotion or building a relationship with the merchant,” says Kapoor. 

As it looks at deepening its reach among the retailers further, Pine Labs has started offering EMIs to customers through its debit cards, rather than waiting for the banks to scale up the base of credit card users in the country, which currently stands at just 25 million. With extensive data on spending patterns of individuals, the company is very well-placed to judge creditworthiness. “PSBs such as Bank of Baroda or Punjab National Bank have a small credit card book as compared to the huge debit card customers. So, this gives us an opportunity to go to the public sector where we couldn’t go to earlier,” says Vicky Bindra, chief executive officer at Pine Labs.

Pine Labs has already tied up with HDFC Bank for the EMI on debit card service while it will be bringing on board ICICI Bank, Axis Bank and some PSBs by the next quarter. The programme is receiving a lot of interest from partner banks and will go full steam by early next year.

Similarly, working with retailers for over 20 years, the company found that cash flow continues to be a big issue for small merchants which hinders their growth. 

To address this, the company is planning to provide loans to its customers on its own and is in talks with financial institutions to facilitate this.

Again, having extensive data on the kind of cash flow a particular merchant has, Pine Labs can easily identify which financial institution among them are creditworthy. 

The firm realises that apart from growing its base of 75,000 retailers, it also needs to help individual merchants grow which can lead to an exponential growth of its own business. Other bets the company is taking to help merchants on its platform include processing settlements of transaction on the same day as opposed to the next day, which was hampering cash flow of retailers. It is also contemplating entering the insurance segment to reduce the risk for its merchants. “We can be an insurer if there is a chargeback issue. This is a role which we can play in the future,” said Bindra.

Pine Labs has an ambition to scale up the number of PoS machines from the current 300,000 touch points to one million touch points in the next three years. 

A Google-BCG report suggests that India’s digital payments industry would grow to $500 billion by 2020, contributing 15 per cent of the country’s GDP.


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