Let me just say a few things from an RBI perspective. One, the payment infrastructure development fund came in its first avatar as the acceptance development fund in 2016, but now the RBI is saying they will put skin in the game and it is a Rs 500-crore fund, of which the RBI is going to fund about 50 per cent, which is remarkable. Second, the RBI has come up with a draft framework for a new umbrella entity for payments.
Manish Patel, founder & CEO Mswipe
Technologies; Nikhil Kamath, co-founder and CIO Zerodha; Rajesh Mirjankar, Managing Director & CEO Infrasoft Technologies
: Clearly, there are more opportunities. Mswipe
has largely been a business that’s been focussed around enabling SMEs around the country to accept payments. Payments for SMEs always meant offline. For the first time, we are seeing massive conversion where small business is starting to think digital. How do I go online? And these requests are more from Tier-2 and Tier-3 cities than Tier-1 cities. So, this is a fantastic opportunity, because the pace of change is going to accelerate.
That said, there are challenges around how you onboard customers, what we do about KYC, etc. How do we ensure that in the digital world, where physical interactions are limited, the person or business who registers on your platform is actually the business that they say they are? These challenges need to be solved. But I am sure solutions will be found.
Sajith Sivanandan: A lot of trends have accelerated as a result of this pandemic. People pay bills, buy things, send money, and none of that is new. It’s how you actually do this that has accelerated by 10 years. In a few months, we have seen 5-10 years of progress.
Even in cards, there is no country today where cards are growing as fast as India. So, there has been an acceleration of a profound nature. I think the shift is secular in nature, not just a bump. And there is a lot of work that we have to collectively do to provide quality service, and to be able to do it reliably and in a trustworthy manner. But I think all of us are down that path in right earnest.
: There are a few specific areas where Covid has been very helpful. One: Customer word-of-mouth adoption of digital payments.
In terms of customer acquisition, the Covid environment has been even more powerful than demonetisation. During demonetisation, the biggest jump was actually in peer-to-peer payments, not in merchant payments, whereas right now, it is across the board. In every type of category, every type of online-offline interaction, people are trying to pay digitally as much as they can — across the board.
Second, all the financial regulators are realising that the way to really open up the market on the retail side is KYC. The third is, simplifying a lot of the regulatory obstacles beyond KYC that makes it hard for new customers to enter. Take the mutual funds example, where the government started a campaign a couple of years ago on television, saying that ‘mutual fund achha hai’, but they stopped short. They should have said ‘achha hai, ab kya karen?’
This is where a lot of the fintech
and tech platforms during Covid have seen very creative marketing, trying to get people to buy their first insurance policy, invest in equities, etc. It really starts with breaking them into sachet-size SIP investments — that’s going to be the future in India. The minute we get into what we call Bharat, you want sachet size for everything — investments, insurance, gold purchases. These are super exciting times.
: There has been an absolute turbo-charging of digital projects. So, the timelines have really shrunk, because the need for customer outreach is very important in these times. The whole concept of branch footfall was anyway changing with the advent of digital payments, but a lot of the business processes for onboarding of customers and the operations for corporate banking or SME banking still needed branch footfall. That has suddenly changed.
So, there is huge demand for solutions in the area of digital customer onboarding, including video KYC. There is demand for regulatory technology solutions like anti-money laundering checks to really become real-time, more real-time in terms of giving a reply back. For example, if you needed to onboard a customer in three minutes, then you’ve got to make sure that all the regulatory boxes are ticked. There is no easing of regulatory requirements as of today.
The third concept has come where there is a change in digital channels. Omni-channel is really taking off and I think now you will find customers moving not just within apps, but also moving to voice commerce. We have seen solutions around Alexa banking, Google Assistant banking and other forms. Within the next few years or in a year’s time you’ll see the advent of 5G and Internet of Things. The marriage of these two will really bring a revolution in the way banking is done for businesses, because every device that can talk to each other in terms of a global network will bring forth an opportunity for businesses to interact as much as someone is today using UPI and Visa
for payment across apps.
Has Covid changed India’s equity culture?
Nikhil Kamath: As an ‘online only’ brokerage, each of these instances beginning from demonetisation has gone a long way towards bringing a considerable amount of the investing community in India online. I think the offline model has gone completely out, and more and more people are moving from that platform to mobile platforms. As much as 6 per cent of our clients now use their mobile phone, transact through the app, whatever they would do through the relationship manager 10 years ago. I would call that a beneficiary of Covid, and it’s a great trend in the brokerage industry. Access to capital markets in India is still extremely under-penetrated.
Only about 5 per cent of our country has either direct or indirect access to the capital market. This number in the West, say America, is over 90 per cent. With an interest-rate cycle which is going down as rapidly as we have seen in India and a plateauing real estate sector, a lot more capital needs to come into the financial ecosystem. I think digitalisation will go a long way in aiding that.
Sivanandan: When more players enter the ecosystem, it just fuels growth in the ecosystem, and what we need to do doesn’t change. It hasn’t changed since the day we launched, and it won’t change just because another five, seven, 10 or 20 players enter. What users are looking for is that we are reliable, trustworthy and available in as many places as possible.
: The Indian consumer today is not devoid of choices. They have some very good choices, all very credible competitors. As a four-year-old startup, we take pride that we are doing something right. Two years into the venture, we realised that whether it is UPI, Visa
or MasterCard, unless payments become universally accepted in every segment, transit, transport, grocery, retail, and tolls, we will not become a fully digital economy.
So, we now have about 12 million merchants that have got our QR, and our internal target is to march to about 30 million retail. We are not looking at the B-to-B side, but I think 28-30 million is the right number. So, when I look at WhatsApp coming in, at this stage of the market, I have said for the last two years that I would like them to enter sooner rather than later and here’s why.
One, if they are really as powerful a change agent as everyone makes them out to be, that means 300-400 million people will get over the hump of linking their bank account. In payments, the first-mover advantage is not as strong as you make it out to be to. Second, I am not that bullish about people opening their purses for every type of application that they use. So, I don’t think it’s threatening.
What are your views on merchant discount rate (MDR)?
Patel: If you look at today, there are zero-MDR payments. UPI, for example has zero MDR, the MDR on debit card payments is just 0.4 per cent, only credit cards have a higher MDR, and there is a very clear value proposition as to why the merchant even accepts that. At the end of the day, the merchant is able to accept a payment from a consumer more than what the consumer actually has in his bank account, so that is the credit that eventually the industry or the ecosystem is paying for.
However, while we have competed in this industry, and as we have seen the onslaught of zero-MDR payment ecosystems, I am pretty proud that Mswipe has innovated and we have launched our POS which we call the bank POS, where merchants now don’t have to pay any kind of payments, whether it is credit cards or debit cards. UPI was always free, but that’s where innovation is coming from.
If I had told you just a few months ago that on credit cards, a merchant doesn’t have to pay MDR, you would say ‘wow, that’s not possible’. But we have made it possible and this industry is going to change, unless you are at the forefront of technology, understanding how all of the different moving pieces come together, and are able to deliver seamless solutions.
What are your plans for rural India?
Sivanandan: Rural users gravitate to video and they use voice a lot. Hence we can find ways in which we serve these users in such segments. For example, we can make voice search even better. Data cost in India is the cheapest in the world now, and we can come up with more video results and in more local languages for rural users.
Nigam: Infrastructural and regulatory enablement were gaps for people to be able to make payments and get into the financial inclusion journey. Feature phones (low-end devices) were not part of the ecosystem. There have been key developments in the last few months. NPCI has formally announced, and the RBI has approved, payments below Rs 5,000 which can be done without encryption. So there’s some relaxation there. So, there are now UPI solutions, and a lot of wallets are starting to build solutions for feature phones.