The payment ecosystem in India is currently thriving along with the increasing internet savvy population of the country. In order to know the current trends in this industry, we reached out to Kumar Karpe, CEO, TechProcess.
Mumbai based payment solution company, TechProcess is a service provider in the Financial Technology space offering a range of payment processing services across all regulated cashless payment modes in India.
Kumar has over 20 years of experience in Financial Technology domain. Prior to TechProcess, Kumar held key leadership positions in IBM India & ASEAN as Head – BFSI vertical.
Here is the detailed interaction:
Tell us about the TechProcess journey so far and the important milestones for the company.
Our genesis dates back to the year 2000 when the company was incorporated as Bill Junction which catered to the growing need of offering bill payment convenience to end consumers via the internet, telephones and SMS. The company then saw a huge business opportunity in the Electronic Clearing Service (ECS) and online space and established a nationwide infrastructure for it, making it a payment mode across mutual funds, insurance and a whole gamut of utilities.
Bill Junction was rechristened to TechProcess Payment Solutions in the year 2007 with a focus on creating technology platforms for processing payments across different industries. The company acquired Talisman Consultants Pvt. Ltd., a cheque processing company in 2008, making TechProcess an end-to-end payment services provider.
In 2010, the company changed its name to TechProcess Payment Services Ltd (TPSL) marking a shift from developing payment technology solutions to leveraging technology to create innovative payment products across all regulated payment modes. The management team too saw a change with people with the right mix of expertise and experience across IT, BFSI and Telecom coming to the helm.
The last three years has seen the company leapfrog with a series of payment platforms making it a leading ‘FinTech’ company adopting internet and mobile as channels for future growth.
What differentiates you from other players in the payment industry?
We are the only specialized payment service provider to offer multi-mode payment solutions under one platform. Our comprehensive payment portfolio covers all regulated payment modes except cash. Our comprehensive next generation platform supports online cards, net banking, mobile based payments, ECS/ ACH, Cheque Truncation, RTGS & NEFT.
We complement the payment processing platform with services that address challenges related to pre & post payment processing. For instance, reconciliation is a pain point post payment processing. We saw some of our corporate clients come to us stating that it took them nearly four days to reconcile the payments to the actual payer post receipt of the payment, leading to a surge in inventory carrying cost. We address this by leveraging our best in class reconciliation platform.
Define the current market position of TechProcess in India?
A payment company usually means only ‘Online payment’. However, we are of the view that it is only one part of the aspect. In the market, we believe, there is requirement of specialised payment company in process. TechProcess Payment Services Ltd. (TPSL), thus, is positioned as a unique end to end solution provider, in the field of electronic payments and transaction processing in India. For instance, currently we are focusing aggressively on creating industry specific platforms, such as for colleges, government, insurance companies, for buying and selling mutual funds online, and many more. We have our presence across 46 cities in India and have processed over a 100 million E-Payment transactions in FY13.
How do you see the current payment industry in India? What are the growth opportunities in B2B and B2C segments?
The Payment industry in India is at an inflection point at present, with customer proclivity to try electronic payment mode growing by the day. The Vision Document 2012-15 for Payments Systems in India released by the Reserve Bank of India (RBI) in October 2012 observed that non-cash transactions have seen a surge from 35% to 48% in volume terms and from 88% to 91% in value terms of total transactions processed from 2009 to 2012.
The payment system initiatives taken by the Reserve Bank of India have resulted in deeper acceptance and penetration of non-cash payment modes. Cheques, however, continue to be the dominant mode in retail payments constituting 54% in terms of volume and 82% in terms of value (2011-12) with retail electronic payments lagging behind.
Cash continues to be the preferred mode of transacting for Indians, corroborated by a cash to GDP ratio of 12%,- the highest among emerging economies. The Vision document has observed that the number of non-cash transactions per citizen is as low as 6 in a year and is largely concentrated among people in Tier 1 and 2 cities conversant with using the internet.
We see the increasing penetration of mobile telephony becoming the game changer for the payments industry in India. India has 893 million mobile subscribers with active subscriber base now constituting 86.49% of the total subscribers according to the January 2014 data released by TRAI. Though nearly 7 million transactions are completed through mobile wallets across India each month, most payments are minuscule, averaging at Rs 260 per transaction (Avendus report 2013).
The increased adoption of internet enabled smart phones and phablets (with sales of over 44 million in 2013) is set to bring about the boost to the payment industry both on the B2C and B2B front. This gives us an opportunity to drive innovation and offer convenience to the consumer to adopt electronic payments. B2B is a space where one can bring in lot of automation. On the B2C front, there are more than 350 million debit cards issued in India, and more than 6 billion ATM cash withdrawals in a year, according to RBI data. This shows the enormous potential to convert these cash transactions to electronic just on the existing base of digitally-enabled consumers. We’re not even talking about the un-banked.
Please highlight a few payment system gaps between India and developed markets?
Comparing the payment ecosystem in India with that in the developed markets is like comparing chalk and cheese. India is a unique market in every way. First and foremost, nearly 60% of the population in India remains unbanked. Bank accounts are an imperative for a cashless payment ecosystem to thrive.
Secondly, Indians have more propensity to effect transactions in cash versus card payments which are prevalent in the developed markets. This shows why Point of Sale (PoS) terminal penetration in India is low. RBI data reveals that out of 10 million retailers in India, only 0.6 million have adopted a PoS terminal. In comparison, a developing country like Brazil has over 5 million PoS terminal users for a population of under 200 million.
According to you, what role does mobile play in the growth of a payments company? What are the opportunities and challenges in this space?
As stated earlier, we see mobile telephony providing a fillip to the payments industry in India. India is expected to have more than 300 million internet access points by 2015 and this growth is largely fueled by growth in smartphones and phablets. The paradigm shift which the internet on desktops and laptops brought to the payments industry over the last decade, smart phones are set to create twice the impact in less than 5 years.
The opportunities this brings would be the proliferation of NFC infrastructure and better Peer to Peer payment options.
The challenges we foresee would be in terms of influencing consumer behavior to adopt mobile as a channel to pay; concerns of security and consistency; mobile connection dropping at the time of transaction processing and whether or not online portals would be optimized for mobile as a form factor.
What innovations TechProcess is planning to bring in future?
We are working on innovations around mobile based payments as well as augmenting the efficacy of platforms that are relevant to specific industries. Our view is that what solution one offers to clients in the telecom sector cannot be offered to an NBFC. Likewise what works for an e-commerce portal will not work for an Insurance company. For example, companies in the BFSI space need to have assured recurring payment assurance which ECS provides. On the other hand, e-commerce players need a frictionless payment experience for their customers.
Customization to meet the unique needs of the client is the scope for innovation lies. Innovation also lies in enabling consumers to migrate seamlessly from paper and cash based transactions to a mode of digital payment that is convenient to the end user.
What is TechProcess’s strategy to deal with the growing competition?
TechProcess has invested significantly both in terms of hiring the right talent as well as working with the right technology partners to create value for our customers. We are sentient towards understanding the requirements of banks, corporates and the end consumers. Developing innovative next generation payment platforms that satisfy these requirements coupled with our long standing wealth of experience in the payments domain would help us to stay ahead of the curve.
What is the state of payment technology in India?
Payment technology in India is still evolving. When we talk about the systems, be it the banks, corporates or the end user; each of them have a different level of technology adoption. Seamlessly interconnecting these systems is the challenge. What’s interesting to observe is how the end consumer is adopting to new technology faster than that of banks and corporates.
Do you believe Government policies, and their limitation to understand Digital Industry is creating limitation on growth of payment industry in India? Is government taking this seriously?
Sustained efforts made by Central Ministries and State Governments at multiple levels to improve the delivery of public services and simplify the process of accessing them show the seriousness of effectuating that National E-Governance Plan (NeGP). E-Governance offers an immense opportunity to the payments industry for facilitating the payment of taxes, fees, public utility bills and also for a more efficient Public Distribution System (PDS).
Government subsidies worth Rs. 2.93 trillion would mean 4.13 billion electronic payment transactions annually. The positive push by regulators such as the RBI, SEBI and IRDA to facilitate making India a less cash society is an endorsement of their seriousness to promote electronic payments.
How can government play a more catalysing role in Growth of Payment Systems in the country? Can you highlight few specific policies that can be relooked by government to help the ecosystem?
The Government has already taken a giant step by moving Direct Benefit Transfer through the electronic mode. However, it can increase adoption of electronic payments by incentivizing its usage and discouraging the use of cash by levying something like a cash transaction tax for utility payments, insurance, investments etc. Korea saw a surge in digital payments when tax incentives were given. This would go to boost government coffers and help to better monitor fund flows.
What is your opinion about virtual currency like bitcoin? Are you looking at accepting bitcoin or any other virtual currency in future via your gateway? Do you see any future there?
Unlike a traditional currency whose supply is determined by the central bank of a country, no central authority governs the supply of bitcoins lending themselves to possible unlawful purposes. TechProcess supports payment modes approved by the regulator only.
Would it be wrong to say that whole digital payment ecosystem has not only accelerated online commerce but eventually shall form the basis of entire TRANSACTION industry, online or offline? If yes how?
On many occasions, growth in electronic payment is linked to the growth in ecommerce. Online retail and travel are two sectors that are playing a leading role in driving non-cash transactions. However, there are many other industries who are contributing towards the growth – Utilities, Insurance, NBFCs, Government, Education and many more on account of offering better customer convenience.
What are the startup opportunities in Payment Ecosystem? Is this space startup friendly?
Today, with the proliferation of so many players in the ecosystem, the market is likely to become more commoditized with pricing used as a lever to gain market share. Consolidation is also likely to ensue. There are hundreds of payments startups in advanced markets like US, but they too eventually get consolidated into the larger players. Paypal’s acquisition of Braintree is a case in point. India being an evolving payments market, businesses will first look for safety and assurance that experienced players bring to the table. There is indeed space for everyone to co-exist, but startups will be successful only if they bring in ‘workable innovations’.
What is the state of rural transaction in present scenario?
The rural non-cash transaction space is fast catching up on account of broadband penetration. According to data released by IAMAI, of the 213 million Internet users as on December 2013, 30% were in rural areas. What the travel and online retail portals have done is give rural consumers the ease of access to the same quality of products at their door steps as against having to travel to cities and then buy. The government has a target of 600 million Internet users by 2020 with nearly 300 million coming from rural areas.
Out of 6 lakh villages in India, only 1.47 lakh have access to banks. The Nachiket Mor Committee recommendations on Comprehensive Financial services for fostering financial inclusion and financial deepening envisions that every resident in India would be within a fifteen minute walking distance of a payment access point and that every Indian resident, above the age of eighteen years, would have an individual, full-service, safe, and secure electronic bank account. With financial inclusion initiatives rolled out by the RBI and growth in internet access through smartphones, rural non-cash transactions are bound to grow.
What challenges, opportunities you foresee in enablement of rural transactions?
The enablement of rural transactions in India hinges on the 7 A’s: Accessibility, Availability, Awareness, Affordability, Assurance, Appropriateness and Acceptability.
The usage of Mobile money through pre-paid instrument issuers is still in its nascent stage in India, and offers an enormous potential for growth given that financial inclusion is being given a major thrust by the RBI. However, challenges of being unable to cash out, contagion risk and inability to provide interest on deposits need to be ironed out. The success story of Kenya’s M-Pesa can be looked to be replicated in India.
The biggest challenges we see is that of weaning rural consumers away from their affinity to cash in addition to the modalities of usage of e-payment modes. Awareness needs to be created about the benefits of using non-cash payment modes and sponsor banks, nested payment network operators and pre-paid instrument issuers need to take the lead in initiating them into the modalities of usage.
Are there some activities in that direction in ecosystem? What is TechProcess doing in that direction?
TechProcess has built digital platforms such as Billjunction and FeesJunction to cater to the needs of different markets. Rural consumers could look to reap benefits of time-cost convenience using these platforms. We are also in the process of introducing some innovative mobile based payment products that would be useful to this target segment.
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