Telco-Bank JVs not desirable in payments space: Co-Founder PayMate

By Nandita Singh

Terms such as m-payments or m-commerce or mobile money or mobile banking are de jure nowadays. These mean slightly different things to different folks in the value chain. However, essentially it is seen as a consumer play in the financial services space but the adoption has been slow as compared to apps, listings, marketplaces travel and ticketing e-tail. And it is so on account of cautious customers.

As money and services move up and down the value chain from Ex factory >Wholesaler>Distributor>Stockist>Retailer>Consumer, and back up again, the sweet spot for electronification of the payment process lies within the business enterprise segment. This solves problems of cash management, float, real time reconciliation, theft and pilferage and working capital thus needs shaving off several 100 basis points in the cost structures of companies and directly impact their bottom line as efficiency savings. All this without having to make any dramatic change in their current business flow or processes.

In conversation with Voice&Data, Probir Roy, co founder of PayMate, a mobile commerce company credited with an early mover payment network, shares some thoughts on what India needs to do to facilitate and boost m-commerce.

Voice&Data: PayMate has been an early mover in this space. What are the innovations that PayMate has made in the space and what are the strategies as you go forward?

Probir Roy: We were the first to facilitate SMS based payments - to make a payment with just three SMSes (Short Messaging Service) using a basic entry level phone for Citibank customers (for which we have a Indian Patent). Thereafter, we enhanced it to incorporate SMS/IVR (Interactive Voice Response) in vernacular as well, as SMS guidelines became rather restrictive for the user and merchant. Then, we were the first to have our own prepaid mobile wallet product called ‘Giftmate’ in 2008 even before the RBI’s Prepaid guidelines came into place in 2009. NFC (Near Field Communication) contactless and our mPOS product ‘PayPos’ closely followed - we were the early movers. The former in 2011 with Nokia, and the latter in 2012.

Going forward I think cloud-based Host Card Emulation (HCE) solutions are the way forward especially for enterprise customers. I have been propogating the idea of having an “Account in the cloud” for some time now, as versus having a physical account in a brick and mortar bank. This account could be created and maintained by a PrePaid issuer or Payment Bank or even a regular bank so as to bank the unbanked in a low cost manner.

Voice&Data: Service providers are entrenched in the banking ecosystem. How long before wallet and credit cards become irrelevant in India?

Probir Roy: This is a slightly tricky question! Service Providers do want to get entrenched into the banking system mainly because of the regulatory aspects associated with Payments & Settlements and the RBI. Not because they want to. The culture and pace of both these stakeholders is as different as chalk and cheese. And never the twain shall meet! I ideally expect interoperable wallets to work across the system. From regulated non bank/non telco players. Even now with the expected entry of Payment banks, there is a flurry of activity around bank-Telco companies to exploit this space. On paper the synergies look like a decent argument. But it is useful to look at the past track record of such alignments. Vodafone has been experimenting with M-pesa in India for some years. They launched in 2011 with a pilot in Chomu, Rajasthan. And again with ICICI Bank. Before that Tata Teleservices launched its own domestic money remittance program with Corporation Bank. As did Axis Bank and Airtel for the same purpose, though Airtel and SBI joint venture was short lived.

The Payments banks space is a whole new market space with no ready made template or use case. The advantage lies with those companies already invested in this space and innovating in making this space happen such as Micro Finance Institutions (MFIs), Pre paid Issuers (PPIs), Corporate Business Correspondents Networks (BCNs), Non Banking Financial Corporations (NBFCs), Mobile Payment Companies, Payment Processors, etc.

Voice&Data: What are the global m-payment standards? What India needs to do in this regard?

Probir Roy: India has a unique opportunity to set the pace for m-payments. In fact, it did in 2008, and other countries have also used this to institutionalize their own practices. However, this sector needs a light touch. Many have moved ahead in taking m-payments to higher level of adoption specially in Africa, and locations such as the Phillipines.

In India, we need a couple of things and this is on track by and large. Higher limits for prepaid wallets, simpler Know Your Customer (KYC) norms, proposed Self Regulation Organization (SRO)status for Reserve Bank of India (RBI) certified PPIs are a few recent dispensations.

Going forward regulation has to top of its work to date by accommodating a sender/receiver or both NOT necessarily –

(a) Having any form of formal Bank account, but just having a unique mobile wallet issued by a RBI certified PPIs. This mobile wallet is what I call as – ‘Account-in-the-Cloud. Lets us give it a generic brand name – My Paisa account.

(b) As per prevailing RBI norms some form of KYC applies for creation/loading up such a virtual wallets. Aadhaar, as a (mandatory in time) RBI accepted KYC tool per se – valid ID proof, serves that purpose, The Aadhaar number also doubles up as an unique identifier mapped to the wallet and mobile number, and in due course to a no frills account or regular account.

(c) Of course until UID (Unique Identity) reaches mass acceptance, the older KYC norms used thus far over the last 60 years will suffice for creation of the wallet as per prevailing RBI Prepaid guidelines.

(d) While the conventional Bank-Business Correspondent Model has yet to deliver any tangible outcome over the last seven years. Arguably though it may have met its penetration levels into villages. It has yet to deliver by way of account registration and/or account activity terms. This effort is now best also complemented by established private players (viz. FMCG, retailers, fair price shops, etc) to allow for network effects to kick in.

(e) In India, a clear million of such existing unique established and trusted points of presence have been built up over the last 100 years. Even if we don’t count the Telco touch points. Allowing for cash -out on such a larger definition of Business Correspondents/Business Facilitators/Business Associates by starting of leveraging the established and accepted networks of private payments processors and agent aggregators, will be par for the course.

Once this is done, direct cash transfers or payments or remittances can be done directly into a farmer’s, citizen’s, or customer’s or any aadhar-wallet account, to be redeemed at merchant points for goods and services or cash out, via the established private payment processors outlets. Subsequently, one could look at e-money issuers (Non bank PPIs ) to also pay the customer interest on an e-float maintained by the account holder by way of some form of subvention where some interest is earned on the pooled account.

Voice&Data: What are the demand side challenges?

Probir Roy: On the demand side frictionless customer experience and diverse benefits associated with both hygiene transactions and aspirational financial transactions is key. The experience has to be form-factor neutral and intuitive.