Knowledgefaber November 2012 Newsletter Contents Pg. Message from Amit Payment industry in India is at a Expert Interview very exciting juncture today. In Mr. Aditya Menon, the past few years in India we MD,Mobile have seen several mobile apps, Payments, CITI SMS solutions for remote Group……………..2 payments. Now there is new breed of mobile retail POS solutions that are attacking an Amit Goel News that matters even bigger problem. ………………5 Banks, telcos, Visa/ Mastercard,CEO, Knowledgefaber Editorial technology companies and Excerpts from other firms should collaborate, Knowledgefaber have constant dialogue to solveamit@knowledgefaber. hurdles, create standards, com report on Payments improve customer awareness summit held on 9th and acceptance and make 91-80-41231576 November, 2012 really easy and useful solutions. ……………….6 This will lead to the growth of Startups/VC corner this industry and making ……………….8 payments a better experience in India.
Knowledgefaber November 2012 Expert Interview KF: What is your view of the proximity and P2P in 2013. global payment market – Entity wise? KF: Citibank has taken numerous initiatives Aditya: Banks have many (globally/India) in each of the channels to reach out to payment areas: What customers. However, with the according to you isgoing to progress of technology, banks gravitate towards newer channels work in India? and mobile based payments is no Aditya Menon exception. There is no doubt that Aditya: mobile payments will grow and a. Banks Driven Models: ForMD, Mobile Payments banks will embrace technology however banks would prefer to do banks, Mobile payments can CITI Group be both channel substitution it organically over a period of time by ensuring that they uphold when the underlying instrumentAditya Menon currently values of trust & security while is a card, but there are clear doing so. opportunities for additionalserves as the Managing NFC technology requires hugeDirector, Mobile Strategy at revenue generation. We investments in acquiring believe that mobile, tablet andCitibank. Prior to joining infrastructure and has some challenges from the internet based payments offerCitibank, Aditya served as implementation perspective convenience for customer asthe Executive Vice President especially in developing countries well as providing cost efficiencyof Global Alliances, CTO but is poised to make steady and revenue generation for theand CIO at Obopay. Prior to growth in developed markets and bank. Our focus is to enhanceObopay, Aditya was the CIO specially those markets who have usage (More Subscribers of clear uses cases such as transitof YES Bank and formerly already implemented. Cards and Banking ProductsGroup CIO of mPhasis Payment gateways have seen as well as greater spendswhere he developed a global tremendous growth due to the e- using digital).process and performance commerce boom and they will continue to grow mirroring the From a global perspective wemonitoring system called ecommerce growth. In India, have also reached out to themPact. Aditya has more there are 900 million mobile unbanked as in the case ofthan 20+ years of subscriptions and at least 600 Mexico, Citibank has aexperience in the payments million people with mobile phones substantial mobile payments and 650,000 merchants with POSindustry. He has been a terminals. With US$ 800billion initiative going on calledserial entrepreneur in the worth of transactions routed Banamex Transfer. Citibanktransaction banking systems through cash at retail in 2010, (Banamex) tied up with Telcelspace. 90% of retail sales in India means (América Móvil) and Banco there is still a huge opportunity for Inbursa in order to turn the electronic payments in India mobile phone into an whose opportunity is over $1Trillion including remote, (Contd..)
Knowledgefaber November 2012 ..Expert Interviewinnovative and efficient payment product, keep the device cost low Do you think Citibank hasinstrument for carrying out and by having a monthly fixed fee enough learnings now totransfers and air time purchasing, . The key issue for acquirers is launch NFC in key markets?among other operations. This underwriting the merchant riskwasa clear opportunity which associated with the lower Aditya: NFC in India is aleads to financial inclusion, where segment of merchants and also difficult proposition with limitedthe solution is s aimed at reaching merchant’s natural propensity to NFC enabled Handsets andthe bottom of the pyramid. avoid taxation and therefore shying away from electronic limited terminals. However,b. Handset Manufacturers:Nokia’s tie up with Obopay was transactions. NFC can be usefulinreally doing well. Volumes Additionally, RBI has already unattended payment scenarios(100,000+ Customers) were very planned the introduction of EMV like Transit. NTT Docomo hasgood and the transactions growth standards to increase security of been very successful in Japanwas giving a lot of confidence to retail transactions. When these where NFC started from thethe stakeholders. However come up, the current method mag stripe swipe will shift to Chip and Transit system, and in severalchange in Nokia’s corporatestrategy forced the firm to close Signature for Credit and Chip and European countries it is useddown its mobile money business. Pin for debit. A mobile phone at Parking lots. c. Carrier Driven Model: What keypad is not considered a PCIAirtel money in India is doing DSS “PED” device and therefore KF: What do you think ismakes sense to me because you cannot be used for entering pins going to the key for beingneed scale and marketing as they might be insecure. In successful in the Industry?firepower to make any initiative such cases, an additional devicesuccessful. For example, M-Pesa for pin entry has to be carried Aditya: The payment industrywas a success in Kenya as there which has in-built hardware in India has already become awere huge investments made in encryption to enhance safety. “Scale Game”. Only those whoKenya by Safaricom to get 26,000 e. Mobile Apps: While can achieve scale will sustainagents on board and large merchants may offer a variety of mobile applications, Banks are themselves in the long term.marketing and customerawareness initiatives. the stewards of the payment Between 2007 and 2011 there However, Consumers in India system and need to protect were a lot of companies thatneed 24/7 access to their money consumers identity and tied up various telecom serviceas they are unsure of their transactions and therefore have a providers to offer paymentexpenses. As cash out is not an strong role to play in services, however there hasoption in the current Carrier authenticating transactions no been insufficient investment inDriven Model (As per RBI rules – matter where they are originated from. Second factor consumer and merchantWhich may lead to MoneyLaundering), this might limit the authentication mandate from the education to change behaviormarket for non-banks. RBI has ensured that banks and create a new market.d. Mobile Card Readers: Swiping remain at the center of electronica card on a small device that is payments. KF: What is your advice tocheap makes a lot of sense for the start-ups in the Industrygrowth of POS in India which has KF: Citibank had conductednot seen much innovation. Few four NFC trials including Aditya: With US$ 800billionfirms are doing the right thing by Bangalore, New York City, worth of transactions routedtying up with banks to push the Toronto and Singapore till date. (Contd..)
Knowledgefaber November 2012 ..Expert Interviewthrough cash at retail in 2010, deployed by players like Visa Chinese government has90% of retail sales in India means (v.me, Fundamo, Movida), instituted an alternativethere is still a huge opportunity for MasterCard (Pay pass) rather minimum tax structure forelectronic Payments in India than reinventing the wheel as merchants thereby removingwhose opportunity is over their ecosystem will generate the volume required for sustainable this impediment and has$1Trillion including remote,proximity and P2P in 2013. So growth. Firms can look at resulted in deep penetration ofdefinitely India is the market to be alternate way of entering the PoS in China.in. However there are few market especially by developingsuggestions. products/services across existing b. Additionally in India, platforms like Visa’s (V.me) and alternative forms of proximity1. Look for the Market Makers – Mastercard’s Paypass. payments might be the key For example in Japan; Transit (Non NFC phone based). system was the market maker KF: How according to you while in Kenya Safaricom’s would the payment industries It could be as simple as mobile huge marketing investment in India shape up over the phone to phone payments was the market maker. coming years. Will mobile which are ubiquitous, phones be the future for payment? especially if the channel is2. For startups, a direct to Consumer model in India will SMS, USSD or SIM-Toolkit. be hard due to the low internet Aditya: penetration rate, therefore a. The growth of POS terminals in focus on selling to businesses India has been reasonably flat in a B2B2C model and look for over the last few years. The two partners like Telco’s, main underlying issues are the Retailers, State Governments, risk of merchant underwriting. In Public Sector entities etc India, regulation does not permit 3rd party vendors to directly3. Firms planning to launch in acquire merchants and India should always keep in underwrite merchant risk as is the mind the "scale is the king in case of U.S. Secondly; the kirana payments" and focus on stores are not so keen to install a number of users they can POS. The main reason for the acquire and the volume of same is their inclusion in to the transactions they can drive in tax slabs while owing a POS. India. Since, the average Here, the additional revenues ticket size in India is very low, which they might gain from firms should try to bring in increase in footfalls would be lost efficiency by looking for in paying taxes to the volumes. Again going back to government. So there is little or point one and two! no incentive for them to have a POS. This kind of problem can4. Leverage third party wallets by only be solved with governmental building on top of assets intervention. For e.g., The
Knowledgefaber November 2012 News That MattersM-Pesa, mobile payment service, China Mobile announces NFC BCCL Group sells majorityto be launched in India shortly rollout plans stake inn TimesOfMoney toIndian bank ICICI Bank has partnered Network Internationalwith Vodafone to launch M-Pesa, the The worlds largest mobile network Bennett, Coleman and Co. Ltdmobile payment service, in India operator, China Mobile, is planning to (BCCL), has offloaded a majoritybefore the end of the year. The roll out NFC services in early 2013. stake in its remittance and digitalservice has already gained Eight handset companies will be payments servicewidespread traction in Kenya, where it launching NFC compatible handsets provider TimesOfMoney to thecurrently has an estimated 15 million including Samsung, HTC, Huawei, UAE based Network Internationalusers. In India, the service will be ZTE etc. UnionPay; China’s national LLC. Estimated deal size isprovided by Vodafone India through payment network, will provide the around INR 1,000 crore .its subsidiary Mobile Commerce contactless payment technology. In TimesOfMoney is a wholly ownedSolutions and partner ICICI Bank. order to introduce Chinese subsidiary of BCCL whichUnder the M-Pesa brand, MCS will customers to the NFC technology, provided offerings like specializedprovide a mobile wallet service, while UnionPay and China Mobile will build NRI services, domestic and globalICICI Bank will provide the mobile 100 demonstration points in 50 cities money transfers, e-payments andmoney account. The service will http://bit.ly/Qu1lha co-branded cards. Networktarget unbanked population and will International provides credit andbe launched initially in the Eastern debit cards processing services,parts of the country before being Ezetap launches mobile POS ATM sharing and ATMrolled out to the other parts in phases. solution in India management and manages more Ezetap, a company recently than 700 services to more than 42http://www.telecoms.com/52675/m- incubated by AngelPrime, has banks in West Asia and Northpesa-mobile-payment-arrives-in- unched a mobile PoS (Point of Africaindia/ sale) solution that allows feature http://www.medianama.com/201 phones, smartphones and tablets to 2/11/223-bccl-times-of-india- be converted into Point of Sale timesofmoney-network-Yes Bank, EZspend Prepaid terminals, by adding a compact international/Payment launches prepaid cards accessory, the Ezetap Card-Reader. The service also does away with BSNL launches mobile money trYes Bank, has launched two prepaid paper receipts as it can capture ansfer with Department of Postcards in association with EZspend signatures electronically. It can Department of Post on ThursdayPrepaid Payment Solutions on the provide small merchants with low launched mobile money transferMasterCard platform. Available in the cost solution to accept credit/debit service with telecom serviceDelhi/NCR and Gurgaon region, the card payments at the point of provider BSNL. BSNL is said toYes Bank-EZspend Card are prepaid transaction. Ezetap is co-founded by provide backend technologycards that can be used to make former Oracle and NGPAY executive, support to Indian Post and onepurchases at point of sale terminals Abhijit Bose who is the CEO and need not to be a BSNL subscriberand even for online shopping across Bhaktha Kesavachar, CTO; to avail this service.India on the MasterCard network. he AngelPrime’s Managing Partner, http://bit.ly/SSbkImproduct line includes two types of Sanjay Swamy is the Chairman.cards, viz., General PurposeReloadable (GPR) Prepaid Cards andNon-reloadable One-time Gift Cards. http://www.medianama.com/2012/0http://bit.ly/UV3IuO 9/223-ezetap-launches-mobile- pos-solution/
Knowledgefaber November 2012 Editorial – Vipul Vohra Payment Methods In India is Expected to See Exponential GrowthThe rise of Internet, the success of business models, acceptance by There is a huge potential for themobile phones in terms of penetration consumers, security, regulatory expansion of prepaid cards marketand the availability of large unbanked aspects among others. The report - if all government and other cashpopulation in emerging economies highlights some of the key enablers transactions are routed throughhave created new and exciting for the Payment Technologies market prepaid cards. Current regulatoryopportunities for service landscape favors banks but theyproviders. Sensing these focus more on credit and debitopportunities, even non-traditional Prepaid Instruments Scenario In cards instead of prepaid cardsplayers such as BEAM, Pay U, Airtel, India while non-banking card issuersVodafone, PayPal, Obopay, mChek, are constrained by regulations.Prism among others is forcing banks Prepaid cards account for only 3 With adoption across variousand other players in the ecosystem to percent of the total debit cards in sectors like online retailing,move quickly in order to preserve circulation in India. Currently, the tourism, transit ticketing,their payments revenues and take market for prepaid cards in India is government subsidies and a hugeadvantage of emerging payment estimated to be at $7.98 billion and is un-banked population, the futureplatforms says the report released by growing at a rate of 40 percent each of the Indian prepaid cards market Knowledgefaber. year. Payroll cards dominate the is likely to be positive. prepaid cards market with a 34 percent share, with travel cards at 19 M - Payments Scenario In India percent, and multipurpose cards with a 27 percent market share (out of The M-Payments scenario in India which, gift cards account for 5 also holds a lot of opportunities in percent). Indian market. With 920 million mobile Market is highly consolidated among subscribers (March, 2012) growing three companies namely Axis Bank, at 14 percent year-on-year & ICICI Bank and Itz Cash Card, nearly 41 percent unbanked accounting for 73 percent of the population in India, M-payments market value in 2011. has huge potential in India. The market is estimated to grow fromThese are exciting times for the $86 million in 2011 to $1.15 billionpayments industry in India with new in 2016 at a CAGR of 68 percent .methods of payment technologiesbeing introduced .There are Availability of affordable handsets,tremendous business opportunities low mobile tariffs and increasingemerging out of various payment voice and data network coveragetechnologies like prepaid, M-Payment across the country will emerge asand others in an emerging economy key drivers for m-payments inlike India. India. Lack of adequate banking infrastructure, low Internet and PCKnowledgefaber’s report on Payment penetration are expected toMethods and Technologies focuses provide further impetus to growthon where the Indian payments of M-payments marketindustry is heading to, which are newmethods of payments beingintroduced in the market, existing (Contd..).
Knowledgefaber November 2012 Editorial ..Payment Methods In India is Expected to See Exponential GrowthHowever, trust coupled with security NFC Technology Scenario In India Lack of awareness,issues remain major hindrances to its interoperability, availability ofadoption. Lack of awareness has also NFC technology is still in a nascent NFC-enabled devices & costemerged as a major roadblock, stage in India, but the trial of barriers pose a challenge. Tospecifically in the rural and transactions based on NFC technology has started to pick up in make inroads in such a scenario,uneducated mass of the country. rail ticketing, retail outlets etc. Many whole NFC payments ecosystem banks, mobile network operators, needs to be developedThere are currently four different vendors and independent companies simultaneously by launchingbusiness models prevailing in this are already implementing this massive consumer campaigns,space namely Carrier dominance technology and undertaking trial runs incentivizing adoption and buildingmodel, Bank dominated model, the across the country. Mobile payment infrastructure.collaborative model (Carriers and is increasingly being adopted byTelco’s together) and the fourth model Indian consumers – it is estimated Quotable Quotes:(Peer-to-peer) made popular by new that the m-banking transactions haveentrants in the payment industry like more than trebled to Rs 286 crores “ India is forefront in terms ofPayPal, Obopay, Mchek, etc. All from 91 crores. technology, first to launchthese four models have their own service like IMPS”pros and cons. The opportunity is big - Mr. Gautam Viswanathan,for all the players in the eco system, Senior VP & Area Head - Globalbut the need of the hour is Banking & Financial Institutionscollaboration between them so that Group Sales, South India ,the opportunity can be profitably HSBCexploited. “ Out-of-the-box payment solutions such as those fromIn the future, regulations couple with Clarna, Cofinoga & PostFinancecustomer acceptance would drive the can change face of Paymentsdecision on which business model market”would be ultimately adopted in most Couple this with over 900 million - Mr. Prabhu Ram, Co- founder &of the emerging markets mobile subscribers, 240 million bank Executive Director, EBS account holders (out of which, 42 percent own a mobile phone) and a “Trust, convenience & cost will be booming retail market, the adoption key to success of m-Payments of NFC technology is expected to in India” propel further. - Mr. Kunnal Sharma, Business Head – Global remittances, Citibank launched an extensive NFC TimesofMoney payment system trial in the Bangalore city to gather customer “ There is a need to reduce insights. Results were quite charges on m-payment favourable but small sample size and transactions for merchants” high adoption incentives might have - Mr. Bhavin Satikunvar, AVP – skewed the picture. Internet & Mobile banking, Dhanlaxmi Bank For sponsoring this newsletter, write to firstname.lastname@example.org
Knowledgefaber November 2012 Humor in use cases Startups/VC Corner – Nagarajan Ganesan Juspay Juspay is focusing on digital payments market in India by providing their “buy with 1 click offering.” Juspay is targeting e- commerce players with huge transaction volumes and recently launched their “express checkout” payment technology for redbus.in. Ezetap Ezetap, a mobile POS solution company incubated by AngelPrime, has raised $3.5 million in series A funding from Peter Thiel, hamath Palihapitiya, Nicolas Berggruen and David Sacks. Ezetap is co-founded by former Oracle and NGPAY executive, Abhijit Bose who is the CEO and Bhaktha Kesavachar, CTO; AngelPrime’s Managing Partner, Sanjay Swamy is the Chairman. iKaaz iKaaz Software Pvt Ltd , has launched a NFC technology based mobile wallet payment solutions to facilitate quick and easy payments. It has also launched a $2 NFC tag which can be installed in any feature phone Aditya Mishra transforming it into a mobile wallet and complete payments faster at merchants who have iKaaz M-POS installed. iKaaz is headquartered at Bangalore and have offices in Washington and Nairobi. MobiSwipe Did You Know?“Apple had 435m registered iTunes accounts, Mobile payment solutions providercomplete with credit card details" does that MobiSwipe Technologies Pvt Ltd hasmake it the largest payment system in the received undisclosed funding from early-world? stage investor One97 Mobility Fund. Vijay Shekhar Sharma, founder and CEO of One97 Communications, which runs One97 Mobility Fund along with private equity firm SAIF Partners, will join MobiSwipe board as its chairman. For sponsoring this newsletter, write to email@example.com