The Hindu Business Line : Electronic payments through mobile

BillDesk is a company that loves trees, albeit indirectly. Established in early 2000, BillDesk delivers and manages electronic payments and remittance solutions for various vertical markets, such as banking, telecom, insurance, utilities and financial services. `Think of all the paper we have helped save,' prompts the company.

What started as a venture with an initial three-member founder team is now growing at 100 per cent year-on-year, employs about 250 employees, and has offices in 30 cities across the country, says M.N. Srinivasu, Cofounder and Director, BillDesk, Mumbai.

The IIM (Ahmedabad) grad feels the mobile market, though yet to be tapped fully, will be a big thing in the future. "A large part (over 85 per cent) of the mobile user base today falls within the category of a `prepaid user' - about whom there is not much information available in terms of the customer profile or customer preferences; addressing the needs of this segment would bring with it its own challenges," he avers, during a recent interaction with eWorld.

Awareness will be key in promoting electronic payments, he adds. If a customer is well educated about the electronic payment service options, he/she definitely converts to the electronic habit! Read on.

Excerpts from the Q&A.

How big is the market for the electronic payments industry? What is your share, and what has been the growth over the years? How is the Indian market for electronic payments different from other countries?

The electronic payments industry is vast territory and covers both retail payments and large-value payments; large-value payments essentially deal with corporate sector payments while the retail payments cover the person-to-business, person-to-government and person-to-person payments. Most payments that happen today through cheques and cash are potential transactions for conversion to the electronic payments segment; from that perspective, the size of the electronic payments market is perhaps gargantuan!

BillDesk's focus has been in building a platform and providing services that provide compelling value for customers to shift from the physical payments mode to electronic payments.

Towards this, BillDesk has primarily addressed payments that individuals typically make on a regular basis, viz. utility bill payments, mobile bill payments, insurance premium payments, monthly investments into mutual funds, etc, and worked with institutional players in building and nurturing this marketplace.

We command a leadership position in this space and growth has been consistently over 100 per cent year-on-year since the inception of the company.

The Indian marketplace is fundamentally not very different from the global marketplace; however the size, sale and breadth of the market in India present complexities. In addition, the supporting eco-system (in terms of Internet/ broadband penetration, number of electronic banking customers, number of active credit/debit card users, etc) is still in its nascent stage and needs to grow far more aggressively to help the electronic payments industry grow to its potential.

From a global market comparison, the one remarkable aspect of the Indian market is that cash is still the pre-dominant mode of payment; consequently, customer-behaviour change in terms of adoption of electronic payment modes will perhaps be a larger and a tougher task in India as compared to most other markets globally.

You have tied up with banks and utility organisations. What is the value proposition you offer them? And to consumers?

Offering a comprehensive electronic payment service to the customer requires the arranging and managing of multiple thirdparty relationships and the related technological and operational complexities; this, by itself, can become a barrier to the building of the electronic payments market.

Knowing this, BillDesk has created a shared, open platform that consolidates and aggregates these third-party relationships and offers a standardised platform to the banks, which could then focus on the customer- facing aspects of the service delivery.

As a business, therefore, BillDesk serves as the single point of interaction between multiple banks and institutions across the country.

The BillDesk technology and service enables banks and institutions to deliver efficient electronic third-party payment services to their customers, while outsourcing the service management complexity to BillDesk.

Today, BillDesk is India's largest bankcentric service provider, providing and managing the service for over 40 banks and over 200 billing institutions. Our company manages these services across a range of access channels viz. Internet banking, ATM banking, telebanking, mobile banking, etc. The payment gateway services of BillDesk enable customers to pay online using either their electronic banking accounts or credit cards.

Outsourcing the electronic payment service management to BillDesk offers banks/ billers established alliances, leading edge technology, operational efficiencies, control of processes, and assurance of service delivery. Importantly, it provides a single, centralised interaction point for the bank and establishes a high degree of standardisation for the bank's activities. Organisations don't have to worry about developing the businesses processes, managing day-to-day operations or multiple biller interactions; instead they simply focus on customer management.

From an end-customer perspective, the BillDesk service enables them to receive, review, pay and organise their bills and various other payments online, in a secure manner, and through the channel they find most convenient.

What, according to you, are the key drivers of growth in the electronic payments industry? Also, what are the major challenges/problems?

There is a whole eco-system that supports an electronic payments transaction - right from the bank/financial institution providing electronic payment facilities, the merchant wanting to receive payments electronically, the underlying payments infrastructure, customer having the necessary access and devices to conduct the transaction and of course, the customer wanting to conduct the transaction electronically.

This entire eco-system needs to move in tandem for the electronics payment (EP) industry to grow robustly and upon a strong foundation.

Like any nascent industry, the EP industry too faces its initial challenges (on all these fronts); equally, given the multiple players, disparate technology platforms, legacy systems, different payment and settlement mechanisms, there is a need for established standards and uniform practices.

The key drivers for growth today, therefore, would be: (a) marketing, aimed at building customer awareness of options and benefits; (b) improvement in last mile connectivity; and (c) better customer service by banks/merchants in respect of the electronic transactions.

How safe is electronic payment? We keep hearing reports of phishing, hacking, cyber crime and so on!

Customer perception of security of electronic transactions is indeed a very critical aspect of the growth of the industry; which is why we believe that proper market education in terms of building customer awareness is fundamental to the growth of this marketplace.

An electronic payment by itself is as secure as any other banking transaction - what a customer needs to be careful about is to ensure that he/she is conducting the transaction in a secure environment, never parting with account-access details and not transacting at `high-risk' sites! Generally speaking, compromise of customer account-led information happens more in the `physical /offline' world than in an online transaction. Compromise made in the `physical/offline' segment is then typically used in the online space.

So care has to be exercised by the customer as much in the physical space as in the online space.

Is the mobile space contributing to good volumes in electronic payments? What are the constraints?

Not yet. The mobile payments space is still very, very nascent. It is possible that customers are using the mobile device to access the Internet and then make payments - but that is akin to an e-commerce transaction with just the access device being different.

The market where a customer uses mobile-application and payment mechanism resident on the mobile phone to initiate payments is still in its infancy. Given the huge mobile users base, most constituents hold the mobile payments space to be potentially very large. To an extent this is true, as the basic `customer-base' is in place!

However, as a market, we are still yet to hit upon a good `use-case' from a customer perspective; also, as for any electronic payment transaction, there is a need for standards in the mobile-payments space.

The key aspect (not a constraint) that will perhaps drive and influence the mobile payments industry is the evolution of a good business model acceptable to the various constituents (viz. the operator, the bank and the service provider). All these constituents hold the space to be critical for their own business future and therefore there will be those tugs-and-pulls even before the industry has evolved. Good collaborative models will perhaps hold the key.

From a customer use perspective, the critical aspect to address would be the deployment of a universal payment mechanism which does not tie in the customer to always use a specific payment mode, specific bank or a specific telecom-operator. Also a large part (over 85 per cent) of the mobile user base today falls within the category of a `prepaid user' - about whom there is not much information available in terms of the customer profile or customer preferences; addressing the needs of this segment will bring with it its own challenges.

Where do you see big opportunities opening up in the near and medium term?

We see the direct-debit to banks accounts electronically evolving as the ideal way to make an electronic payment. This has multiple advantages in terms of reaching out to the entire banking-customers base immediately, lower cost of transactions and a higher transaction assurance and non-repudiation.

As industry-vertical segments, all the existing sectors will see very high growth; in addition, consumer payments to government might emerge as a new big segment. Finally, depending on regulator will, policy direction and evolution of a suitable model, electronic payments in the IPO market segment and secondary-market segment could open up a huge additional transactional base for the electronic payments industry.

Are there clear insights about the patterns of payment behaviour of Indian consumers and about where they are headed?

As an aggregator across all the key banks and large institutions in the country, BillDesk holds an advantage in terms of getting a holistic view of the electronic payments marketplace. There is a significant information and analytics that has emerged with respect to the customer payment behaviour, but if there is one key insight that we have gained over the last few years it is that if a customer is well educated about the electronic payment service options, he/she definitely converts to the electronic habit!

While it sounds commonplace and commonsensical, it is amazing as to how little an attention is paid to this aspect by many of the large players. For example, electronic bill payments is a fundamentally new business that will deeply impact the core `savings account' population and be a key plank for customer retention for banks.

What global best practices are you integrating in your service? Also, how are you leveraging IT?

Our business being `electronic payments and remittance' the entire proposition is based on the leverage of IT platforms! The key driver of our business is IT, we constantly leverage the extraordinary potential of IT for enhancing our business competitiveness and business performance.

BillDesk works with the largest banks and institutions in the country, in offering its unified payments and remittances platform. Given the complexity of the underlying platform and also the business requirements of the key clients base (i.e. banks), BillDesk has followed a philosophy of incorporating best-in-class standards into all aspects of its technology, and operations and service delivery.

These range from the security standards adopted for processing online transactions, standards for storage and use of customer account information, for encryption, storage and movement of data, best practices for routing and filtering transactions and for settlement and transaction reconciliation.

Is there scope for reaching electronic payment service to those who are financially excluded?

Yes there is scope - but given the expected customer profile, demographics, accessibility of electronic channels in the relevant manner (device, location, merchant aspects) one would have to wonder about the adoption rates for such services. It would take a significant amount of customer education efforts over a period of time for this to work in a secure, efficient manner. So, given that, the near term outlook for the electronic payment services being used directly by those who are currently financially excluded is very low.

What is perhaps very likely is that in an indirect manner (viz. through business correspondents, etc) the electronic payment and remittance channels will get used to the benefit of this segment of customers.

Can you talk about the takeaways from your Andersen days that continue to be of value in your current work?

Prior to founding BillDesk, I worked with ITC Ltd for about nine years and then with Arthur Andersen for about a year.

With ITC, I worked across a range of businesses, with a diverse set of people (across functions, hierarchies, cultural profiles, etc) and under diverse business and market-environment conditions (profitable markets, unprofitable markets, competitive markets, monopoly markets). As a training ground it was an incredibly valuable experience - in the context of the learnings that I am able to apply in my current enterprise. The depth of exposure that I gained across all the functions of a full business - operations, HR management, finance, marketing, legal, aspects of P&L and balance sheet management, investor handling, customer handling, vendor relationship management, brand and price management, shareholder management, dealing with government agencies - was deeply enriching, and more importantly, practical on-ground learning; not substitutable through any kind of textbook learning or B-School grooming alone. All these aspects essentially instilled a degree of managerial competence that has proved vital in building the BillDesk enterprise.

The most wonderful learning that I have from my brief stint at Andersen is that every individual in an organisation - no matter how senior or junior - needs to be held accountable for the way they spend their time at work; it holds the key to productivity and efficient working of an enterprise!

dmurali@thehindu.co.in

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