You’ve been in the payments business from long before it became a buzz word in the world of finance…
That’s right; back in the 90s we implemented switch to all the banks including SBI, HDFC Bank and ICICI Bank. Then we made the ATM interoperable so that you can go to any ATM and withdraw cash. Then, we got our own product for debit card. Today most banks use our debit card management. We developed, as India was developed. The moment debit card happened, disputes started happening and we created the reconciliation system at the backend. Every product required to make retail banking successful, has been created by us in India for Indian banks. In the reconciliation system, banks tried global tender, and they found us better than any global tender. NPCI came in 2008; effectively whatever NPCI was doing, we were doing. When the transaction started going up, the government decided that there should be a regulatory body and that’s how NPCA came into the picture.
You were among the applicants for new umbrella entity which is now shelved. Is there a case to relook at these licensing norms?
From payments perspective, India is the most advanced country for protection of consumer. They’re worried about the commercial model of NUE. The government has adviced not to charge MDR on UPI. Therefore, will a NUE by itself be profitable or not, they don’t know. This needs Rs 500 crore of equity and after putting up a huge infrastructure, my job as a NUE is to get return on this capital. So you can’t have one entity charging (for UPI) and another entity giving free. NUE will certainly come, but in what form, how and when it will come will depend on the profit model.
But for that UPI has to become chargeable at some point…
Yes, finally UPI has to get charged. It took so long for us to remove the fertilizer subsidy. Similarly, it will take some time to charge it. You go through that route for every product model. But is this the right point? I don’t think so. We need to give at least two years time to make sure at least half of our population at least comes into digital payments. Otherwise, I am worried about the digital divide which is not good for the country.
You resisted the lure of listing till now, but at some point your investors will seek an exit…
They have been with us for 10 years, and at some point, we must give it (exit) to them. If I’m profitable, I can play anyway. But at this point of time, we don’t want to do anything till we have clarity of next three years on how the space will move.
Why is that important?
Banks are realizing that the volumes are going to be 3x – 10x. When UPI came nobody believed that it will happen like this. Initially, I used to get three UPI registrations and some four transactions a day. Today it is 10 billion and they have realized this is the reality of life. For me it looks like I’ve gone back by 10 years redoing my own product for these banks to transform to the new level. Banks trust us because we have been with them for 30 years. The next three years is a time for migrating banks to the new technology; it’s like what we did 15 years ago of trying to adopt new technology. Therefore, if I’m willing to wait and my investor are willing to wait, why not? Certainly, investors will seek an exit and we will give it them. But what form and when, why should I worry about it now?
From an innovation standpoint what holds ahead for FSS?
We are all going to embrace new technology for the scale. What we have built is still a legacy monolithic system. We are moving to a micro-services based architecture on a cloud and charging people on number of service they use rather than per transaction. For instance, authentication is a service which can be used in any payment application. It benefits banks because it’s all small services and any change required can be done in that service. This will enable banks to handle even 20,000 transactions per second. If I touch the whole monolith, I have to test the whole monolith. Today I cannot afford testing a small change for one month.