Naveen Surya in Q&A with Raghu Krishnan – Business Standard

Business Standard, Mumbai , September 29, 2016

“The reality of payments firms is, we are relevant to urban and rural”

“The digitally-savvy Indian uses physical cash for 30-40 per cent of her spending. So you can see the opportunity for a differentiated service”, Naveen Surya tells Raghu Krishnan in Q&A

How are you differentiating ItzCash in an overcrowded market with a range of companies offering similar services?

The opportunity is enormous for companies as 90 per cent of India still uses paper. Many of us who are digitally savvy use 30-40 per cent of our spending in physical cash. Imagine a migrant labourer or a vendor, for them it is 100 per cent cash. You need a touch point that this physical cash can be digitised. It can be a smartphone app or money in digital form. For example, we run 75,000 outlets across India, in 3,000-plus locations. While you are doing this we also need to acquire services that agree to accept this. There are entities that do only merchant aggregation and they tie up with prepaid issues, wallet companies to acquire customers.

Security is top-of-mind with consumers these days for digital payments. What have you done to address such concerns?

Prepaid by default is generally more secured as they tend to bear/hold less value and hence users of lower value are targeted less. Moreover, all security measures in terms of encryption, passwords, etc. are stringently observed equally in wallets as much as they are followed in case of net banking or debit card/credit card transactions or any other products. And as per the guidelines prescribed by RBI we get an income security audit done on a regular basis to ensure security.

How often do your users spend on the wallet? What is your revenue currently and are you profitable?

We have around 35 million active users. Most of them do active transactions minimum a month — for satellite TV charge, mobile currency recharge. We are leaders in utilities, whether it is Reliance, Assam and Manipur electricity boards. We are processing Rs 15,000 crore worth of transactions, spend value. I would be earning Rs 250 crore revenue this year. We were profitable in the first quarter, second quarter also looks good. This year we will be fully profitable.

What should we look for in the future? Will mobile wallets spell the end of physical credit cards and cash?

In the context of a country like India, for a period of at least the next five years, each of these product categories will grow rapidly. If you observe the recent past all products on the digital platform have been witnessing double-digit growth with wallets growing even more rapidly.

The mobile wallet business is run on cashback. Will it survive long?

On an average Rs 5,000-6000 crore business is done in wallets every month, cashbacks is not more than Rs 1,000 crore. The cashback is in the e-tailing or taxi services which are used by consumers who have a choice in making payments. They have debit cards, credit cards and wallets that offer cashbacks to use their products. We are working with customers who don’t have choice. The real value proposition is to convert their cash genuinely and digitise for transactions.

Is the wallet business a largely urban phenomenon?

It is equally urban and rural. In areas such as Dharavi in Mumbai certain pin codes are rural. The classic definition of urban and rural is based on income segment and population type. The reality of companies such as us is, we are relevant to urban and rural. Because the majority of our consumers use wallets to buy a train ticket, mobile charge, money transfer in very different ways. Wherever connectivity and internet is available, people want to do transactions digitally.

How would the Unified Payment Interface (UPI) disrupt the wallet space? Do you offer any products on UPI?

We are not offering any specific products for now. Currently, UPI is largely available to account-to-account transfers and even credit card, debit card and wallets cannot be linked. We are connected with NPCI (National Payments Corporation of India) for IMPS (immediate payments transfer) for the wallet-to-account transfer. We are amongst the top three players in the country. Our contribution is around 10 per cent to that or two million transactions on the IMPS. Nonbanks are significant partners to NPCI in IMPS. UPI is bank to bank, as they expand to wallets, we will be part of it.