Will Dawson, chief operating officer of MoneyOnMobile, an Indian-based mobile payment platform, shares his thought son the impact of the demonitisation in India to cash-based remittances, how it drove digital payments in the country, and how it resulted in a growth for the company. post-demonetisation. Domestic remittance growing up as people move away from cash-based remittances to digital-based remittances, which is good for the country, right?
Here is the transcript:
Will Dawson: So, we enable retailers to take digital payments. So, we enable retailers all across the country (India), we’re present in every state, for about 350,000 retailers, consumers come into those retail touch points and with their cash and convert that into digital transactions.
I can be paying a utility bill, I can be sending money to a family member, I can be putting money into their bank account, so we facilitate that last-mile infrastructure between the consumer and the banks.
And now, because of demonetisation that happened last year, we started to do more and more cash out transactions, so consumers who want to get access to their bank account and can access that into a digital cash format.
How MoneyOnMobile works
Mobile, so about 60%-70% of our transactions in every month come from SMS. The retailer types in a short code into an SMS…Pure SMS, not even leveraging USSD. So, basic form factor, simple-feature phones, so we have that. Smartphones are growing in penetration in India, so that’s becoming more and more important for our retail base, and we also have a web portal for the PC-based retailers, but predominantly, SMS-based.
Yeah, it’s a B-2-B-2-C play. We service the retailers, the retailers then resell our services to their consumers, so, a consumer will walk into a convenience store with cash to pay their bill, the retailer takes that cash and sends us an SMS message, pay whose bill of $7.8 (INR500) for their electric bill this month, we send a digital receipt to both the consumer and the retailer, and the transaction’s done sub second.
So, the retailers are the ones we service. We have all the KYC data on them, we’ve been operational for over seven years now, and we’ve touched over 200 million phones in India. That ranges from doing a simple top-up, to doing a domestic remittance, or even cash out, so consumers are the consumers of the retailers, right? We view our customer as that retailer. But, today we have touched on over 200 million phone numbers.
Correct. Correct. Sure. So, think about our transactions as remote transactions, where cash doesn’t really work. That’s where cash has to travel a distance. So, we started our business doing airtime at satellite television, then a few years later we expanded into domestic remittance, now we do air travel, bus travel, all kinds of hotel bookings, we just launched an “assisted e-commerce”, so the consumer can come into the shop, internet penetration in India still at sub-30%, so if a consumer wants to buy online, they can come into our shop, browse the catalogue online, pay in cash, and have the goods delivered to them. We also do cash out. So, if the customer has a debit card, they can put it into one of our payment terminals, do a chip-and-PIN transaction, and withdraw cash. So, we think of ourselves as an aggregator of all financial services that the consumer wants to do, but leveraging the assisted model of a retailer, helping them through that process.
So, all of our transactions go through a bank, so we’re really a last-mile facilitator to the banks. We work with over 11 banks, depending on what service it is, we also leverage the banks to do cash collection, and convert the cash into a digital format. So, the banks really view us as a last-mile provider, and we enable them to do cash collection that they couldn’t do cost effectively.
If you think about India, there are about 200,000 bank branches, but over 600,000 cities. So, lots of cities are unserviced by the traditional banking infrastructure and we’re facilitating that last mile to them.
So, since demonetisation, our processing volume is up over 400%, I mean it’s been an amazing growth, as people now understand what digital payments are, right? So, you have more retailers that want to come onboard to offer to the consumer, but also the consumer’s knowledge level about digital payments and wanting to put money into a bank account or withdraw from a bank account is growing every month.
Ninety-nine percent of our transactions are retailer-assisted. We have some customers who will put money into their consumer wallet and do the transaction themselves, but that’s a small percentage of the overall market.
So, retailer-assisted is our primary focus. And now in India, with the India STAT coming, more and more consumers are going to start to pay for their everyday goods via digital. So, most of our transactions - you’re not buying that bottle of water from the Corona shop, that’s still happening in cash, right? Or buying shampoo. Or buying food. That’s still a face-to-face transaction happening in cash.
But, we’re seeing a big growth in that transaction for face to face actually happening. So, is that growth? You know, we’ll continue to ride that and offer more payment services to those retailers.
And then this year, we’ve launched our big data initiative with our retailers. We’ve got a nice transaction history with them, so we know what their credit profile looks like and we’re leveraging that with our banking partners to be able to offer these retailers micro loans, for working capital to run their everyday business. And then, we facilitate the collection of loan repayments for the banks. So, again, we’re not doing it off our own balance sheet, we’re leveraging the banks to do it, but the banks see us as a way to get a credit score if you will, for these retailers, as well as a way to do cash collection in a cost-effective manner.
Clean loans, exactly. So, they’re done leveraging the transaction history, we know what kind of business the retailer is doing on a regular basis, you can think of like Square Capital is doing, right? They’re leveraging that transaction data to do it; we’re doing that in India.
Oh, we work with all the major banks. So, we’ve got accounts and services with all of them. As banks have different focuses in different regions, but also in different products, it just depends on which product category it is.
Sure, so, we’ve leveraged all of that. Correct. So, we accept RuPay cards, we use UPI and the IPMS infrastructure, the IndiaStack in order to do domestic remittance as well as face-to-face. We use the Aadhaar card to do KYC both our retailers and the customers. And as you see the QR code start to come out and be more prevalent, will start to leverage that for our retailers and give them access to the plethora of different means to take payments. And the exciting one that’s coming up, they’ve been rolling out biometric-based cash out. Now you can do an iris scan or you can do a thumb print, and actually do a withdrawal. That’s our base payments we’re rolling out, so.
Now, we’re not taking any services from the payments bank, but we’re not against it. They’re competing more with the banks. We’re just facilitating transactions. We’re a transaction engine for the bank, and a cash collection engine for the bank. So, the payment banks are competing with the banks because they’re wanting to hold deposits and wanting to make money off that float and to give loans off of their float, we’re not in that space, we’re purely transactional-based.
Well, the growth rate that you saw during demonetisation hasn’t continued, but the awareness of it and the continued use of it is happening, so in our network we’ve seen a doubling of what consumers are doing digitally, post-demonetisation. And now, like what I was saying with the cash out because of demonetisation, we are now allowed to by the RBI to do cash out, you can start to see the retailers spin on working capital go much faster. Because they’re taking in cash for domestic remittance with one group of customers, and they’re selling that same cash to the next group of customers for a cash out. So, the spin on working capital, that cash that they have is much faster. We’ve seen those kinds of retailers see their processing volume grow two to three times, just because they’re offering this cash out facility.
Sure. So, the retailer earns a commission on every transaction they generate, depending on the economics of that transaction. So, we aggregate all these services on behalf of the retailer, and then whatever fees we collect from either the bank, so for a cash out it’s a bank charge or a reverse interchange, for airtime we earn a commission from the airline, we share that with the retailer. And they make money on the processing volume they generate.
The company’s growth post-demonetisation
We’re seeing lots of growth. I mean, this year has been a dramatic growth year for us post-demonetisation. Domestic remittance growing up as people move away from cash-based remittances to digital-based remittances, which is good for the country, right? It brings a lot more transparency to the transactions that are happening, it reduces the fraud for the customer…into a tax-based, right? Which is good for the overall growth. So, our businesses have seen exceptional growth this year, both in terms of number of retailers, but also in terms of how many transactions the retailers are doing. So, I’ll give you an example, before demonetisation, let’s say a customer is doing one transaction, those customers are now averaging three transactions in a month. So, just that mental awareness of digital has raised processing volume dramatically in the customer’s mind.
Doing well. We’re scheduled to break even in the first quarter of next year, but our focus is primarily on growth. So, we’re adding more retailers as fast as we can get them going. We’ve got a sales force of about 200 people around India. Signing up new retailers. We signed up about 2,000-4,000 new retailers a month on to the network, and some months we’ve seen actually 10,000 retailers come on. So, it’s all around focused on growing our distribution network and growing the number of services that we’re offering.
So, the finger-based cash out is coming. The government has just finalised the regulations on the encryption of that, so we’ve been waiting for the encrypted devices to come on to the market to be able to offer that. Now, the government is very keen on doing government-based payments on the digital channel, especially on the micro-payments side… benefits, exactly. And just ten days ago, the government has now allowed us to do inbound remittances. So, we can originate the remittance, but we can work with an origination partner and be the termination. Especially, in the rural areas, where it’s very difficult for them to get a cash-out out of a remittance, now they can come to one of our shops do a cash out for any money transfer from one of our partners. So, that just happened about ten days ago, so we’re actively out and that’s one of the big initiatives part of Money 20/20, why we’re here, to talk to those guys about how we can be that final mile to receive international remittances and give it out to the 600 million people in India that don’t have a bank account.
So, we’re about 350,000 retailers today, there are about 15 million retailers target in our customer segment so, we have a long way to go to grow there, so, India’s our focus, we’re going to make this work, we’ve got the large customer base… that’s our whole focus. Great, thanks for your time.