India has 15 lakh POS machines; but market as big as 5 crore: Paynear
Demonetisation has created the need for a shift to digital transactions, its surprise element depriving cash of the security and confidence it once enjoyed as a legal tender. Fintech startups have drawn enormous benefits from the Centre's mission of less-cash India. One such startup is Paynear that offers a one-stop affordable solution for vendors who want to accept payments digitally.
Dearth of POS manufacturers in India has led to Indian POS device sellers like Paynear importing the hardware from countries like China. The recent exemption in custom duties on these devices, until the end of March 2017, has led to pricing benefits and subsequent burgeoning of demand. But there are concerns regarding such a measure proving detrimental to 'Make in India', in the long run. Currently, India, with a deployment of only 15 lakh POS machines, lags far behind its ambitions of drastically expanding the digital economy.
The impact of sops extended by the government during budget 2017, to boost fintech, is yet to be evaluated. The growth and performance of the fintech industry is a barometer for India's progress towards a less-cash economy. In an exclusive interview with Priti Shah (PS) CEO, Paynear, The Dollar Business (TDB) paints a fair picture of the scenario that the fintech startup scene presents:
TDB: Tell us more about your product and its USP.
PS: Our main product is Paynear One. We are the first providers of a complete omnichannel payment solution. With a single app, you can accept payments from all channels including debit/credit cards, e-wallets, UPI and internet banking. As of today, there is no other platform that bundles all these payment options.
mPOS is our hardware product, a portable alternative to the bulky POS machines. It is also priced 40% less than the standard POS machines.
Paynear has also successfully turned around Siddipet and Ibrahimpur, which were the first cash-less villages in Telangana.
Meru, a cab service provider and Pind Balluchi, a restaurant chain in Delhi are among the many businesses that use the services of Paynear.
Another uniqueness Paynear has is that, the founding team, comprising of 6 members, is well-versed with the payments industry, with an average of 12 years of experience in the same.
TDB: Who is your target market?
PS: Anyone who wants to accept payments digitally, from small and medium merchants to large enterprises. We have 15 lakh POS devices across India currently, but there are 5 crore registered businesses in the country. These numbers underscore the untapped opportunities in the market and its relative nascence.
TDB: What is your current market position and immediate future goals?
PS: We had commenced full-fledged business operations only at the end of 2015. Today, we have successfully deployed 50,000-75,000 devices all over India. Post demonetisation, we have achieved a growth of almost 100%. We're looking at deploying at least 1.5-2 lakh mPOS devices in 2017.
TDB: What benefits do you see Paynear accruing from Budget 2017?
PS: Exemption of 12.5% excise duty and 4% SAD (Special Additional Duty) till March 31, 2017 on POS machines is a big positive from this year's budget. We've been able to achieve a 10% cost benefit due to duty relaxation, which has been passed on to customers.
Secondly, tax reduction from 8% to 6% for small traders who accept payments digitally is also extremely favourable.
The government has also planned to deploy 20 lakh POS machines over the next six months. The political adinistration is doing its bit to incentivise merchants through various schemes like lotteries and we must draw upon the opportunities that the external environment is presenting.
TDB: What more do you think the government can do for fintech?
PS: Cash transactions are preferred because they facilitate tax evasion. So, the best way to minimise cash is to make digital payments attractive through tax rebates. There's still a lot that the government can do for end-customer incentivisation, which will help the fintech industry.
TDB: What is your view of the fintech industry? How successful has it been in conquering cash?
PS: Businesses are gradually shifting but there's still a long way to go. With the size and population of India, especially in the 3-tier cities, towns and villages, there are big opportunities yet to be tapped and this is only the beginning of the digital drive. All stakeholders, instead of competing with each other, should now work together to beat cash.
TDB: Does Paynear believe in giving away freebies to capture market share, the path that most startups are succumbing to, even at the cost of heavy losses?
PS: Business is not for charity. Free or highly discounted services lose their value and fail to capture customer loyalty. Giving away freebies or burning money to increase market share is a strategy that spoils customers and makes losses for the business. At the end of the day, there's no point in running a business if it's not profitable. As a responsible stakeholder, one must avoid indulging in excessive price cuts because it damages the entire business ecosystem.
TDB: Do you find it difficult to compete with firms that offer big discount deals and cashbacks?
PS: Competition is never a problem. Everybody has a market. If your sales pitch is focused at a particular target market, then it won't be difficult to sell your service and grab a significant market share.
TDB: Do you see a saturation point in Fintech, with numerous businesses opening up everyday, trying to get a share in the most coveted industry today?
PS: India's techno savvy population and a favourable demographic dividend are two factors that make the Indian market highly accommodative of any number of businesses that crop up in this sector. So, there's no possibility of reaching a saturation point in this nascent stage.
TDB: India is currently the third largest hub for startups in the world. Do you see the possibility of a startup bubble? What is likely to happen after the startup fad dies?
PS: Our country lacks a precise definition for startups. Any business that is newly registered cannot be termed a startup. There's a lot more that a business needs, to qualify as a business venture. When the startup buzz fizzles off, many closures and consolidations might follow, resulting in the survival of the most sustainable business models.