On Tuesday, a media report said that American Express was planning to acquire a significant majority stake in one of India's largest payment gateway BillDesk for Rs 600 crore. BillDesk, which offers online payment services for telephone bills, electricity bills, cell-phone bills, credit card bills, depository account charges and ISP charges, had raised $7.5 million in 2006 from State Bank of India and California-based Clearstone Venture Advisors. Techcircle.in caught up with Srinivasu M N, Co-Founder & Director, BillDesk to ask about the deal and learn more about his business, the current online payment industry and the flux introduced by the sudden growth of e-commerce in India.
Are the reports of Amex looking to acquire BillDesk true?
No, there are no talks...they are just a regular client.
What does BillDesk do?
With our services, users have a set of payments for utility bills, mobile bills, insurance payments, online mutual funds and SIP payments. You can schedule your online payments and even pay taxes using BillDesk. Regular banking account customers as well as credit card users can use the service.
How many clients do you have?
We have 45 banks and financial institutions on one hand and the other side 250-300 large billers - all the major telecom operators, 20-odd electricity companies, 30 insurance companies, as well as mutual funds, travel companies and large pure play e-commerce platforms. There are about 250 million cardholders (debit & credit combined) and we estimate that there are over 70 million customers with netbanking access. Our services typically reach out to this customer base, whether it is from bank channel or a biller or merchant channel.
What are your revenues and net profit?
We cannot share that information as we are a privately owned company.
What are the key trends in the payment industry?
Online banking is the largest category of online payment transactions. Credit cards dominate over debit cards but the trend is toward faster adoption of debit cards and we are seeing a 60-70 per cent growth in payments using debit cards. In India, the payments market is growing at 50-100% growth rate and will be around 60-70% range since the base is large now.
How is the growing e-commerce sector affecting online payments?
The online payments market can be seen as 3 key segments (a) Online payments towards bills, utilities, taxes etc (b) Travel based e-commerce payments and (c) Non-travel segment e-commerce payments. Currently the non-travel segment of e-commerce is still a small part of the overall online payment flows. However we would expect to see significant growth in this segment in the coming years.
The online payments market is still much larger than the e-commerce market and the benefit from India's e-commerce growth will flow through to us. The payment behaviour is also of better quality at the large biller, merchants and utilities sites compared to e-commerce stores, with over 90 per cent of users successfully completing the transaction, whereas dropouts on pure-play e-commerce sites is higher. We assess this to be a function of customer decision-making pattern. Take the LIC site, for example. All the user's actions are geared towards completing the transaction whereas on an e-commerce site, he may change his decision. Customers do experiment and may drop off at some point.
What are the issues with payment gateways? Are regulatory changes still affecting business?
India has very progressive regulations and regulations are meant to secure transactions and have been replicated globally. If i wear the hat of an e-commerce service provider, this has tended to mean lower transaction volumes from consumers. Regulations have evolved to offer 2nd factor of authentication and it's more of a customer education issue now. As long as the sectors are able to work with banks, these issues will get ironed out. We keep getting feedback from e-commerce sector that customers are choosing cash on delivery. As the market matures, customers will get more comfortable towards online transactions.
What is your market share? Where are you positioned in this sector?
There are no official reports on the online payment sector as of now to offer you details of market share. We are fairly dominant on the merchant side â€“ especially in the large merchant category with OTAs such as Kingfisher, Jet Airways and Indian Airlines using BillDesk. We are channel agnostic. BillDesk works over various media such as mobile, online, IVR, etc and offers standing instructions, so generally when players get to a level where they want to broad-base their payment gateway, they choose us.
What are the synergies you have with loyalty programs?
There are two trends which worked in the West which people are going to look to experiment with in India. The first is - with loyalty you can leverage payments. Second - discounted deal offerings work. So if there is a loyalty program, it will ride on payment mechanism. BillDesk is completely neutral and we will work with all types of programmes.
Are you seeing any interest from international companies in India's online payment industry?
We are seeing significant interest in India from international payment companies. India has a lot of things going for it and growth rates will be significant. The changing demographics and profiles of transactors indicate that the presumption that they will transact online is right. India also has a large mobile userbase and should be able to leverage this for payments. The good thing that has happened is regulations in this space, which have clearly outlined definitions as to where the market is going and gives comfort to large players who are looking at India. Globally, they are finding that payment is key and at the heart of everything.
What about acquisitions?
There are a lot of acquisitions happening, but we will continue to build out as a dominant player. We have no interest in being acquired in the short term.
What are your plans going forth?
We are a 10 year old company and the opportunity to grow from here is stupendous given the ecosystem is growing at a fast clip. We've done the difficult work and now it's the next phase of growth. These are exciting times and there are good quality e-commerce players in this space. All the large entities â€“ telcos and insurance companies etc. - are also getting serious about electronic and online transactions. We are at the beginning of a significant period for the online payment ecosystem in India.