The Advent of Mobile Sales

Ajay Adiseshann, Founder and Managing Director, Paymate.
The impact of electronic payments on the retail industry including the unorganised sector remains negligible. Similarly, the penetration of the banking industry vis-à-vis our population remains small, as a vast majority of Indians remain unbanked.

We have close to 10 million retail merchants nationwide. Only 300,000 of these accept payments in some electronic form, largely via Point of Sale (POS) devices installed by banks. These devices are expensive. The banks mostly underwrite the devices, especially when they are confident of the return on investment in a relatively short period of time. At other locations, the merchant has to pay or finance the POS devices but unfortunately, not many merchants are making a beeline to acquire these devices. To add insult to injury, the charges for accepting payments on the POS devices are high. Therefore, as a small merchant, not only do I have to incur a cost for the device, but also a high cost to service every transaction. In other words, a nail in the coffin for mass based retail electronic transactions. Therefore, the penetration of electronic payment options across merchants will continue to remain low unless they are given more options.

So is there a way around this quagmire? Yes, there could be. We all know the mobile penetration story being of X number of cell phones around and lots more to come. Good so far, now, let’s add another feather in the mobility cap by turning the cell phone into a POS device. Is it possible you ask? Quite possible.

Now, we need to build a financial payment system that is more merchant friendly and less dictated by global norms that are not applicable to us. Bottom line is to increase the merchant’s bottom line. This too is achievable.

The mobile phone makes both of the above possible and companies like Paymate are already starting to implement this strategy. Of course, it is just the beginning for us and we have a long way to go, but we believe that is the right way towards enabling electronic transactions for a larger base of merchants and catalysing the growth of electronic transactions.

Close to 700 million Indians remain unbanked and a fair share of the balance number remains under-banked. Mobile phone penetration is already at 250 million and adding 8 million a month. Therefore, in 2-3 years we might be closer to 500 million users.

With around 13 ATMs per million compared to 530 ATMs per million in China and 10,000 ATMs per million in USA, the scenario in India is not going to change drastically overnight. Therefore, a large population will continue to remain under-banked and unbanked.

The Financial Inclusion Act in trying to address this gap by encouraging correspondent based banking to reach out to the larger population base. While the intention is evident, the need to accelerate this process via innovative means is paramount to its success. Again, the cell phone can complement this effort in many ways with the ability to provide real time electronic banking for customers and correspondents via cell phones. Basic banking services can be followed by other requirements like finance, for example.

In conclusion, the mobile payments industry has been receiving a lot of attention lately. We need to bear in mind that it is imperative to be able to identify and pursue a direction, which ultimately channels the nation towards a cashless society by building out new electronic payment channels where they don’t exist, and not just cannibalise on existing electronic transaction channels.