Budget should ensure level-playing field so that innovations can be driven by smaller players

Payments technology provider DigitSecure has come up with a new solution, which makes mobile phones into point of sale (POS). This solution, launched with Visa and HDFC Bank, is likely to push touchless transactions in India, which has seen many digital wallets dominating the payment ecosystem. In a conversation with Bizz Buzz, Seshadri Kulkarni, Chief Executive Officer of DigitSecure, said the company is hopeful of gaining huge traction in the Indian market over the next six months by onboarding 100,000 merchants

DigitSecure has launched the new concept of turning mobile phones into POS (point of sale) devices. Will it make the POS ecosystem redundant?

Globally, everyone is trying to go as much cashless as possible with governments across the world pushing for digital transactions. That is mainly because of the costs involved in offline transactions. It is a proven fact that digital transactions help in growing the business as customers have more choices on payments. This usually helps in doing larger transactions.

Worldwide, small merchants are not in focus for the stakeholders in the payment system. Around $70 billion is spent on purchasing hardware devices annually (in the case of using POS systems) across the world. That's a huge expense, whether it is a small merchant or a big merchant. Also, these devices have to be replaced every two years, adding to the costs. Along with the hardware, the software has to be upgraded time to time. For this, someone has to go to the merchant's place, which again is not cost-effective. Moreover, while the cost is incurred by the service providers, they are not able to recover it from merchants. So, while service providers are not making a profit on one end, merchants find it not so friendly on the other.

Therefore, we thought of making mobile phones the point of transactions where cards can be accepted. There are a lot of things that exist now, that were not there a year ago. To start with, there were no clear specifications on touchless card transactions. The payment Card Industry (PCI) didn't have any specifications earlier, which has now come up ensuring safety and security. Also, the global card companies Visa or Mastercard are pushing touchless card transactions aggressively through incentivising the payments. Last but not the least, phone costs have gone down substantially. These factors are driving the acceptance of cards in mobile devices. In the Asia Pacific region (APAC), PCI is the first one to come up with such regulations. So, we launched the solution with HDFC Bank and Visa in September last year and are seeing an encouraging response. We are currently working with other large acquirers to launch the solutions. If this happens, we will cover around 70 per cent of the Indian market.

How many merchant touch points has the company reached so far?

It is not fair to talk about numbers as we have launched the solution in September. However, we have a couple of large merchants as our customers. These are the early days. However, we are witnessing huge interest among merchants. Given the trend in this pandemic, we are optimistic about the growth. In the next 6 to 8 months, we hope to see good traction from banks. We currently have 15,000 merchants using this solution from our partnership. Our goal is to reach 100,000 merchants by the middle of the year. Ultimately, we want to reach $20 billion in payments volume with over a million merchants in the next three years across the 18 countries we currently operate in.

Has the solution already been launched in other geographies?

Not yet. We are planning to launch this solution in the UAE by the end of March. We want to launch the solution in the domestic market first and then plan to expand our footprint to other geographies.

When small merchants use their mobile phones to use payments, will it ensure safety and security?

It is absolutely safe. There are no safety and security issues involved in these kinds of payments. It is rather safer than the point of sales devices. What we are doing is that we are migrating a lot of software sitting on the hardware to the Cloud. We are taking extreme care in putting all the safety and security issues for all kinds of transactions. Risks of hacking of mobile phones have been addressed in our solution. These are already been taken care of with PCI certifications.

The payment ecosystem in India is very competitive with many global players launching digital wallets and other payment platforms. In this perspective, do you think this payment system will pick up in India?

I know that the Indian payments landscape is very competitive. However, when global players like Google are looking at touchless transactions, there is a huge potential in this kind of payment system. Of course, Google is talking about the payment platforms for customers and not merchants. Google Pay is enabling debit and credit card-based transactions. It is a testimony that the trend is fast catching up.

What are your Budget expectations with regard to pushing digital transactions?

I think the government has done a lot and the results are showing. But it is an open question with regard to the financial condition of the payment service providers. We see the payment platforms are doing millions of transactions but are not making money out of these transactions. So, the notion within the regulators or the government is that the payment platforms shouldn't charge anything to the merchant. While it is fine for banks, which are making money from other sources, what about the third-party service providers who are giving a solution? So, making it completely free will crumble the whole ecosystem, because the only source of income for service providers is to get fees from merchants. Large companies like Google also have other sources of income like advertisements. So, the Budget should ensure a level-playing field so that innovations can be driven by smaller players. My expectation is that the Budget will not touch the merchant discount rate (MDR).