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Building The Fintech Backbone | Prabhu Rangarajan @ M2P Fintech
304 Plays3 years ago
In a gold rush, the ones who sell the shovels are the ones who make the most money. In the fintech gold rush that we are seeing today, it’s a company like M2P Fintech that is selling the shovels; connecting banks, fintechs, and businesses with custom APIs for financial services.
This episode is a must-listen for anyone who wants to understand the fintech ecosystem in India!
Know about:-
- Conceptualizing use cases
- Coining the term “payments infrastructure”
- Building a neo banking platform
- The BNPL scheme
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Transcript
M2P's Role in FinTech and Bank Integration
00:00:13
Speaker
In a gold rush, the ones who sell the shovels are the ones who make the most money. In the FinTech gold rush that we are seeing today, it is a company like M2P FinTech that is selling the shovels, which also explains how they raised more than $100 million in less than two years with their last valuation at $600 million. M2P FinTech builds the pipes through which FinTech startups can work with regulated financial institutions.
00:00:24
Speaker
This is Prabhu Langarajan, co-founder of MTP FinTech.
00:00:38
Speaker
They help banks to grow by integrating with a whole host of fintechs without incurring any CAPEX. And they help fintechs to focus on what they do best, which is providing a great customer experience while M2P takes care of all the back-end
Exploring India's FinTech Ecosystem
00:00:53
Speaker
plumbing. This episode is a must-listen for anyone who wants to understand the whole fintech ecosystem in India and learn about how the various stakeholders in the space have worked together
00:01:03
Speaker
to create one of the most vibrant economies in the world. And there's no one better than Prabhu Rangarajan, founder of M2P Fintech, to hear this from. Prabhu is a software developer turned entrepreneur, and here he's telling Akshay about how it all started.
M2P's Origin and Market Gap Identification
00:01:21
Speaker
In 2014 was when, like one year into Cognizant, I met Madhu and Mutu, my other co-founders.
00:01:28
Speaker
I went to Madhu for a very different idea. I wanted to do an aggregator of aggregator. Hola was there. Uber was there. Fast track was there. So many cab companies were there. All of them had apps by that time. There was one company called Taxi for sure. All of them had apps. But when you wanted to book a cab, you had to juggle between multiple apps. So I told them.
00:01:50
Speaker
why don't I create an app which is an app that connects to all the apps. Getting into anything that is direct to the customer, it is not easy to build. You'll have to have a lot of background around branding, have a lot of thinking around customer support and all that. But what really clicked was that when you do an app of apps,
00:02:12
Speaker
there's this payment thing that you'll have to solve for which I went to Madhu and told him my idea how can I solve the payment piece alone and then he liked the idea and he said forget about your larger vision
00:02:23
Speaker
Just take this payment as a problem alone. This itself is like a big enough problem worldwide. Why don't we just set out and solve that? Because I have already been in discussion with Mutu. I've been discussing with him over a cup of chai. So that's how it happened. Madhu and Mutu were colleagues at Visa. So that's the M2P's founding journey. They were colleagues at Visa. They were placed in Mumbai. Tamil guys being in Mumbai, you can understand. They go to chai or any break together.
00:02:49
Speaker
So, over a couple of days, they kept discussing that, hey, see, these many banks are there, these many companies are there, but there is no one solution that is there which companies want to launch and banks can never come and bridge the gap. So, that's when the M2P idea was born. This was mid-2014 and then I went to him and pitched. So, the trio met and agreed that we're going to build this. What is this here? Just help me understand what was the idea.
00:03:19
Speaker
So the idea was, okay, so what happened was that when there were several companies, like I'm talking about 2013, 14, when Paytm was in its infancy. Paytm was just an app. It was just a wallet. Yes, it was a wallet. You can top up the wallet and use it for mobile payments and recharges and stuff. The store payment also hadn't started back then. And Paytm was probably a $20 million company back then probably. So that market was coming up. It was just blooming.
Building Solutions for Traditional Banking Limitations
00:03:48
Speaker
And then there was this problem of companies wanting to launch several fintech products.
00:03:54
Speaker
where products that embed finance into their core offering and then they want to launch it. However, what banks have was very conventional traditional banking models. And banks could not do program management. They were unable to come out of their core, which is current account, savings account, deposits, and stuff, and build a specific product for, let's say, a Swiggy or a PTM. They were unable to do that. So that was like a big white space, which we understood.
00:04:21
Speaker
that somebody had to come and do this program management piece or stitching all these things together and have a platform of sorts which can help FinTech companies launch products faster. This was the white space that we wanted to go and play with. And we knew that, yeah. Like what would be like a special product for a Swiggy that a bank would need to develop? Give me like a more relatable example.
00:04:48
Speaker
Sure. Say for example, today you have, if you use Swiggy as a wallet, Swiggy as an app, there is a Swiggy money section in that app, which is powered by ICC bank.
00:05:00
Speaker
Swiggy cannot go and collect money from you and keep it themselves because in India everything is regulations. RBA has clearly directed that either banks or prepaid instrument providers only these two entities can collect money from customers and retain it and there has to be a ledger which maintains everything. So for Swiggy having a
00:05:22
Speaker
friction-free app experience is very important. That's what they are. That's what defines them. And then for the wallet, you can't go and ask the regular set of questions that ICC Bank iMobile asks.
00:05:33
Speaker
for you to open an account with ICCA bank, it is like you fill tons of forms, probably go and do a huge process. Yes. So for Spiggy, that won't cut ice, right? You will have to simplify that. And ICCA bank cannot go and do it all by themselves. They need an external help. They need a layer which simplifies this. M2P is that layer which can do that.
00:05:55
Speaker
At that time, were you able to conceptualize that there are all of these use cases which can be enabled if there is a layer in between? I mean, today, of course, there is so much, there are all these neo banks. And so we can see, OK, that neo banks are working with existing infra and improving the consumer experience. But at that time, what did you conceptualize as a use case for this? So to be very honest, we did not coin the term payments infrastructure at that time.
00:06:25
Speaker
We wanted to attend to that wide space where we knew that we had to build a platform which caters to.
00:06:32
Speaker
the companies that want to launch products. We were only focusing on the FinTechs, the aspiring FinTechs. And on the other side, if we were to do anything with money, we had to partner with the bank. So this was running in our mind. We never had this thought process to call it as payments infrastructure. Nobody in the world called it as payments infrastructure. At that point of time, if you had said payments infrastructure, people would have probably thought AT machine.
00:06:56
Speaker
or boss machine which you say is doing. Design Mastercard are like in a way event infrastructure companies. That's right. So people would have probably discounted you for being among those regular companies. We honestly wanted to start something which can make go to market faster in the payments world. That's what we set out.
00:07:16
Speaker
And by payments here, you are talking of wallets as the use case because payment gateway is already there, right? If you just talk of helping a company collect payments, they have payment gateways already at that time, they were also there, although they were not so big. But so what was it that you thought as a use case? So we initially thought we'll solve two major use cases. One was this wallet as an operating system.
00:07:41
Speaker
never existed. Everybody had their own closed, I would say, walled garden. Pay team had their own walled garden. Free charge had their own. There was oxygen. There was a mobile quake. All these companies had their own, and you can never do interoperability. That was very evident. So what we thought of was, why don't we build a wallet? We can white label it. Whoever wants to launch a wallet, they can just simply use our APA stack and launch it themselves, go right to RBI, partner with a bank.
00:08:07
Speaker
and then go right to RBI and say this is our co-branded wallet and stuff like that. That was one. The second use case on that is why don't we add a card like a Visa or MasterCard on top of the wallet so that it becomes interoperable. These were the two use cases we set out to do in the first year of our existence. So what we did was we started building our wallet operating system. We tried to use somebody else's stack for that card issuing layer, the card layer, that stack that can actually come and dip into the wallet
00:08:36
Speaker
use the wallet balance for paying to any merchant that is out there. We did not want to, we were very clear that we will not be able to rewire the entire or reengineer the entire process around how payments are collected and done. We were very clear, we did not want to reinvent the wheel. We were very clear that these are the two things that we will be able to do because we were a team of five or six people at that time back in 2014 or 15.
00:09:00
Speaker
So these were the two use cases that we took. We launched our first product, which is like a wallet plus card product for India Infline. India Infline had a gold loan portfolio. This was May of 2015, when we launched a DCB bank co-branded card with India Infline gold loan as the brand. So the use case was that go to India Infline outlet, pledge gold,
00:09:28
Speaker
they offer you cash or cheque into your account or NAFT transfer into your account or you can take a prepaid card and off you go. Turns out most customers who go on pledge code make sure that their family doesn't know about it. This prepaid card is useful for them because they can keep it completely off the record when it comes to their bank statements around.
00:09:51
Speaker
So it clicked. Then we found out like this is a good use case. We can go and reach out to many NVCs that are there like India and friend. There was Mathur, Manapuram, so many other golden companies, so many other lending companies, which we are trying to lend and disperse the money. We thought the prepaid card would be an easy manner or easy handle to go and disperse the money.
00:10:12
Speaker
That was the use case for the first year. Just help me understand how this prepaid card worked exactly. So did the customer have to do the regular KYC and open an account at DCB?
00:10:24
Speaker
Yes, so back then the KVC guidelines for prepaid was a bit easier than opening an account because prepaid was seen as the cheaper alternative to opening an account. At that time, that was the time like I'm talking about 2015, early 2015 when this Jandon account and all these things were pushed across. So, banks were already under stress to open so many different accounts like current account savings accounts and stuff. So, prepaid was an easier alternative then.
00:10:49
Speaker
So the KYC was, there was a concept called Business Correspondent. So IIFL had to sign up like a correspondent for
00:10:57
Speaker
the bank. Of course, there was a workflow which we built in a portal kind of model. We gave it to the bank. All the documents that were uploaded will be deposited in the bank's KYC system and they'll have an approve or reject button to see the KYC documents and approve it. And then once the card is enabled, it's all over a bunch of APIs, we knew that. So this was a key decision, right? We did not want to build portals and front ends for everything. We never had that skill set, first of all.
00:11:24
Speaker
We were not good at UI, UX. We were not good at branding. So we knew for sure that this is not a strength. Why don't we have companies use their own front ends? Let's just stick to APIs, like the backend engine, be invisible in this entire journey, and make sure that the job gets done.
Focus on Backend Technology and Partnerships
00:11:42
Speaker
That was what we were after. So we were very clear that we'll be like a core piece behind the scenes, not the one which is front-ending the entire show.
00:11:53
Speaker
Okay, and how did you crack these deals with the first DCB to get them to partner with like a unknown, unheard of company and with India and full line? Again, this is a space where white hair probably helps to open doors and also how did three youngsters manage to crack these deals?
00:12:15
Speaker
So I think Madhu and Muthu's time at Visa held because they had met with almost all key decision makers in banks. They had built a lot of goodwill. They built a kind of sense that these guys understand the product well.
00:12:32
Speaker
And the approach that we took was that when you go to a bank and ask them for money or ask them for a business opportunity and stuff like that, unless you show that this is going to make revenue, it's going to be very hard for the bank person to take a decision. So when we went to the bank, we had already convinced them that there is the strong use case and we'll also bring a client for it.
00:12:53
Speaker
and India Inflane had already agreed that okay if you are able to bring a bank we are ready to partner and try it out. They said we'll initially try it out in a proof of concept model with five branches and then we can expand to all our 100 odd branches across India. So that was the model that we went with. So how does the bank earn in that? Yeah so every card that's issued the bank has an issuance fee attached to it.
00:13:15
Speaker
There is a cost that Indian friend, in fact, they charge the customer for it. And the fee is paid to the bank. And every transaction that's done throughout the bank. MDR, the budget discount rate. So through the MDR, the bank gets something called as interchange reimbursement. So the bank earns every time. And if they go and withdraw money, cash using ATMs, they again charge ATM fee for that. So the bank kind of never is in a position of losing money at any point of time.
00:13:45
Speaker
And we gave the comfort that we will do it in a very small manner through that this works and then we'll expand it. So we never went and asked them for a multi-million dollar deal or anything like that. We said we'll do 5,000 cards in the first batch, make it right, iron out all rough edges and then we'll expand.
00:14:01
Speaker
So, that was the model and the bank was willing to. So, DCB bank was one of the banks which were not trying to go into the retail model where they were, you don't see ads of DCB bank for... Yeah, they don't have a retail presence. Right. They are a B2B bank. They were very clear of what they can do and what they can't. It worked and India and FLAN and DCB were able to strike a proper conversation and get into a partnership kind of model and we became that technology service provider there.
00:14:29
Speaker
did the branches have like cards over there and then they would just map the card and activate it and put the money in it the way it happens in telecom like the sims are already there they just map it and activate it exactly in fact yes we took inspiration of that insta sim right we call it as an insta card or insta kit so what we do is like all the terms and conditions all the material of the bank that has to go like the regulatory ask is there right like you have to tell the customer explicit take an explicit consent from the customer
00:14:59
Speaker
on what they are getting into, the agreement, the wet sickness, all these things are packaged into one envelope. There was a cart, there was a pin, all these things were there in the envelope and it was there as an insta-kit. So, what India influent brands effectively had to do was, they promised this five minute loan dispersal. That was a product that they launched back then.
00:15:17
Speaker
And we were able to help them get there because in five minutes you can't do a bank transfer at that point of time. Today you can do it. With Google Pay and all these things you can do it. But at that point of time it was very hard. So this kind of helped them to meet that strategy. You do the attribution process in three minutes if you're done. Just pick a kit, enter the number and say transfer and it is done.
00:15:38
Speaker
So yes, we took that approach of stocking instant kits in the branches of Italian flying to begin with a few branches in Mumbai. And then we expanded. You said that DCB bank had like approved reject button when they received the KYC document. So they needed to do that approved reject real time. Right. See, one comfort for the bank over here is that the entity that is actually lending money will be more interested in the KYC.
00:16:08
Speaker
So, Indian plan as an entity, right, if they are seeing Akshay as a customer and trying to give money in return for a goal that Akshay has, there is already a collateral, the money is safe, whatever they have lent is already safe. And the money that they are going to give you, the kind of documents that you give, they will ensure that they vet it properly. And then the card is only an instrument using which they are giving that money out.
00:16:32
Speaker
So, the bank is having a comfort that number one, these guys have done due diligence on the customer and then made sure that this customer is the real guy, like the identity is verified and all these things. So, there is this thing called OSV, original, seen and verified, right? That every banker does, like you would have seen that whenever you open a current account or savings account, somebody from the brand sees your original ID proof and gives it back to you.
00:16:56
Speaker
So, that process was done by these guys. So, the bank had some amount of comfort and there is another additional comfort that India Infant is a regulated entity themselves. They are an NVFC, Non-Banking Financial Corporation, right? So, these are factors that added to it. So, that is why when we went with the first set of products, we did not go with companies that were pure startups because we being a startup, the bank had to have some amount of comfort to go and launch it. So, we went with established ways.
00:17:25
Speaker
Got it. So, you built this like the pipes to make this happen. So, which year was this? When did the Indian feline product go live?
00:17:35
Speaker
So this was 2015, early May 2015 was the first card issued for India and Thailand in a branch in Mumbai. And soon they also had some amount of technical issues that they had to solve. So it took a couple of months of testing back and forth. And then by August, September, we really scaled up. And then we did a cookie cutter model and tried to launch the same product or similar product across multiple
00:18:02
Speaker
Lending companies like NBFCs. Loan focused or like any? Not just go loan. Even there were NBFCs which were, there is this concept called microfinance institutions. They give a group loan, a group of 10 women self-help group customers come and give a group collateral and take loans. These were target segments that we were able to tap into because the loan lending size was sub 10,000 rupees or 8,000 rupees.
00:18:27
Speaker
and the ticket size did not warrant a bank or the NVFC to push the customer to open a bank account. It did not really qualify. So it's a very small ticket size. So the prepaid card really fit into that purpose well. So whole of that year till early 2016, we were doing that. One question here. How were you funding this? Was it self-funded or did you raise?
00:18:49
Speaker
We were completely bootstrapped. We did not raise any funding. By mid of 2016, we knew that we can expand this. We can hire more people and have this into a proper vertical and then start focusing on
Innovating for Scalability and Flexibility
00:19:00
Speaker
bigger things. Then we were using the card stack was like a rented out card stack, which we understood that it had its own limitations and all. So we were always wary of the amount of scale it can take and all that. You said the card stack was a rented out card stack. What does that mean?
00:19:19
Speaker
Yeah. It is a card stack. Sure. So what happens is that if you want a card to be issued, there are three or four different entities that are required here. First is the network. Which network you're going to issue a card? That is Visa, MasterCard, Ruby. All of us know that. Second is the issuing bank, is the DCB bank or ICC bank here, right? The bank which actually authorizes to issue that card.
00:19:43
Speaker
Third is the technology, the switch and host of the card which can actually generate the card number, send the card details to a printer like Manipal card technologies or color class or some printer who can actually print the card into real plastic.
00:19:59
Speaker
embossed that car you have seen the car number will be embossed slightly raised embossed and silver tipped or gold tipped. So that job is done by a car personalization vendor. And so there are three or four different entities that are required to take a ship a card out. So in all these things, the car technology had to be certified by Visamastra Karandope.
00:20:20
Speaker
You can't get it certified in a month or two. It is generally a six to eight month process where you build the software, you attend to there, there is grammar involved in it, how you interpret a transaction, how you start a card number, like generate a sequence of card numbers. There are a lot of logic behind it, which we couldn't do. We couldn't afford to do with being a bootstrap company. Right from day zero, we were unable to do. So we had to partner with some company.
00:20:46
Speaker
which was able to lend it in a rented model to us. So we just took a fork out of it and used it for launching the car product.
00:20:56
Speaker
So you were actually responsible for getting the card printed and delivered to the NBFC. Okay. Which is why you needed card technology. Okay. Got it. Got it. So we were trying to make that experience. So in these NBFC deals, what was in it for you? What was your way to earn?
00:21:17
Speaker
So we were on the bank side because to the NBC, we can't confuse them saying you'll have to pay me this and pay the bank that and all that. So we kept it very simple. Out of whatever revenue that is generated, the NBC takes a cut and the bank takes a cut. And with the bank, we had a back to back arrangement where we had a cut out of the revenue that they make. So our lifetime.
00:21:39
Speaker
Like every time the card is five, there is some pennies on the dollar and you get some percentage of that. That's true. That is how the flow worked. The NBFC did not make any revenue from this. This was just a way for them to give their customers a better experience.
00:21:59
Speaker
They did make, they did have some amount of incentive to use this card, right? What was their incentive? I would say in a 100 rupee kind of ticket size, let's say, 20 to 30 rupees will be held by the bank. The remaining 60 or 70 rupees or 80 rupees will be shared between the NBFC and us. So the NBFC would at least require about 50 rupees as a cut for them to incentivize and use this card. Even they have to push their branches and branch personnel to
00:22:28
Speaker
use this card. They had to do training. All these things were there. So they had also invested in technology and all that. So we had to incentivize them. So it was like more of 50, 30, 20, or probably like the ratio differed based on the size. Initially, we did not have that negotiating power to go and ask for more. And then over a period of time, as we added more value to the entire chain, we were able to extract more dollars.
00:22:54
Speaker
So the NBFC would also get a share from the lifetime usage of the card. Like every time the card was swiped, some part would be going to the NBFC also. And then that one time initial, the issuance fees that is charged to the customer, that again gets split between all three parties. That's right. That's right. Okay. Got it. Yeah. So we were talking about how you were funding it and how you were bootstrapping it. Yeah. What we had to do was that we were very particular that every card that is shipped out of the company,
00:23:24
Speaker
is going to start earning revenue within two months. Because it will not be sitting in the shelf for a very long period. We will stock it in such a manner that it doesn't waste time sitting in the shelf. Because cards also have this validity period problem. When you generate a card number, it has. So, correct. So, we tell the NBFC or the actual customer that order only what is required for the next two months. Because the card order process is like a three to four week long process. So, just order for the next two months and then you can keep replenishing the stock.
00:23:52
Speaker
So, that is why we were very clear that a dollar spent today is going to come back with profits 2 or 3 months down the line. So, we were whatever money we had pumped into the company, it was enough for us to run the operations.
00:24:06
Speaker
All of us found us, the three of us never took any salaries. We were very clear that at least we'll have to take the company to a respectable revenue and then start thinking about taking any money out of it in terms of salary or expenses. So for the whole of first year, we never took any money out. We were pumping in money, whatever we were able to pump in. You had to pump in for the card printing also. What were you pumping as?
00:24:32
Speaker
Yes, so initially, yeah, so for the card printing and for the stack that we took as a rented model, we had to open some money to keep the lights on basically. And then for the card printing, we were able to get some amount of credit period and all, and we managed it. And the NBFC was also willing to give 20, 30% in advance also. So that kind of helped. So we were able to, so it was like very, it was a very closely, I would say like we were on a very thin line in terms of crashing and surviving.
00:25:02
Speaker
We were able to pass that phase by efficiently managing the cash flow and that's why the three of us never took salaries because had we taken it would have been very hard. We were all in a high paying job so it was not okay to do that to the company in its first year at least.
00:25:22
Speaker
So by early 2016, having seen the progress and stuff, all the friends of Madhu, Mathu and mine had shown interest that, hey, why don't you actually, you don't need to raise venture funding and all, even though we had VC friends and all that, friends who were angel investors themselves. We had this idea that we can raise a small portion, dilute some equity and raise a friends and family round and all that, because people are willing to, because for our friends, it was more like,
00:25:51
Speaker
their dream coming through us. All of them wanted to start up, but every one of them were stuck in some commitment or the other. It was more like a checker, right? Everybody were stuck in that loop. So they were willing to, not much of money, like 5 lakhs or 10 lakhs at best per individual. And we raised about, I think, some 60 or 70 lakhs in terms of capital through our friends and family.
00:26:14
Speaker
And how many cards had you issued by that time? What was the total gross number of cards issued? Yeah, we had done about at least close to a lack of cards we had done by then. And we had decent enough. Yes, we had decent enough money in the bank to run operations in a loop. So we did not have this cash flow kind of issue and all. Of course, we took few calls. We wanted to make sure, come what may rain or shine, we have to pay salaries on the last working day of every month.
00:26:42
Speaker
we have to pay, number two, like any vendor or any supplier that we use, we will ensure that we meet the payment terms that they had. So these were thumb rules that we took when we agreed upon, when we shook hands. So we said, only after all these things are met, we will take our salaries or any money out. So this was the first principle that we agreed upon. So we wanted to make sure that
00:27:04
Speaker
when even at a time when we grow or when we pivot and try to rebuild that entire thing ourselves and all that we had to have some money in the bank so that we can pay the salaries for the next one year or so. So we wanted to keep that six to eight months of salaries in the bank to be comfortable and make sure that our people don't suffer. So that was the reason why we first of all went and agreed to do a friends and family round.
00:27:26
Speaker
We initially wanted to do only about 50 lakhs and then several very interested friends had to push us to push it slightly upward. It was around 100k at that time. Dollar was around 70. So we did a 100k round and closed it. And what did you use these funds for the card technology?
00:27:44
Speaker
Yeah so this was yeah so what we wanted to do was we wanted to hire a few folks we were who were slightly on the on the expensive side we had to afford their salaries number one. Number two we wanted to build like what we were wary of at that time was that the rented technology that we took
00:28:01
Speaker
started showing its age and its colors true colors we were not able to scale it as and when we like it was not flexible enough. So, we were very clear that we had to build effort also that was when this payments infrastructure piece started you know striking us ok.
Global Expansion and Payment Standardization
00:28:15
Speaker
What we are doing is program management at best we are trying to take whatever is already there in the market put it together in a meaningful manner in a timely fashion make sure that we take care of the heavy lifting and the banks are always used for any regulatory stuff.
00:28:30
Speaker
This was more like an a la carte of products which you are putting it together in the right manner and taking it out. There was nothing innovative about it. And you were doing like assembling basically. Right, effectively. So at that point of time, it struck us that there is no infrastructure. The overall thing that we do can be built over a bunch of APIs or we can actually have a proper layer which does this over and over again. And this was a worldwide problem. So worldwide, if you see, Marketa was one company.
00:29:00
Speaker
which had attained a meaningful scale at that time in the U.S. There was no other equivalent of any such company existing in the world. I'm talking about, again, 2015 or late 2015. If you see other than Marketa, there was no other company which was doing similar business as ours. And Marketa is spelled as what? M-A-R-K-E-T-A.
00:29:22
Speaker
Q-E-T-A. It's a public company now, marketer. Okay. So they were building like an API first kind of an approach too. Yeah. They called their offering as modern card issuing stack. And then we coined this term called payments infrastructure. So we also believed like initially our brand name was called as Yap, Y-A-P. It was paying reverse. We thought that the card
00:29:48
Speaker
product overall itself was in its last stages of kind of evolution, it is probably going to go and everything will become invisible and everything will become push based payment like I will explain what is push based payment. So, the entire card technology piece or the card based payments piece is called as pull payments, why it is called as pull is because
00:30:09
Speaker
actually going to a shop the shopkeeper asked your card or you did the card in this terminal and the terminal actually pulls the money that is there in your account or credit limit to his terminal right basically so that's pool payment whereas when you do a google pay or phone pay based payment like a qr payment it is push based right where you as a customer do not touch any of the merchants infrastructure at all you just scan their qr or enter their credentials like a vpa and then
00:30:37
Speaker
put your own passcode in your own phone or fingerprint or Face ID and then push that money to the merchant. So we thought push payments is going to be the future. It won't be pulled. And that's why we wanted to reverse the trend. So that's why we said pay and reverse the app and we went with a brand name called YAP for the platform. But then we figured out like in 2019, when we set foot overseas, we saw that YAP as a company name was there already in the Middle East. So we thought, okay, we'll have to just take them to be as a brand name.
00:31:05
Speaker
Yeah, so what happened was in 2016 when we said this is payment infrastructure, the reason for that was we had invested heavily and done R&D and tried to make it a push-based kind of model. We built on the M Visa and the QR-based payment model. We were quite ready. So that was then number 2016, number eight 2016 demonetization happened and there was a heavy push for
00:31:32
Speaker
digital payments. Paytm took off back then. They had a huge respect to whatever they had done. They had entered into every store. There was a Paytm QR there. People were able to scan and pay and all that. But there was no standard, single standard. Paytm had their own standard. Mobiki had their own standard. So what we did was we thought there is a huge opportunity to standardize this. Can we make all the QR talk one language? And then luckily, government came up with their own initiative called Bharat QR.
00:32:03
Speaker
Bharatkyar is the single for all payments in India, all QR payments in India, everybody had to follow that standard. It was like a more like a tag length value kind of format, right? Like where you are Amex, this is it, you are UPI, this is it, this is your tag and all that. So it was quite useful. And we were ready in a Jiffy because we had already thought this is going to be the future and we had already built a stack for it. And when Bharatkyar was launched, there were 14 banks which were ready on February.
00:32:35
Speaker
That was when Barakya was launched by RBI in the presence of all the payment schemes like Visa, MasterCard, Rupee and all. And we had 8 of them. 8 banks out of 14 were our customers. We were able to quickly spin it off because we just made it into 3 different APIs. That's all. One for payment, one for status check, one for reversal.
00:32:55
Speaker
That's it. We were able to easily integrate with all these aid banks and make them feel comfortable. And that was ready. And we thought that will actually become big one day. Yes, it did. Not the regular card schemes. The UPAPs alone took off really well. One of the investments that we had made, it still paid off. The UPAPs really took off and where UPAP is today. And it's like the mainstay of digital payments in India.
00:33:21
Speaker
I want to just recap and understand a bit better. So once you raised the funds, then you hired a team to build more of the tech in-house. I assume you built the card stack in-house. And then you wanted to invest in building tech for M Visa, you said. What is M Visa? So Visa had come up with their own standard called M Visa. Mastercard had come up with their own standard called Masterpass QR.
00:33:45
Speaker
and Rupe had Rupe QR, right? And all these things were different streams, right? We had built a capability to, these were documents that were available, so we had to just build to read the QR, understand the QR, understand its language and call an API or Visa or MasterCard and make the payment. So we had done that like a laboratory. We had built a lab and a couple of developers were assigned for it. And we said like, why don't we be that player? Because M Visa was launched as a global product. It is still a global product. Wherever Visa is present,
00:34:14
Speaker
you can enable Mvisa as a capability as an issue. So Mvisa is something you would find at a merchant outlet where you can scan with your phone and pay. Correct. So you build something which would allow
00:34:29
Speaker
a bank or a ATM or any of these companies to just integrate with your product and be able to scan any QR code because you've got the documentation for every type of QR code. So you build something which would scan any QR code and then know what is the location where the money has to be sent. Correct, exactly.
00:34:49
Speaker
It is more like a language. We set the grammar for the language and we were ready. We understood the language and that standard was we in fact standardized more and made sure that it is very easy. People did not really build that QR reading technology again and we just made small SDKs, code snippets for it and gave it to the customers. So we were able to integrate and go live in a matter of two, three weeks. But you said that
00:35:11
Speaker
8 banks launched something which was compatible with Bharat QR. So you're talking of the mobile banking app which had a scanner to read. So that scanner was powered by your SDK. Exactly. What I was trying to say was that a team of probably 10-12 people at that time
00:35:31
Speaker
integrating it with banks. Just imagine one person assigned to one bank also, it's like very hard to achieve. And we were able to do because that's the power of automation and power of technology. If you're able to simplify the technology to its most granular detail, it kind of pays off, it rewards you with attaining scale in a very quick fashion.
00:35:51
Speaker
So we were able to quickly scan. So that was when we moved away from just working with DCB Bank. Of course, we onboarded AS Bank also as a partner by 2016. For the prepaid card product. Prepaid card product. And then we also enabled Equitas Small Finance Bank. They were just born. Equitas was MFI. We had tied up with them for the MFI business. But the moment they were given the banking reasons, the day they were born as a bank, we were there already.
00:36:19
Speaker
So, we had only three banks to do this prepaid capability and all and then with QR code enablement we had suddenly we had over a dozen banks enabled energy fee right by mid 2017 we had over 12 or 13 banks live with us.
00:36:35
Speaker
This QR code business, help me understand that business. So I understand the prepaid card business where you are helping lenders to issue prepaid cards and then you earn pennies on the dollar which is shared between the bank, the lender and you. What is the QR code business there?
00:36:54
Speaker
Yeah, QR code business, again, it's a transactional business where whenever the customer transacts, there is some portion that is collected as fee. The same MDR applies in QR code also.
00:37:06
Speaker
Just that it was going fine for about a year or so and then government intervened and said we want to push digital payments, we want to remove MDR on QR payments. So, we only had a rental or a SaaS kind of model for QR payments beyond that. Like the moment it became free, we said we will just keep it like a SaaS kind of model. You just pay for a subscription fee for enabling that capability. We did not really go with the transaction based revenue and of course,
00:37:32
Speaker
every other player in the industry with UPI, that is a problem. UPI gives you scale, it gives you a lot of data, it gives you a lot of transaction volume. However, revenues with respect to UPI, nobody makes any money. Yeah, it's just like a top of the funnel for companies. So that one year in which you were sharing the MDR with the banks, that was for doing what? For giving them the ability to read a QR code?
00:38:03
Speaker
Yeah, we were doing everything. So effectively what they did was their mobile banking app, when they opened that Scan and Pay option, it just transfers to our territory, right? They just don't do anything. They had to write no code. They just had to read the QR and then our SDK took over.
00:38:23
Speaker
So for them it is to say for example I'll tell you I'll just give you a model change request for a bank right like software companies which used to charge banks on upon every change request. They generally used to contract with the bank using a tender or an RFP process. They sign up using at a loss okay.
00:38:40
Speaker
And then they make money with every change request. Like a small change request like that would have easily built for the bank by the software company for about 25-30 lakhs. What we charged was some 20-30k. So it makes a lot of difference, right?
00:38:53
Speaker
Got it. Essentially, it becomes a no-code solution for a bank. The way any commerce company can have just a payment gateway through a simple integration, a bank can add a QR payment option in its app just through a simple integration.
00:39:11
Speaker
Just that we were naive and we didn't know to name it as no code at that time. Got it. So initially, this was like a revenue share, but once the MDR got eliminated, then you switched it to a fixed fee subscription model. Subscription kind of model. So the QR code, so I'll tell you this, like in our mind map,
00:39:39
Speaker
What we do for core infrastructure was going to be the one which is going to earn our revenue and pay our salaries. But your heart is always tilted towards things that are
00:39:52
Speaker
stuff that you perceive that this will be the future we'll have to keep investing even though there is no return on investment in the near future so QR code payments were one such approach yeah it was a bet and we had to it was a very small bet very low-cost bet the only thing that was record was human effort which we were able to put at that point of time
00:40:11
Speaker
So, we build that to be that leader when it comes, as and when there is a time when it like when QR payments become huge, let us say globally if at all QR payments are taken off really well, we could have easily gone and copied from several countries and done that. But yeah, so it was quite a good learning curve for us like we understood that when there is something that requires a habit change for the customer, it takes at least two to three years of big tech players to invest.
00:40:37
Speaker
make sure that habit change happens because Google pay and phone pay and all these guys pumped in heavy dollars like PTM they did that huge respect to them because they did that and now many people at least in the urban centers if you see most of us don't carry a wallet which has cash we just go with our mobile phone and we complete our day-to-day hypothesis
00:40:58
Speaker
So we understood that it's not easy to just build the technology. Customer change requires a lot of time, a lot of reinvestment, a lot of habit changing exercises that they had to go through.
00:41:11
Speaker
And if they find value, they will do it. Okay. By 2019, what kind of revenue were you at? And was it still funded by that one friends and family round you did? Yes, yes. So what? So I covered till 2017. By 2017, we had already certified on rupee. We requested Visa and Mastercard certification as well. And we got it done over that 2017 period. So 2017 was more like a
00:41:34
Speaker
very pivotal year for us we invested at least for five years into the future at that one year we thought we we built we said to ourselves that we will we'll be at a very handsome kind of revenue by 2022 like back in 2017 we thought we'll be at a 100 core plus revenue if we are able to put in the right ingredients at that time and we started cooking right so we got certified on all the three major networks in India
00:42:01
Speaker
We got certified for prepaid as well as credit card and debit card of course. So, what we did was right after that we built a product called multi currency travel card.
Launching Revenue-Driving Products
00:42:12
Speaker
That was a product you would have traveled abroad, you would have taken prepaid dollar card or multi currency travel card. It was a product that was not at all intervened over the last 2-3 decades.
00:42:24
Speaker
ever since thomas cook and coxson kings of the world had some offering it was just remaining as it is nobody intervened so we thought we had lot of ideas around it now that we have built the card capabilities can we start intervening more into how the experience looks and all that we built an app for it we built capabilities like you go abroad right when I myself and Madhu visited Barcelona in 2018
00:42:47
Speaker
There was absolutely no idea where to locate an ATM, where to locate a restaurant, and all these things. Even though Google Maps were there, the meaningful data where there are ATMs which does not have a surcharge. If you go and withdraw using a HDFC card in an ATM in Europe, there is something called a surcharge that is applied, like a convenience fee that is applied in Europe. Things that are not heard of in India. Right here, we have three transactions free. Over there, there is nothing free. So all these information are available in a Visa API stack.
00:43:16
Speaker
which we can actually build and make it into an app. So we built that. In 2018, we built that right after we had all the networks in place, network technologies in place, we started building capabilities. Like we initially began with multi-conceit travel card as a core product. And then we enabled that for several companies like Cox and King's, for his bank, for several customers got onboarded in that.
00:43:40
Speaker
and then that took off really well that took off and went as one of our big revenue drivers at least 20-25% of our revenues were using the multi currency travel card from late 2018 till
00:43:52
Speaker
early 2020 when COVID happened and the entire travel industry came to a standstill. But the currency travel card must be a lot more profitable because people load like dollars or euros or like much higher like that MDR earning would be much higher therefore. That's true, that's true. Yes, that was one of the reasons why we wanted to invest there because it was like an incremental innovation over and above what we had already built.
00:44:19
Speaker
We had built a multi-wallet capability card here, which you can have a general wallet, fuel wallet, food wallet, and all that we had to do was each wallet had to be in a different currency. So we had to make incremental changes to what we had already built. We didn't need to have to reinvent the entire thing. So it was, I would say, like an automatic choice for any engineering team to take it as the next iteration.
00:44:42
Speaker
So, we did that. Right after we did that, the same problem was... And the revenue model was the same that is shared between all three parties. Absolutely. And in multi-concentral, there are many other revenue streams as well. You as a customer... Currency exchange rate. Right. The currency exchange rate, there is like a spread there, and then there's something called as markup that banks apply. And then there is this cross-currency charges. When you load your card with dollars and spend in the RAM, let's say,
00:45:12
Speaker
from INR you load to dollar and then when you spend in DRAM of course, there is a two two levels of conversion that happens in every level you get to earn. So, multi currency was definitely if you make it right, if you price it, it is definitely going to give you good amount of returns in the longer run that was very clear.
00:45:30
Speaker
And that's the reason we invested in that. And we were still bootstrapped. We hadn't raised any funding other than the small friends and family round. Friends and family. This is something that I'm talking about in 2018. I have some more questions on the multi-currency card. So in this multi-currency card, who does the exchanging of currency, the bank does it, the issuing bank?
00:45:51
Speaker
Yes, the issuing banks do that. There is a function called treasury in every bank, which actually do the trade. They sit at the forex desk and do the actual trading. Every card at the rule, the bank has to take a position there. They have to.
00:46:07
Speaker
whether they have to buy dollars or buy dirhams or buy euros, they have to take a position there. And we built workflows for all that. So that was again a huge learning curve, how treasury works, because these are things that are core to every bank. This is not known by outsiders at all. Even for the people who are called as insiders in the fintech industry, even for them it will be like a huge learning curve.
00:46:31
Speaker
We had to go sit with a bank, sit with an operation guy who actually takes positions in a Forex desk or a terrestrial desk. It is completely different. I had not experienced that ever before. Madhu had that experience because prior to Visa, he used to work with Thomas Cook for a few years. In Thomas Cook, he was the one who launched the Forex card product of Thomas Cook. So he had that idea.
00:46:53
Speaker
So, we had built using his like he even though he runs the business end of the company he is a very good product guy in our company most of the requirements come from him he will at least give it as like a very top level requirement and then we will have to go back and research and you know find out more yeah. And which were the issuing banks for this whom all did you tie up with the same set of banks?
00:47:16
Speaker
Yeah, so S-Bank was major. S-Bank was one of the biggest. Bank of Parada was next. That I'll talk about. That was in 2019, we enabled Bank of Parada. DCP, of course, we had. And then I think, yeah, those were the three major banks that we went ahead with.
00:47:33
Speaker
Yeah, then from that 2018 you launched multi-currency. And then we thought the same problem is there with the credit card industry as well. Credit cards were boring. The only thing that happened to credit cards was with the advent of Flipkart and Amazon, you started seeing more cashbacks.
00:47:51
Speaker
You really did not have any sort of product intervention in credit cards at least for the last 15-20 years. Ever since Citibank came, Standard Chatter came and started giving cards. We never saw any intervention but we thought there were so many lending fintechs who wanted to launch credit cards but it was prohibitively expensive.
00:48:09
Speaker
There are few companies which offer the credit card stack like Fiserv First Data who has a product called Vision Plus. It is quite expensive. It's a very good product. Very, I would say, it's a huge enterprise level product used by the SBIs and HDFCs of the world.
00:48:26
Speaker
It comes at a price, right? And not all capabilities or all that scale is required by smaller banks. Let's take a bank like city union bank in Chennai or a equitas bank in Chennai or a south Indian bank in Kerala. All these banks are of a book size of anywhere between 3 to 10,000 crores. For them, this was huge investment like this. I'm talking about investments like a million dollars every year.
00:48:52
Speaker
It's not easy for them to run a software stack at that bare minimum cost. So we thought we can again, anything and everything that we do, we are very clear about not having a lot of CAPEX discussions. Because the moment you get into a CAPEX kind of discussion, the bank would talk about ROI and all these things. So we always take an iterative approach. We tell the bank that you can take it in an OPEX model.
00:49:16
Speaker
Pay as you go. If it succeeds, all of us succeed, and all of us get to share the profits. If it doesn't, it's fine. We invested, we learned, and we'll move on. So that's the approach that we took, and that kind of work. That's when SBM Bank India happened. This was early 2019 when SBM Bank, SBM stands for State Bank of Mauritius. They have a wholly owned India subsidiary, which is given with a full bank license, a full federal and commercial bank license.
00:49:43
Speaker
So, SBM Bank India happened and that's when we partnered with them, a bunch of very talented guys joined there, some ex-colleagues of Madhu and Muthu as well. So, we partnered and gave all our capabilities there. We thought we will build an entire banking stack, like banking stack in a sense, except the core banking solution. Let's build everything, whatever capabilities that a FinTech would normally want. Can we build a Solaris bank or can we build a digital only bank for the masses, right, for the FinTechs?
00:50:11
Speaker
So, that was the kind of journey that we took up with the SBM bank. I think two or two and a half years later, I think we have achieved a decent amount of traction there with the vision that we set out to do together back in 2019. So, what we started building was we thought we will build a credit card stack, full-blown credit card stack, a full-blown
00:50:30
Speaker
you know debit card stack, a full loan, neo banking stack. All these were three major product lines that we set out to do. This was early like late 2018, early 2019. We started building and these three were run as three different product units within the company. We had from an architect to a fresher, we had a full set of people. I would say we were about 40, 45 odd people at that time as a company.
00:50:54
Speaker
At least 20 of them were engineers and between those engineers, some five or six were supporting the earlier customers and integrations and stuff. The remaining people were deployed in building all these three stacks. So the 2019 was the year of we building a credit card stack and a new banking stack.
00:51:10
Speaker
2018 was the year of rebuilding the Forex stack. And then 2020 was the year of actually scaling all these things. Like all these were ingredients that we put into cooking the overall stuff. And then this started really coming up or started scaling in 2020, early 2020.
00:51:31
Speaker
All these things, all these products were launched by at least one big FinTech. Like the Forex card was launched by Wall Street Forex, Bookmei Forex. All these are FinTechs who want to do something big in the multi-currency industry. The Neobanking stack was launched by Finin, which recently got acquired by Bankopen. That was the only Neobanking app where you can do a fully blown digital onboarding and all.
00:51:55
Speaker
And then the credit cards were adopted by several plays like Paisa Bazaar, Carbon, Kodo, Ncash, several corporate and consumer credit card companies. All of them use our stack. And the model that we took was that each and every one of these companies had their own USB.
00:52:12
Speaker
They had their own method towards the user experience and stuff. So what we did was, instead of we saying, hey, these are my bunch of APIs, you'll have to use it, whether you like it or not. That was not the approach that we took. What we did was we understood that we cannot innovate everything. There are innovators. Why don't we partner with them, co-create products with them? So we also are part of the innovation journey. So that was the approach that we took. So we said to ourselves that one day we will become like a play store or an app store for FinTechs.
00:52:41
Speaker
give them what they want and on the other side we become an operating system of sorts for banks right and then over a period of time when all of these things come you know good over a period of time we can become more like a global super network of sorts right that that vision was quite visible in late 2019.
00:52:59
Speaker
And that's when we started this process of why don't we raise funds and expand globally? Because for India we were self-sufficient, we were able to pay our salaries, we were able to keep churning out products and platform capabilities. Why don't we take it globally? What kind of revenue were you doing by 2019?
00:53:18
Speaker
I that was sub million dollars about five to seven crores was the rough amount of revenue that we were making. It was flat for two years because we were building. So between 2017 and 19, the revenue was stuck between four to seven crores. It did not really multiply. But 2020 onwards, it just started that the hockey stick growth was seen. 2020 Jan onwards. Of course, in between March, April and May, we had a dip. There was there were two reasons for it.
00:53:47
Speaker
Yeah, two reasons for it. March, ES Bank went into moratorium. Several of our heavy programs were tied up with ES Bank. So the settlement was stopped. The bank was asked to shut its business. And one month of that moratorium affected our revenues for a while.
Adapting to Market Challenges and Opportunities
00:54:03
Speaker
But luckily, we were funded by them. We raised our seed funding. Our series A was done by them. So we did not struggle for cash, but revenue definitely took a beating.
00:54:11
Speaker
And right after that, we had the lockdown. I still vividly remember the dates, right? March 23rd, the government of India announced that India is going to enter into a lockdown. And 25th, the moratorium on his bank was released. It was like one was done, one lock was out, and the other lock is in. And then all of April and May, we were all struggling. So that one three month or four month period was the only blip in our overall journey.
00:54:37
Speaker
MDR based earnings should have been unaffected because everyone would be transacting and digital transaction card payment would have gone up.
00:54:46
Speaker
Yeah, so during the lockdown, the travel was completely stopped. So, the travel card was 25-30% of revenue. Right, right, right. Only online commerce was picking up. So, the spread between physical ATM and online, the online channel started really taking off. That we were able to see. Of course, the travel related spend started really... Yeah, that must have crashed.
00:55:11
Speaker
I want to ask questions here before we move ahead. The credit card stack that you built, did you build it the way you built the prepaid stack and the forex stack where you imagined third parties to use it? Or did you also build for a bank to issue credit cards to their own customers? I think
00:55:32
Speaker
Prepaid was the only thing that we took out any kind of rent product. Right after that, we said... My third party... Prepaid was built for third parties to issue prepaid cards using this. Like a NBFC can issue prepaid card of a bank using this. So the credit card product was built with the same thought.
00:55:52
Speaker
An external like a fintech company can issue credit cards using this and collaborating with the bank? Or was it built so that the bank can issue cards to their own customers? Yes, there were two use cases for credit cards. One was for the smaller banks. We definitely can't go and really crack bigger banks at that point of time.
00:56:10
Speaker
being a small company with a new product, they wouldn't want to risk their business because critical is like a mainstay business for many of the banks like HDFC have built an empire with critical trade. So definitely we were consciously staying away from bigger banks like I say HDFC we did not even go and pitch even one product to them at that point of time.
00:56:27
Speaker
We wanted the credit card product to be with a two-pronged approach. One is the partnership approach like the likes of Carbon, Kodo and all these companies where there is a corporate card offering that they want. We will give them the credit card suit. That was one angle. The second angle was can we have smaller banks that play the fintech role themselves if at all they have the appetite to issue credit cards.
00:56:48
Speaker
smaller bank become a slice is a question that we ask for ourselves. We are not going to lose any money on that. We just have to do the sales cycle and many banks are actually seen to be quite interested in doing that. They want to build a credit book because see one thing is for sure like when there is a bank which partners with fintechs
00:57:08
Speaker
What sticks to the customer's mind is not the bank's brand. The Swiggy customer using a Swiggy money wallet sticks to Swiggy. They don't know that it's powered by ICICI. ICICI had to create their own brand awareness elsewhere like a pocket or an iMobile or something else.
00:57:23
Speaker
So every bank would definitely, whoever are brand conscious, definitely want to venture into something that is FinTech friendly or the customer friendly, gives a better user experience and all that. So when we built it, we made sure that we white label it and make sure we can adapt it for every bank's needs. So it was a two-pronged attack.
00:57:40
Speaker
But would you also enable banks to do regular credit card business? Like you were mentioning very small banks who are like 3000 crore size. So those kind of banks could do their traditional credit card through this. That was part of the product was built like that.
00:57:56
Speaker
Correct. In fact, we have in fact closed down on several banks like that. I'm not naming the banks because of non-disclosure reasons. But yeah, several banks have signed up like at least half a dozen banks have signed up and they're going to launch. Some of them have launched in a closed loop kind of manner for their own employees. So it's really chugging along very well. It is because they don't incur capex, as I told you, a bigger platform in like they'll have to incur a lot of capex and not more and many banks
00:58:24
Speaker
Yeah, they cannot show that ROI for such a huge spend. So we have made it into a plug and play pay as you go model as they issue more cards they have wages payers. So that is really it's a model that we have found as working. Okay.
00:58:39
Speaker
Okay, and the bank does not even need to do any of those online integration, like for people to see what is their due amount for people to pay the bill. And even the bank can offer them an app, which is essentially your white labeled app. So everything which a bank needs to do to issue a credit card is just like a plug and play pay as you go available to them on tap.
00:59:04
Speaker
That's right. So we call it as three different capabilities. One is the admin or the management center, which is done by the bank's product team or the business team, which actually runs the P&L for the bank. That is one module. The second module is the support center, which is like the call center or the contact center that the bank has or the branches that they have.
00:59:24
Speaker
who, where you as a customer, if you go and say, hey, I have lost my card, why don't you block it? You can immediately do that quick service. And then the third is the self-care option for the customers, which will be an app or a mobile or a web page, which again is a self-care portal where you as a customer can go and see your transaction, download statements and all that. So we offer these three plus the bunch of APAs for partner integrations as one box.
00:59:48
Speaker
Got it. And the revenue for you is those two streams, one issuance at the time of issuance, some fixed amount and a MDR share. So we have taken a lot of inspiration from SaaS on this, right? Like you have a one-time fee.
01:00:06
Speaker
and recurring revenue which makes it much more easier for you to predict how the future is going to be at least for the near future like one year from here you will be able to understand what will be your rough numbers with so many customers onboarded. What about the underwriting for like the risk assessment for issuing credit card do you give a product for that also that is banks internal process?
01:00:28
Speaker
We do give a product for that, so we do have that entire layer of contacting the bureau, getting the data. The customer only keys in his mobile number or pan number and the remaining is done by our system where you get the data, present it in a meaningful manner to the bank.
01:00:46
Speaker
There is a workflow for it. That's the admin module that I mentioned about. The admin gets to see the options. What are the key things that the bank wants to decide? Like his credit score or his repayment. How many defaults has he done over the last three years? There are several conditioning factors that are there. We also have our own risk scoring methodology. But the bank need not rely on that. We can always say, these are the truths about the customer you can decide. And then they approve or decline. And then they set the credit limit for the customer.
01:01:15
Speaker
it's just one workflow where they just have to do this. And the bank would also have a savings account for that customer so they would be able to look at that data in addition to the bureau data and then make the decision. So what this has enabled is wherever they have salary accounts kind of relationships they automatically spin off a credit card because they know that this much amount of salary is going to come to the customer. So there's a lot of product cross selling and cross pollination that is possible when you go and you know
01:01:43
Speaker
have a bank work like a fintech it has a lot of rewards and we also what we have done is we've also told the bank that there is even though we don't use huge industry targets like AML and all these things we don't go and bombard them with all these charges just tell them hey the decisioning system is going to get better over a period of time if this spread of customers where the credit score is between 750 to 800 the salary is about 30,000 to 60,000
01:02:10
Speaker
and these are the factors, you can automate it. It is your option, right? We give them the AAML capabilities without telling them that this is like these jargons. We make it idiot-proof and tell them that was if these are the formulae that you are applying for every adjudication, we can automate it for you. So you don't have to waste your warm bodies in going and clicking that approve button. So that is also a capability that we have for you.
01:02:32
Speaker
Okay. Amazing. Okay. And what about collections and stuff like that? Do you give them some tool for that? Like that is the toughest part of the lending business is lending is all over. Yeah. Madhu keeps telling this lending is all about collections lending. Anybody can do.
01:02:49
Speaker
Collecting is where the art is. So, collections, we did catch up with several bright minds around collections. We, in fact, zeroed in on one such person who is a mathematician. You would have seen an announcement of ours over the last one year. We had acquired a company called Orega.ai.
01:03:06
Speaker
who are specifically into collections. We first thought we will tie up with somebody and give that combined stack as a single stack because we didn't have a lot of experienced people in our product team who had done that collections and collections risk and all these things. So we thought we will go and
01:03:23
Speaker
take expert advice and see if we can do a co-creation of a product with some other company. And then this overall approach worked. Orega.ai was looking for an external or a strategic partner and then the deal happened and we were able to kind of acquire them. So we did a joint exercise and we are now offering that as a joint suit. So wherever we offer credit card or any lending product like a BNPL or any lending product. We also offer the collections platform of Orega along with it.
01:03:52
Speaker
What does a collections platform look like? What is a collections tool? Of course, there are multiple options. One is to collect money digitally. You have this virtual account or you pay using a credit or any other payment model. It is collected and apportioned to the correct card. And whenever there is a collection that happens, how do you knock off the balance? If there is interest charge, if it's a customer who revolts, how do you knock off? Which transaction you knock off? So that entire piece is built by us.
01:04:20
Speaker
The Auriga piece gives us that adapters to collect money and push it to the right card and make sure that the payment is reflected. And then Auriga specifically gives capabilities for all types of collections right. The bank will on one side they will have digital channel to collect online. There is second part which is like the build desk or a cred which is the partner channel.
01:04:41
Speaker
Third is the fleet on street, right? So you have collection agents or agencies which are, you know, tasked to go and collect money, which will be like they collect in cash or they collect in check or whatever, and then that clearance and everything has to be managed and then it has to be accounted for. So this entire piece of three different models are built by Auriga. And that is something that we offer today. And this is a India focus product.
01:05:08
Speaker
No, this is a global problem. Collections is a global problem. In India, it's more so because we still don't, like I think most of the people who have access to credit still don't understand that their bad behavior with respect to payments or on-time payments is going to affect them for a very long period in terms of their credit score and all that. So it's more to do with awareness, right? Whereas in the US, credit builder products and credit scoring and everything is like very sort of 16 year olds and 20 year olds understand that very well.
01:05:35
Speaker
Whereas here it's still, but what we see is collections as a product. The digital channels at least is applicable in every market. We have seen good acceptance for that in the UAE, in the GCC region, and even in the Southeast Asian markets, wherever we are doing research now.
Creating Customizable FinTech Solutions
01:05:53
Speaker
Okay. Okay. Okay. Got it. Okay. I've understood all the three major products now. No, I've understood Forex, credit card, prepaid. What about the Neobanking stack?
01:06:03
Speaker
Yeah, so Neobanking is something, okay, so how we approach Neobanking was that, what banks had to offer was more like a tailor, it was not like a tailor-made product for a specific class of people, right? What Finin wanted to do, what Slice wants to do, what Uni wants to do, all these are players who want to, who approach Neobanking in a different manner altogether.
01:06:24
Speaker
What Jupiter is doing is a very different model. So, each of these Neobanks want to do a solution or build a solution or build a platform or build a experience for their target segment. Slide is very clear that they want to build for young adults, right? 20 to 25 is the age group that they are going after. Uni is for the people who kind of purchase and make it like the one-third of an
01:06:47
Speaker
make it divide by 3, right? Pay in 3 tokens, right? One card is for the elite group where they have established credit cards already in their pocket and they want to make one card as the primary brand or primary card that they use and all that, right? They offer a very premium metal card and all that. So every or every FinTech has a different target group that they are going after. There are also farmer near banks that are getting built today.
01:07:15
Speaker
specifically attracting farmers, telling them what are the interest rates and all these things. So, very different use cases. So, what banks cannot do is when it comes to near banking, of course, all our Indian banks, if you see, they have a very good presence in terms of mobile banking, in terms of UPI, in terms of internet banking, almost every bank offers that free of cost.
01:07:36
Speaker
So, it is not the regular capabilities, regular suspects that the near banking startups want to solve. It is a different proposition altogether which we understood. It is a matter of giving more value for every money that is transacted using the near bank is what we need to give.
01:07:55
Speaker
It was a natural choice for us to build that near banking as a capability. So what we did was with the SBM bank as to begin with, we build an entire capability around opening an account with a fully digital kind of onboarding channel and attaching other products like a credit card or a BNPL line or a credit line or an NBFC script line.
01:08:14
Speaker
So we were able to give not just an air banking platform, we were able to give a lot of bells and whistles as well. We're adding loyalty rewards to that section. We're adding, in some point of time, we'll be adding an insurance or a gold savings or an investment kind of an option. So these are things that will add to the overall experience for a user. So you don't go to Jupiter for doing one thing and then go to India Gold or Safe Gold for doing another thing. If everything is offered in one app,
01:08:42
Speaker
you kind of use it like a super app that's where your banking is going towards and that's where we are building towards as well.
01:08:49
Speaker
Okay. Like for you to build Neobanking, a lot of your existing stack is already done. Like one part of Neobanking is credit card, for example, or debit card. So both debit and credit card, you've already built technology for it. The other stuff that you have to build is like account opening, that transactions of your account, like KYC, the money transferring, bill payments, and then reward points and okay.
01:09:21
Speaker
Those were the incremental things that we had to do in late 2019, early 2020. Those were the incremental capabilities that we had to build to enable Neobanking in a meaningful manner. And Finin as an app had all that. And then we also had to enable UPI so that the transactions are seamless and all that, which we did. For a person, for a founder who's considering starting a FinTech, then essentially say Kodo or Finin, these would
01:09:50
Speaker
not really need to have a CTO in place as such. They would rather need to have a design team in place to figure out the customer experience and things like that. But the tech can just be a plug and play from M2P.
01:10:04
Speaker
Yeah, so if it is a fintech startup that works really well, if it is a startup that is entering into a swiggy, right? Say for example, swiggy foot tech or Insta delivery is their main offering, then they definitely need a CTO to take care of their core business. They don't need a payments expert because we are there.
01:10:22
Speaker
So that's how, so on the fintech startup side, we can be that all encompassing kind of player, which saves them a lot of dollars in terms of not reinventing things that are already done by us. So that's it. And for companies, so that's what we believe, right? Like our thesis is that we think every company across the globe can become a fintech. What is Swiggy's fintech player here, a wallet, like a prepaid wallet, you load the wallet and not just a prepaid wallet.
01:10:50
Speaker
Yeah, not just a prepaid order, there are several things that are, you know, coming up, there'll be a BNPL offering, there'll be like, you can actually, you can make that entire piece of ordering food like in a one click kind of model, you don't have to even enter any credentials, no fingerprint, nothing. You can power several things, right? Not just the current use cases. Let's say, there is this option of using Swiggy Genie for something.
01:11:15
Speaker
you can pay for something from here like today it is like a cash and carry you can pay it's not that it's not being paid there is a cash and carry that you don't do as a customer but the agent who goes to the store is actually paying cash let's say you ask a swiggy genie to go and collect a shirt from a tailor okay swiggy genie is like a dunzo kind of a service exactly on demand rider
01:11:37
Speaker
Exactly. They run on a cash and carry kind of model. They go to the local agent and get their money and then go pay the money to the tailor and then come and collect it. You might have probably done digital payment but the actual that in the entire ecosystem it's not fully
01:11:54
Speaker
digitised. So we are also digitising on the other side. We are working with SIGI and such companies on the other side to see how we can digitise their entire journey. So the delivery executives can be issued a card that they can use to pay, like an expense card, basically, what Happy had launched. I think Happy got acquired recently, but yeah, something like that.
01:12:14
Speaker
exactly very similar there are several use cases so that's what so when we go take a specific business any kind of commerce happens there will be payments yeah and we think there is an angle of in tech that can you know intervene into the payments and make it much better
01:12:30
Speaker
Uber could issue a card to the drivers to use for petrol payments through which they could earn some points and like that or they could help them to finance the purchase of a vehicle. So all these fintech kind of opportunities, you would be able to directly hook them up with a bank to enable this.
01:12:51
Speaker
Exactly. In fact, we work with Ola. Ola is one of the big tech players. We work with them. We power two different products for them. One is on this Ola money side, the post paid offering, the BNP offering that they have. That's one. The regular Ola money wallet you can attach a card. That's another. And then the third driver module is something that we have been doing as a proof of concept for them.
01:13:10
Speaker
They have tried it out in Bangalore and few other cities. It is yet to take full shape. But yeah, they see that as a big problem because no Ola driver is ready to accept the money as a mode of payment. They call you and ask you like, where to go?
01:13:27
Speaker
And then cash. So we want to solve the problem. We are working with them closely. So they'll issue a card to the driver. And as soon as the trip is completed, the money goes into the card for the driver. So that way, driver payout is instantaneous, something like that. Exactly. You nailed it. And what about this credit card linking to the, what do you do with that?
01:13:53
Speaker
Yeah, so there is a post-paid kind of offering that Ola has. There is a card attached to it. Like Ola Money themselves have a PPI license. They are a prepaid issuer. They acquired a company called ZipCash back in 2016 or 17. So that, the card that we offer, it's a Mastercard card which we offer, which dips into the same wallet. So we give that entire layer around card issuing.
01:14:16
Speaker
and enable that interoperability for them. So you don't have to necessarily use Ola money only to pay to Ola drivers, that you can pay elsewhere, you can use it like a regular store of value.
Venturing into Global Markets and Securing Funding
01:14:28
Speaker
You were talking about like a series A in about 2019, wasn't it? Like after that initial friends and family round, what next did you do in terms of fundraise?
01:14:39
Speaker
So we didn't do anything. We did not do anything around funding at all. Even though Madhu was connected to several investors, not many understood our business. So we tried reaching out to large investors in late 2019 to check, do a dipstick check of how and how much money can we raise and all that. We knew that we had put together a plan. We traveled to Dubai. We traveled to Abu Dhabi, understand the market. We thought,
01:15:07
Speaker
there is huge play when it comes to this push payments model is also applicable for remittance right if you want to send money from India to the world or from anywhere to India there is it's a push payment you are trying to push money to somebody else's account there. So, we thought like we can also participate in remittance, but remittance was already like a commoditized business. So, we thought like we could do something different there and we like we figured out that there are
01:15:31
Speaker
zeroed in on few use cases which we wanted a kind of power and then we found out that earning in INR and spending in DRAMs or dollars doesn't work.
01:15:41
Speaker
The math will never work. If at all you want to go step into any new market, you will have to probably raise funds or find a local partner who can actually infuse the capital so that you can go in the initial bit of time to research and ensure the product goes live. So, that is when we thought we should set offices probably in Singapore and Dubai and understand the market and go big, right? Land there first and then expand, start expanding.
01:16:10
Speaker
So we reached out to several large investors. In fact, there was a lot of input interest. We started honoring it, took it very seriously, did those exercises. Two, three months passed and then we figured out that
01:16:22
Speaker
straight away going into a big VC and raising funding is going to eat at least six to eight months of our time. So we thought like we'll just first go talk to some experts like ex-entrepreneurs or people like super angels who have already exited a profitable business and all. Understand how to do this and all. We met Amresh Rao, who's an ex-CEO of Citrus, Pine Labs, A.U., current CEO of Pine Labs. We met him in Singapore. Madhu and Muthu met him in Singapore.
01:16:51
Speaker
He was immediately hooked on to the idea. He said, how much ever money you want, you'll have to first start small, and then you can always have several rounds of funding raised over a period of time. We took his advice very seriously. We, in fact, wanted him on board. We requested him to come as an advisor. He was really very helpful, very kind of him to have done that. And he also put in some money. So we raised about one, one and a half million dollars, about 10 crores of money we raised in effect 2020. That was the first.
01:17:20
Speaker
a funding round which was like a seed round which we raised outside of our friends and family. And even by the time we executed and got the money in the bank we had already signed up with BNEXT for a series A. They said we are ready to let you complete your funding round because BNEXT had invested in Amrish, Amrish's earlier venture citrus payments which got acquired by BU and there was a lot of that was a time when
01:17:47
Speaker
Visa wanted acquired played in the US and there was a lot of talk around payments infrastructure being an integral component to build a scalable business. So, when people started looking around for companies which are similar, there were very few across the world. Even today, even though there are several startups which want to do it, companies which have attained certain amount of scale, decent scale to say they have built meaningful infrastructure are very few. I would say in a continent, there are only two or three.
01:18:17
Speaker
like all of Europe there are few companies like Revolut and Monzo and there are very few companies which have actually built infra and the friend facing apps. We did that by April 2020 we had a series A also done and we had the dry powder to start executing. We set up our first international office in
01:18:39
Speaker
Series A was $5 million, $4.5 million to be precise. We had about $5.5 million in the bank. We initially wanted to first set foot in Abu Dhabi. We went to Abu Dhabi Global Market, which is like a reg lab, the government's offshore model, where you as a foreign company can go and set up a subsidiary there and all that.
01:18:59
Speaker
We did that. We had our first team come on board like Vanati who leads our MENA business, that entire region business. She joined us along with a team of four or five people. This was August 2020. And then yeah, really the UAE business or the idea of setting up base in Dubai or Abu Dhabi was to keep that as the regional base. We wanted to cover several countries in that region.
01:19:25
Speaker
We in fact have signed up with at least four or five different markets in that region already. We have live implementations going on. But the team sits out of Dubai. Majority of, we have a 25-30 member team there, sitting out of Dubai and Abu Dhabi, taking care of the entire region.
01:19:44
Speaker
So you've tied up with banks there? Is it the same place? Have a bank partner and then allow other companies to offer like Prepaid, Forex, Credit Card, all of these through that bank partner.
01:19:57
Speaker
Yes, absolutely. We tied up with one of the largest banks there, FAB, first Abu Dhabi bank and also another bank called Emirates NBD. These are the two larger banks like ICS and HDFC in India. So they would probably be among the top 50 banks across the world in terms of asset size.
01:20:15
Speaker
Yeah, so that gives us access to not just UAE, also ancillary markets like Bahrain, Saudi, Qatar, and all the entire pan GCC region we have access to. And we have also set foot in Egypt this year. We have also enabled Qatar, Bahrain. And what kind of intakes are you tying up? What kind of products are going live?
01:20:40
Speaker
I think all kinds. I would say UAE or the GCC region in terms of fintech activity is very similar to how it was in 2015 in India. Similar journey is being seen there. Companies are trying out with banks, they are trying to launch co-branded products, prepaid, like valid for specific use cases, BNPL for use cases like Flipkart, and there is a Flipkart equivalent in UAE, it's called known. They are trying out very similar products like how Flipkart or Ballet and products of Amazon.
01:21:10
Speaker
So, we see that that market GCC market is probably 3 or 4 years behind India when it comes to fintech action but they are just catching up. I would say the next 5-6 years they will probably catch up and you know be on par with what is happening here.
01:21:26
Speaker
And there are also like there is a different type of methodology there. It is not like RBI. The Central Bank of UAE also offers like e-money licenses which for private entities which operate in a slightly different manner. They are not allowed to do certain components of banking but they are able to do lending or you know financing and all the other stuff. So it is slightly different.
01:21:49
Speaker
And of course, when you set foot to a land where Islam is the prime religion, you will also have to fine tune your product according to Islamic banking and there is the Sharia law has certain portions where you are not supposed to do certain things like interest related stuff. There are minor tweaks that we are supposed to do for the product or the way the fees and everything are applied, which we have done, the last one we have done.
01:22:14
Speaker
So, yeah, slight differences are there, but we see that there are a lot of, I would say parallel lines that you can draw with India. This Sharia law says earning interest is haram, right? So, I thought banking works on interest and how do banks, or is it just relabeled, like the label changes? Yes, some are relabeled.
01:22:35
Speaker
Yeah, not many people open savings account, they are okay with current account like where it doesn't earn interest. Banks do not charge interest, they instead charge a fee or you know some other line item like convenience fees or service fees.
01:22:52
Speaker
And it's a learning rate like for us to charge just two line items in terms of commercial contracts. Over there when you get in to see somebody else's commercial contract, it's like 12 or 15 different line items. It gets somewhat jittery for us. So we still stick to our model of keeping it very simple. That has worked for us for a very long period in India. I think that will work everywhere.
01:23:17
Speaker
build it in a frugal manner, price it properly, you can export to anywhere. If it works in India, it definitely has legs to work anywhere. So that's the approach that we have taken. We are sticking to the same formula of keeping the commercials and the line items simple. So banks, yeah, they keep doing what they keep doing. But we are saying we will not price it in this model. We will go with a model which is like pay as you go and make sure that the business doesn't suffer.
01:23:45
Speaker
Because it's very expensive there. Let me be very honest.
Supporting FinTech Innovators and Expanding Revenue Streams
01:23:48
Speaker
If you want anything and everything that you take, it's at least 3x of the cost of what you pay in India. If you want a tech resource locally there, you pay at least 3 to 4x.
01:23:57
Speaker
on an office page it's 3x. So you'll have to make sure that the business that launches along with you does not suffer in paying you also. You should not be seen as a cost center there. So we are working on that. So far we've been able to make sure several fintech companies have launched and they're able to run their business comfortably. So do you do a BNPL product or do you enable fintechs to offer BNPL?
01:24:28
Speaker
Yeah, yeah, we do. So that happened since late 2020. We have also started building for BMPL. BMPL, of course, it's like a chicken and egg problem. You have more lenders, you get more merchants. You have more merchants, lenders will be interested. So you'll have to get a balance. And I think we are in a good position to do justice to both sides because we, on one side,
01:24:49
Speaker
We work with a lot of NVFCs. We can quickly enable another spin-off, another product for them and give them a meaningful spread of merchants which would like to use a VNPL offering in their checkout experience. So, we have been able to hit a good amount of traction. In fact, we have
01:25:05
Speaker
large banks like this was like a eye opener for us. Several large banks would want to enter into BNPL space for getting their target customer, right? Because BNPL is like a very low cost customer acquisition strategy. You offer a 2000 rupee, 3000 rupee loan for a guy to buy probably a mobile phone or a headset or something and then see his repayment behavior and then start betting bigger ticket sizes on him.
01:25:33
Speaker
It's a very cool customer acquisition strategy for large banks. So, what we found out was on one side fintechs like LazyPay and all these guys want to offer BNPL and they have really done enough innovation to make sure that product is seamless and all that. And on the other side, banks want to use this as a tool for customer acquisition.
01:25:56
Speaker
So it's going on very well and BnPail is getting a lot of traction. You would have seen it's one of the hottest investment areas in the last one, one and a half years. So like your BnPail product would be like a direct competitor to a simple or a lazy pay. That's what you're building. Or you're building something which simple and lazy pay will use at their back end.
01:26:17
Speaker
Yeah, so we work with them with lazy payer offering is to enable a card on top of whatever they have to offer. They don't have to build or we don't have to build the BNP layer for them. They already have that they have established. So we offer like other like cross pollinating other product lines along with their BNP layer is something that we are doing with them.
01:26:35
Speaker
Whereas for people who want to launch the BNPL experience, forget about Amazon and Flipkart, right? Online commerce is still big. Beyond these two biggies, it is still a huge market and every small merchant website will not be able to offer BNPL as an offering.
01:26:51
Speaker
And similarly, take Razorpay or Cashfree or Payyou, these three big payment gateway companies. They are able to offer BNPL by partnering with banks and all that. They are just offering or doing a payment gateway service of whatever the banks have to offer. But there are so many other smaller payment gateway companies, payment aggregators, who want to enable BNPL as an option, EMA payment as an option. So we are able to find these white spaces and go and cater to all these. So that's what we've been doing with our BNPL product.
01:27:21
Speaker
Okay, so you're not building a BNPL which will directly compete with these BNPL startups, but you're building the pipes, enable other companies to come into this space, say a cash free, which is like a payment gateway solution, they could start offering BNPL through your product or things like that.
01:27:41
Speaker
Yeah, actually, I think that is what is our strength, right? We do not want to compete with anybody. We want to go along with them, see. So our thesis is to go and empower innovators. Like we are very clear, very honest to ourselves that we cannot innovate everything. There are people who are innovating, how can you go help them if there are things that out of the journey, if there are few areas that you have already solved for, if you're able to help them and take the product to the market, because market is the only validator, right?
01:28:10
Speaker
that is the only validation unless you take things to the market you do not know all other things like whatever research you do is all paperwork. So, how do we take it to market test it out and be iterative and make it better is the only thing that we are going after. So, we are very clear that we will not go enter into a lot of B2C play, we will make sure that we sit behind as the invisible layer to empower other innovators that is what we have been
01:28:35
Speaker
successful so far. That's why we've been successful so far. And I think for a good amount of the time to come, we'll continue doing that. Okay. So you also raised the round with Tiger Global, right? Like after your Series A, what was next? So Omidyar was next. Series B, Omidyar was next. Omidyar is one of the respected, very well-respected investment funds, global investors. They do a lot of due diligence. They do very good analysis of how your metrics are.
01:29:05
Speaker
are your margins really sustainable, will they be compression, margin compression or will they be competitors who can come and eat your lunch. All these things are done by Omidyar over the course of their due diligence and we went through that.
01:29:20
Speaker
We wanted that amount of rigidity in our P&L. It should be watertight, it should be built in such a manner that for the next five, six years, because everybody, if you see any company that attains up to $100 million or a kind of ballpark valuation, they start thinking about becoming a unicorn and all that. The unicorn mindset has never struck us because we think, can we build a company that can last 25 years without the founders?
01:29:45
Speaker
So, that's a fair lifetime for a company and then beyond that it will only be like then leaders how they take the company forward and all that. So, that's what we are behind. We are not behind a model where can we show certain numbers, can we show vanity metrics and beef our valuation that's not what we go behind and people call it as a cockroach approach.
01:30:06
Speaker
approach company which can sustain any survive any kind of weather any kind of harsh environment so that's what we are behind with Omidyar that thought process really got very well said with us they did a lot of they asked very good questions and that happened this was march of 2021 last year and right after we were done with Omidyar on tiger was interested and the due to this
01:30:35
Speaker
Omidyavar was about $10 million or about $9.5 million. And then right after that, Tiger had shown interest, which was about a $35 million round. And the Tiger due diligence was like a breeze because Omidyavar covered almost everything, right? And Tiger guys were very open about what are the bets? What are the things that we know? What are the things that we need? Well, they were quite open. They gave us very good support in terms of
01:31:00
Speaker
doing some research outside because we told them like we're going to enter the Southeast Asian market and the easy market. They tried helping us with several white papers and write introductions and stuff. They've been quite very active, very exciting to work with them because they just don't do this regular lip service of investors saying like I do bring in all these synergies and all. They really do that, like very silently. They keep executing it.
01:31:27
Speaker
And I think right after that, Insight have also done our recent C1 round. Insight, it was more like a follow on round, but we had to close that immediately back then because of various reasons. So we followed it up with the Insight round. Again, the Insight partners guys have been like phenomenal. Yeah, Tiger, the round size was overall 35 million. Several earlier investors had also participated. Tiger led the round. With the Insight, the recent round, it was 56 million.
01:31:55
Speaker
Yeah, 56 million of which the majority was not the lead who was taken by insight and Tiger also participated in all the other engines. So one good thing that we were very happy about was that BNEX participated till the last round, right? Which means like a company that came right in the series A have come along with you for the last next four rounds. Better capital participated in every round that they participated.
01:32:19
Speaker
which is a validation that I think we all of us guys have been doing something right for these guys to show this amount of faith. So we just humbled by that gesture of theirs. This also adds to the fact that we'll have to think much more deeply, understand each and every action that we take, every decision that we take in terms of growth or expansion or you know product line.
01:32:42
Speaker
or any other future initiative that we take, we are very clear that it has to be meaningful, not just for ourselves, not just for our folks who have worked with us. It should also be meaningful for all these guys who have believed in us. Got it. Okay. Okay. What was your valuation with this insight round? It was a $605 million valuation.
01:33:03
Speaker
Okay. Okay. Okay. So I guess the next round will pretty much be a unicorn round, even though I know that's not what you are chasing, but absolutely. Yeah. So if you are, overall thought process goes like this, right? Like the moment you make
01:33:18
Speaker
The company earns, make sure that it is sustainable. You are not reliant on the venture funding only for running the company. The company can run by itself. Funding is only to expand because expansion cannot be organic every time. You can go with an inorganic kind of explode and expand as well. Like Uber, Uber expanded to nearly 40, 50 countries in a year. It's not easy. They did that.
01:33:44
Speaker
So, such expansion requires venture funding, so we understand that. So, that's what we keep telling. Initial five years, we built like Zoho, and then the next two, three years, we've been building like Freshworks. Nice. Both Chennai-based companies. So, what was your revenue last financial year, 2021?
01:34:06
Speaker
It was, so I can say, I don't have the right exact figure. So it was somewhere between, I think we, I'll tell you the growth rate. We grew by about 3x in 2020, when we closed 2020, March 2020, we grew another 4, 5x in 2021. We are looking at another five to six years of growth this year.
01:34:26
Speaker
Like this year you'll cross say 500 CR. Yes. Amazing. Amazing. Okay. Okay. Okay. And what is the, like how much of this is from India? How much from outside? What's the breakup of this revenue? So I would say 80% is from India even today.
01:34:42
Speaker
We have also expanded into Australia, New Zealand, Philippines, and Southeast Asia. We are enabling another three or four markets very soon. But all of these are early bits. GCC region has started earning revenue. All the contracts that we signed up in early 2021, they've all gone live. The remaining 20%, I would say, is by all the other units put together. I would say it's probably 85-15, I would say.
01:35:07
Speaker
But yeah, I think another five or six years down the line, the international business will be like surpassing the India revenues is what we are hoping for. And in this revenue, how much comes from like a subscription fees? How much comes as you're earning from MDR? What is that breakup like?
01:35:28
Speaker
So, see the one-time fee or the sign of fee that we take from every free tech is more for validation to just get that seriousness, right? That's not a big portion or big driver of this thing, revenues, but that is easily some 15-20% of our revenue book.
01:35:44
Speaker
There are also the subscription or the transaction-based fee that we charge, which also includes the MDR portion is about 50-55%. And then there are other avenues of revenue that we make by doing some sort of partnership.
01:36:03
Speaker
or offering our platform as a service, offering our infrastructure as a service for some companies. These are things that are, I would say, flat revenue models, which is like monthly rental kind of models, which is again another 20-25%. So, tell me about this 20-25%. Give me some example of what you do here. Yeah, so there are several companies who want to use our infrastructure just as a
01:36:27
Speaker
layer right they have built their own technology and all that there are several companies I am not naming them here there are several companies which are using so we have direct rails to visa mastercard not many have that overall there are only you know few hundred odd companies that have visa mastercard direct connectivity and so we have gone a full vertical deep right if you want a visa product we have from their network connectivity visas routers and switches sit in our data center
01:36:56
Speaker
We have an RJ butterfly LAN cable connecting from them to our routers. So we have direct plumbing into the network. So many payment gateway companies, many card issuing companies use our platform. In fact there are several startups, again I am not naming them, there are several startups who use our pipes, our platform as the base and they are wrapping it up over a bunch of their own APIs and selling it outside.
01:37:20
Speaker
and they claim it to be the fintech infrastructure but yeah more power to think they'll definitely one day build a full-blown suit like us but we are very happy to empower such model so that is about easily about 15 to 20 percent of i would say our revenues yeah okay this would be like a licensing fees that you would be charging here yeah probably how much of your revenue comes through a bank like a pink you and how much comes through like a fintech partner paying you
01:37:51
Speaker
I would say it's probably 60-40 or 60-40 towards the fintechs like several fintechs pays but overall I would say it's 50-50 because in several occasions where we pay the fintechs also there is a huge amount of share that we pay the fintechs as well like wherever there is MDR or interchange revenue we share a big portion with the fintechs so we collect from the banks and pay to the fintechs and vice versa happens when the fintech brings the bank.
01:38:21
Speaker
What is your specific role? Between the three co-founders, who does what?
01:38:27
Speaker
Okay, Madhu is the business end of the company. He hits the business units. He works with Rajesh Vadwa in India who leads our India and Southeast Asia business. He works with Vanati to lead the GCC business. And we have also appointed Sanjoy and Abhishek joined us recently. Abhishek is the CEO of PTM, used to be the CEO of payments bank. He joined us to take care of commercialization of several product lines. So Madhu heads the bunch of these guys.
01:38:55
Speaker
And Muthu runs the tech stack. He builds the tech stack. I take care of all the other thankless jobs in the company. So it takes off operations, infrastructure, networking, all the other stuff like Infosec. And I am a big believer of community-driven approach. We invested in a full-blown marketing and branding and community unit to build a community for FinTech. So it's called Teta. We launched it in a very small manner.
01:39:23
Speaker
So, that is something that is my, I would say, it's initiative from my end where I want to kind of build it to a meaningful size over the next two, three years. What is Tethil? Is it like a place where you
01:39:39
Speaker
help developers to understand how to use M2P products and is that like building a developer community around M2P? Is that the goal? Yeah, not just a developer community, it's more like a community for Vintex. To begin with, we'll start with Vintex and we can add other associated techs also.
01:39:58
Speaker
but it's a community for fintech anybody who wants who has a fintech concept who want to bring their idea into real life can they use it can they can join the community ask questions so we're building it into a community where it becomes less about him to be more about fintech
01:40:13
Speaker
And any idea that they want to take it to market, we can package several of our products into a box and give it, offer it to these community players to go test out and do that. Again, going back to the same thesis, we believe that we can't innovate everything. So when you take a community based approach, there are several people, several thought processes that can come together. If you are like-minded, I think you'll be able to innovate more. So that's the idea.
01:40:41
Speaker
And of course, we are also taking several other initiatives through Tether, helping new edge startups right from the grassroots level, help them set up a company. We work with a company called India Filings, which takes care of company registration to account opening to everything.
01:40:56
Speaker
So, we help such startups and we'll also bring in a bunch of investors, seed investors, angel investors into the community. We can run something like pitch fest or like road shows for these startups to raise money or get access to investors.
01:41:16
Speaker
Exactly, that's exactly what I'm trying to, it's very new, very early stage, I would say the entire effort is just 3-4 months. We are building that very discord type of channel to keep the messaging around and all that. So, what it will one day turn out into will be, as I mentioned, it will be more about fintech entrepreneurship, starting up taking an idea to market or validating an idea and all that and less about M2P.
01:41:42
Speaker
incubator or YC, something like that. Very similar. Okay. Like you're basically building a YC for fintech, basically. Yeah, but YC again, there is eligibility criteria and all that we hear we are trying to go in an all inclusive kind of manner. See, if you ask us, what is our vision is that,
01:42:02
Speaker
We have to make financial services universally accessible. When I say universal, it's not just the world. One day there will be, like Elon Musk says, by 2040 there will be a human colony in Mars and there will be payments happening there. We want to empower that as well.
01:42:17
Speaker
And there are people building metaverse here and there. Weddings are happening in metaverse. So the gifting can happen through the FinTech channel. So we are trying to make that financial inclusion is a serious problem. We should definitely attend that. We should make every human on earth or anywhere else have access to financial resources in a digitized manner. So that's the overarching vision, right? This community approach is one such stream to make sure that accelerates and
01:42:45
Speaker
gets the power of networking there. We as M2P alone can't solve that problem. We think a community effort will definitely help us reach there faster.