Small device and mobile may curb cash payments
Some innovations typically change the way we operate
By : S. Umamaheshwar
Update: 2015-06-09 01:24 GMT
Hyderabad: Some innovations typically change the way we operate. For instance, the introduction of internet banking and ATMs have almost eliminated the need for visiting a bank branch. A group of entrepreneurs in Hyderabad led by Prabhu Ram is trying to do something similar: Bring about a drastic change in the way we pay.
“The Indian economy is heavily run on cash. Only around 10 per cent of transactions in India are made by cheque or through online transactions. The rest of over 90 per cent are settled in cash, which leads to the creation of black money,” said Prabhu Ram, managing director of payment and merchant solutions firm Paynear.
The company has developed an affordable point of sale (PoS) solution called mPay, where merchants can connect a small device with their smartphone (which hosts mPay app) to accept card-based payments.
Currently, only banks supply PoS machines, which you see at commercial establishments that accept card payments. “Since RBI prohibits banks from selling PoS machines, they prefer to issue to outlets which can promise good transaction volume. As banks charge a small fee on each transaction, a greater number of transactions would help them to recover the machine’s cost, i.e. Rs 15,000, faster,” said Mr Prabhu.
mPay, however, does not entail merchants making commitment of minimum transactions. Instead, merchants will have to pay Rs 3,000 as initial payment and pay a monthly rent of Rs 500 to Rs 1,000. The company has already sold 2,000 such devices.
Paynear is an startup founded in 2013 by five professionals — Anil Bharadwaj, Preeti Shah, Maulik, Krishna Kishore, and Ravi Kiran. This year, they were by joined by serial entrepreneur Prabhu Ram, who is leading the team now.
Explaining the potential of their offering, Mr Prabhu says, “Though there are five crore commercial establishments, only minuscule per cent of it accept card-based payments. While a shop which cannot offer a minimum transactions a month will not get a PoS device from the bank, our device can be used by anyone — be it a small grocery shop or professionals who may not have voluminous transactions. With 50 crore debt cards in the country, there is a huge potential for us to sell our devices.”
Recalling the origins of Paynear, co-founder Anil Bharadwaj says, “Five of us used to work with Prabhu Ram’s earlier venture and online payment processing firm ebs.in. After it was sold out to French major Ingenico in 2013, we came together to start Paynear, using our savings and funds raised from friends and relatives.”
Prabhu, who exited ebs.in after its acquisition by Ingenico, joined Paynear after the end of the two-year non-compete agreement. Talking about competition, Mr Prabhu claims that other companies cannot enter this space for at least two years - the time required to get all required permissions from six regulators, including RBI.
The challenges going ahead, Mr Prabhu says, would be reluctance of merchants to use the product because it does not leave any scope for unaccounted money or black money and people’s faith in a device being sold by a private company, despite it being cleared by several regulators.