Patel believes that while the point-of-sale terminal business would grow at 5 to 7 per cent year on year, the unified payment interface will continue to grow by at least 70 to 80 per cent in the next four years
When he joined fintech Mswipe Technologies as chief executive office two years ago, Ketan Patel asked the company’s founder and managing director, Manish Patel, whether he wanted to focus on sanity or vanity. When the latter said he was not interested in vanity, Ketan knew he was in the right place. He was confident about running a sane business that did not resort to cash-burning activities to stay in the limelight, which fit in well with the philosophy of the company that has raised a total of $97.5 million during its nine funding rounds.
He tells Outlook Business how his soonicorn is gearing up to become a one-stop entity where 40 per cent of its revenue comes from value-added services like lending and small-ticket insurance policies that will offer its merchant partners more bang for their buck.
The latest Hurun report stated that Mswipe Technologies is likely to reach unicorn valuation in the next four years. What is your current valuation?
I do not know our current valuation and do not really care whether Mswipe is a unicorn or not. We want to be a profitable company and not a unicorn just for the sake of it. We are not in the rat race of being the most valued company; we want to be the most valuable company.
How are you achieving profitability at Mswipe?
From (being) a one-trick pony pre Covid, we realised that focusing on only one business segment will not help us. We needed to cover the ecosystem to the best of our abilities. We deliberated on the other things we could do with a point-of-sale (POS) system that is easy for a merchant to accept and that could also be revenue streams for us.
Lending is the holy grail for everyone, including us. After acquiring a non-banking financial company last year, we started lending to merchants, which is now a profitable business.
Similarly, we introduced the quick response (QR) soundbox terminal recently to help merchants manage their operations and boost digital payments, especially with the unified payment interface (UPI).
Were your POS terminals not doing that already?
The QR stickers that merchants put up would often get scratched and, therefore, had to be replaced every few months. At the same time, UPI’s success rate has been 92 per cent, which means only eight per cent of these transactions have failed.
Now, look at this situation from a merchant’s point of view. When a UPI transaction takes place, they must deliver the goods then and there. Often, they do not receive the money even after delivering the goods—an issue that our soundbox resolves. Now, merchants can accept payments from a single Mswipe device.
Do you charge the merchants any commission fee?
There are companies that charge commission on transactions but we do not. We want this to be a rental model and charge Rs 125 monthly rental for the device, which has a 4G SIM. There is no deposit either, though there is an installation cost of Rs 300.
What is the volume of your transactions across India currently?
We are clocking $3.5 billion per annum and want to take this up to $4.2 billion in this fiscal year. The soundbox, rolled out in October 2022 across India, will be a huge game changer in helping us achieve this.
The average ticket size per transaction is Rs 2000. This saw a huge uptick during the past couple of years when digital payments became more popular.
Do you think this growth will start plateauing now?
The POS terminal would grow at 5 to 7 per cent year on year but UPI will continue to grow by at least 70 to 80 per cent in the next four years. The reason I believe this growth is possible is because it solves the merchant’s problem. With credit on UPI coming in, transactions will explode.
What are some other trends imminent in the payments space?
The first would be an omnichannel landscape where a single player would be offering all the solutions. Moreover, payments companies will not be able to create mind-boggling profits on their own unless they cover the ecosystem. This could even mean trying to do everything a bank is doing without being a bank.
It will also give the merchant more value since he deals with only one company for everything. That small real estate that the POS machine occupies on a merchant’s counter becomes his financial partner.
What is the size of India’s POS market in terms of revenue and at what pace is it growing?
It is growing at a 5 per cent rate year on year and six million terminals are installed across the country. The amount of transactions on POS is around $45 billion per year.
We are a credit-starved economy, so the POS terminal is not going away. What will happen is that UPI will remain good for transactions below Rs 5,000 and consumers will use their credit card for transactions above that.
The RBI gave another window to payment aggregators like Mswipe to apply for a license by September 30, 2022. Since Mswipe Technologies has received an in-principle approval for this license, how will it leverage this to currently offer POS devices to merchants for offline payments?
We want to be an omnichannel player and provide all payment options to our merchants—be it UPI, POS or pay by link. So, merchants can accept payments from all available modes and get all the reports from a single company, which can help them in reconciliation of their accounts.
We aim to be a one-stop shop as far as the long tail is concerned with 40 per cent of our revenue coming from value-added services, which include lending. We want to do insurance at POS and are waiting for our corporate agency license so we can allow merchants to dispense small-ticket insurance policies.
Today, if you ask a merchant about the POS terminal at his shop, he will say that it eats into his profit because the merchant discount rate (MDR) is a hit to him. This is also why UPI’s acceptance is so high because there is no MDR. We want to change that narrative by ensuring the device also enables merchants to make revenue—be it buy now, pay later or micro ATM. Insurance at POS will mean higher payout for them.
How do you evaluate the data you gather from a merchant’s credit history to decide whether you want them to be part of your network or when to raise a red flag?
As a payment facilitator, Mswipe does not store any card data but all the transactions are routed through us. On the basis of this information, we can create a credit profile and decide whether we can lend to the merchant and even set the credit limit.
Moreover, since the payments are routed through our terminals, we can see whether merchants are swiping their own card, or if there is a similar card or if the same card is being swiped multiple times. If we see this, then we question the merchant.
We also have data on the lending side in terms of transactions. For instance, if we know someone has been transacting for 30 days monthly but transacts only for 2 days after taking the device, that is a red flag. We then do an outbound call to the merchant to check if everything is fine at their end and if even the Mswipe terminal is working properly. This helps in sorting any issue at the outset.