Demonetisation has been a disruptive event that opened up opportunities for organisations like Atom Technologies that operate in digital payment solutions space. This multi-channel payment solutions provider considers demonetisation as a huge opportunity to expand their footprint more rapidly. Dewang Neralla, CEO of the company, explains the ground realities and potential in the digital payment space, to Pankaj Joshi
How many point of sale (POS) machines have been installed post November 8?
The November 8 (demonetisation) event needs some perspective. India was on the digitisation path even before demonetisation, but the speed was not as desired. Across the world, digital payments signifies a healthy structure, if it forms one-third of GDP. However in India, digital payments is only three per cent of the GDP.
The November 8 event created a mind shift. Businesses started adopting digital payments and people started to move on from the traditional ATM-cash payment method. Cash still continues but habits have changed.
The Government target between November 8 and the following March 31 was a million PoS installations. The installations till November 8 were 1.3 million and on March 31, 2017 , it was 2.5 million as per RBI data. So it is beyond expectations.
Where has the extra come from?
We work closely with Union Bank, United Bank and others. We have seen that smaller towns are generating demand for PoS. Initially, the demand was so much that supply was a challenge. The demonetisation impact on retail stores was huge, and they have been aggressive in adopting PoS.
How would payment systems of the future look like? What advantage does Aadhaar and UPI system have over others?
Prior to November 8, non-cash payment meant debit cards, credit cards and PoS, all of which were face-to-face transactions. Globally, transactions based on wallets and QR codes were prevalent but not here. Post November 8, QR codes started getting into action – the Government too created Bharat QR. All majors – Visa, MasterCard, AmEx, Rupay – got on board. Other innovations from the Government’s side include creating the BHIM app and the Aadhaar transaction base. Now, we have access to an account where transactions based on Aadhaar, UPI, debit card and credit card details can all happen. Individually, these are major areas of innovation which will not only co-exist but also scale up. But they will morph going forward.
From here on, it is vital that the PoS seeding momentum is maintained and increased. The plan is for one million more installations in 2017. Plastic will be there but digital has the potential to really take off. Cash cannot be wished away but from a base of 3 per cent the potential is massive.
The main issue to manage is how to make transactions seamless and friction less, both for the customer and the merchant. Security remains another big issue – hacks and cracks in any payment system create a fear psychosis. There has to be a strong emphasis on ensuring security. Both these are defining factors.
What kind of innovations are taking place? Where will you see the bulk of deals reside – banks, telecoms, PoS?
If you look at the legal and technical aspect of a digital transaction, it is owned by the bank. The telecom networks are mere carriers. Of course, they are vital – connectivity via speedy, reliable and efficient network is an imperative for digital transactions. However, the very fact that telecom companies are getting into payment banks underlines what I have just explained.
We are hopeful that PoS systems will evolve. From a cash-register size instrument, today a PoS device is an integrated mobile-shaped device. The virtual receipts it generates have already made the printer obsolete. We see its utility getting enhanced through other value-added applications, especially as the penetration goes to more basic retail outlets. Apart from own transactions, in retail outlets PoS processes other transactions and also helps the outlet in things like inventory management. In physical terms, we will see the PoS getting smaller and sleeker.
What are the measures that will boost the industry?
Fundamentally, digital payment means that you are trying to fight cash. So how does one disincentivise cash and ensure people use plastic or digital mode? It is not as if people are averse to digital transactions any more – the IRCTC and flight booking data is enough to prove.
Now, the key is dispute resolution, especially in case of transaction reversal. For the train and flight bookings, the process is laid out. It still has to be laid out for retail outlets which are much more numerous. Beyond that, the existing Government publicity and education drive needs to be sustained. One ground reality is that disincentivising cash is not easy. Take jewellers for instance where they take a 2-3 per cent surcharge for non-cash transactions.
Given that they do not give any extra service, this surcharge is unjustifiable. Such segments have to be focussed upon. The next vital aspect is that technology providers have to see commercial viability for their efforts, else technology maintenance, security and upgradation cannot sustain.
In the context of all this, where does Atom Technologies stand?
Atom Technologies is an 11 year-old company providing end-to-end digital payment solutions, across different platforms and instruments. Today our footprint covers 50,000 merchant establishments across various public and private sector activities. We process 20 million transactions a month with an aggregate value of USD 0.5 billion.
Given our presence and the environment, we foresee rapid growth. Our three-year target is to cover 1.50 million merchants, a 15-20 times growth in the monthly transactions and a 5-10 times rise in the transaction value.
In financial terms, we are clear that we need to follow the basic tenets of finance. We have achieved operational break-even in the last two years and today there is no cash burn. Our funding requirement gets evaluated from time to time based on the growth opportunities and our plans. However as of now our entire funding is from the promoter group, without any external participation.