 Morning folks. Welcome to day 2. Our speaker is running a little late, so expect a 5-10 minute delay Morning guys so Madhusuddin here will be talking about Bharat QR and Is it addressing the real Bharat? Madhusuddin works for YAP in Mumbai. This talk focuses on the basics of Bharat QR Where we are in the market and the traction that we've had and how does it pan out over the next 12 months? Okay, thank you, and my apologies. I got up. It's late So I'll spend the next 30 minutes talking about what Bharat QR and what is it done in the last year or so and How does it sort of pan out and what it sort of entails for? the digital payments as a you know as a business in India and We'll also sort of have some time for Q&A towards the end So Bharat QR is it's essentially an initiative Mooted by the government last year after demonetization Where there was a need to address? The challenges around having multiple QR codes. I mean to sort of step back and see What a QR code is, you know, you you typically most of us are aware It basically an abbreviated quick, you know, the abbreviation is quick response code Which is nothing but a two-dimensionals metric barcode Which you know, which started getting used if initially in the manufacturing industry and then over time it has sort of seen Major adoption in payments largely led by The you know internet behemoths in China So today QR is probably the largest form of digital payments method globally To sort of give give a perspective We chat last year processed almost about 800 billion US, you know Which is a third of India's GDP, you know on QR code based payments So a similar number for Ali pay and and so on and so forth. So As a form factor, you know, it has found a lot of relevance in payments Which is what we are, you know, we're hoping that we will be able to replicate that success in India and The fundamental reason why you know, it's seen this massive adoption It's on three counts one. It is cheap. It's inexpensive and it's almost free, right? Factors that matter a lot for a country like India where There is no value sort of ascribing that happens Anything that is sort of inexpensive people tend to sort of adopt a lot more and embrace So what really is this QR, right? So it basically is a mobile channel for the existing payment ecosystem that used to that we are all used to So we all have a debit and a credit card In our wallets. We use them based on, you know transaction ticket size based on the offers that have been provided Essentially, there was a need to sort of look at or bridge the gap between card and mobile site Until last year you had Mobile payment products that are, you know created by companies that had Tech-enabled sort of, you know outlook. So someone like a Paytm went out and created an ecosystem and said I will own this customer experience and I'll drive the way Consumer should spend so thereby they created and what's called an island of closed loop, right? So it will if you if you were to participate in that network You'll necessarily have to have a Paytm app and you'll have to take money from your existing bank account and move it to the You know to the Paytm wallet or you know any other bank wallet What that means is that as a user you're constrained to sort of take money and you know use it in a certain way That is prescribed by the by the ecosystem But if you look at how the cards will operate As a user you don't really care which bank has provided a post machine All you do is that after your transaction is over it. So habituated for for all of us now That we don't tend to actually worry about which bank has given the machine, you know Whether it will work or not we just present the card and the payment just happens So there was an and and the whole card operates in a what's called as a four-party model There are four players in the ecosystem. There is a issuing bank which issues the card There is an acquiring bank which goes and signs up merchants puts up devices and all that There's a merchant who actually needs to make you know collect money from the consumer And there is a nodal agency called as the payment network, you know, which is nothing but the visa mastercard and you know Indian India and PCI so these four parties actually sort of have a commerce that's happening between them So the merchant typically receives the money and everybody else other than the issuer actually, you know Relays that money to the merchant it's from the consumer. So if I were a consumer, I have to pay a merchant The money goes from my bank account into the consumers, you know receivable In that transaction the consumer been the merchant benefits because he's getting that money So he's actually ready to discount that transaction and that's why the term merchant discount rate, you know You'll find in you know in the merchant parlance, you know Being quoted which is essentially that the merchant is discounting his transaction. He's ready to take a lower value Because there is a sale that's happening for them and it's in it's adding to his sort of bottom line So the the important aspect of you know having an interoperable sort of payment network is to ensure that this four-party model economics is preserved and You know, it runs on the existing ecosystem because only when there is money on the table Issuers will be interested only when reward points are there you as consumers will be interested to sort of, you know Use that over cash So there is a lot of motivation that gets built into for each of the ecosystem players for them to be You know adopting than existing existing model and also What Barak you are meant was that you could actually go after use cases which card found hard to attack Something like a cash at pause something like a cash-on delivery where Most of us when we opt for a cash-on delivery at home Either we will not have change or we would have left money that with someone at home They may not be available at home. So all these new use cases which you know card system struggled to handle because Inherently they it was a apex heavy Infrastructure-laid, you know hardware-laid model where you know Barak you are sort of addressing I'll talk about that in detail in the coming slides And from a from a stakeholder standpoint It's imperative for the issuer to sort of issuer which is the bank that is issuing the card to see how can consumers Adopt and you know more and more use cases around payments thereby, you know at a very fundamental level Issuers make money when you start going digital, right? Because if you compare How payments happen when you take money from the ATM, let's say somebody who's drawing a 10,000 rupee salary He goes to the ATM pulls out the entire 10,000 rupees There is no money left for the bank to actually make on the float, right? So if he were to spend that 10,000 rupees assuming he spends, you know equally distributed over that it is Which practically doesn't happen, but you know the runoff period, you know It's about 30 days before the money comes to zero, you know in a digital sort of world So it's imperative from a issuing bank standpoint from their Casa mobilization standpoint that they ensure that you know, there is more and more consumer adoption around digital payments so they which will actually sort of add to their bottom line and Any use case that helps them to achieve this, you know, all of us wonder why you would you know banks provide a Free book my show ticket, right? So that's the first use case where you will find Which is a small ticket you would not mind taking that first plunge, you know You would not mind saying what if if this goes wrong, you know It's only a 200 rupee risk that I'm taking but the reward of that risk is that I'll get another ticket free so so the customer action from a the issuer action from a customer activation and Driving digital payment will always be a small ticket transaction We're all now, you know, pretty much every one of us in the room would have tried a Google taste transaction to do a P2P And earn probably multiples of that 50 rupees It's all aided towards building an habit and a meant making sure that use case sort of get it off gets adopted So what goes into the QR is essentially The traditional card networks, which is basically your debit prepaid and you know credit card products We also have an India specific asset, which is called UPI Which I'm sure all of you in the room are aware It's basically me moves money from one bank account to the other using a virtual payment address It's an enhancement or it's probably a 2.0 of what PayPal did 20 years ago in the US Where you could just send somebody money with just their email address, right? So UPI has seen massive adoption the numbers that NPCA quotes is like 150 million transactions last month and it's all P2P currently but You know P2P there's only so much money that you will have to give to your friend or neighbor or rent But the P2M which is payments to merchants is you know probably in you know hundreds of millions of transactions that happen So it's imperative even from a UPI Success standpoint the low hanging fruit is P2P and you know what some of the large internet companies are trying to drive But at a very very very fundamental level unless they are able to crack the P2M story Which is merchant payments in a small ticket and I know come you know in an economically viable model You know UPI will have a long road to sort of cover Other has also been thrown into the QR mix. It's not yet seen adoption as yet It has other has its own sort of challenges The QR as it stands today also captures the merchants other somewhere, you know in the in the road map There is an opportunity to sort of also work on other as a payment method So how does it work? Essentially you have a card that You know you are having in your pocket the same card gets represented in a phone Which is nothing but your mobile banking app or your you know the wallet application that your bank provides Enables you to pay using the same card, right? So you you then What what happens in the bank system is that if it is their own merchants? Let's say you bank with State Bank of India and it's a State Bank of India an account It just goes into their internal systems to sort of get processed If it is some other bank then they sort of route it to the network and you know They follow the standard network processing you as a consumer will always use the same card So your experience from a from a user perspective will continue to remain the same if you're earning reward points By using a certain credit card, you'll continue to earn the same credit, you know reward points The single difference between the two models is that in a card world, it's a you know What's it's called as a pull payment? So the merchant is pulling money from your account and in an in a QR world. It's a push payment So you are actually pushing it's more like a bank transfer that you undertake, right? So you you are opening so it's like you doing a recharge from your phone, you know You just you actually given a number to be recharged you enter the amount you submit that request and the request gets taken care of Instead of entering that mobile number to do a recharge you actually scan a QR code, which is the merchants account So that has a huge bearing in terms of how You know the QR deployment happens simply because when you allow somebody to pull money There is always a chance that that person can you know Pull an incorrect amount pull When you are not authorized. So there's whole charge back Or a dispute management that gets built in so there's a risk profiling that the banks will have to do So they need to ensure that this merchant is a not a rogue merchant So it goes around and pulls money from everybody's account. So the cost of Taking a merchant on board when it is a pull payment where there's a hardware led model is Significantly higher, you know, which will sort of cover as we go along So so that's the principal difference and what that means is that as a user There's a huge challenge around adoption that happens right so today When you go to a restaurant, you know with friends you actually hand over the card a lot of people actually hand over the pin as well, which is not the right thing to do but You know, there's a the whole experience is something that the you know, the merchant sort of manages the Waiter will bring in the post machine. You enter just the pin You are not participating in the transaction. You're a passive player, but when it comes to mobile You are actually participating you have to take your phone out. You have to you know, open an app There should be network So there's a lot of dependency that gets built in and there's an habit forming that has to sort of go in in terms of making sure that You're able to adopt this as a payment method Which is one of the challenges that QR is facing as we speak today And how the payment flows is essentially that I Sort of mentioned it so you have an app where this facility sort of enabled You scan a QR code that is present at the merchant most of us must have seen at least a Paytm QR code in you know in shops So the QR represents the merchant data. So what that you know when you scan the QR code What it says is that who's the shop? What's his shop name and in some cases what is the amount that you're paying right and then you will authenticate it using your existing You know, whatever the pin that you have or the protocol that you have for that particular mobile app And you are going to sort of confirm it in the back and it flows through The bank and the network and all of that and the merchant just receives a confirmation in the form of a notification You know while it looks very simple from a from a framework and how it works There are fundamental reasons why you know you we have to sort of look at Mobile and QR, you know as a as a big component of how digital payments can be driven It it sort of goes back to what are the barriers to sort of adoption of a card card payment itself, right? So if you look at why somebody doesn't use, you know, we are a country where we have about 800 million debit cards You know and at an average of about 1.6 or 1.7 per household So the reason why a lot of people don't use a debit card is the the primary reason is that there is a fear of their account getting sort of Compromised which is essentially the number one fear people don't use the card and this was proven when you know in 2009 When RBI allowed a rather mandated that All online transactions have to be, you know, two-factor authenticated Which is you have to do an OTP just to make sure there is no fraudulent transaction that happens the adoption of online You know payments actually sort of went through the roof It grew at almost about 3x for the next, you know, two to three years It continues to grow at, you know, maybe one and a half to two X of what if you know face-to-face merchant transaction happens There's also other very nuanced reasons like you don't want to pay because you know A lot of people think that if you pay digitally you probably come under the tax net, you know There is the you know in the 90s When Citibank used to run the only credit card business People used to get tax notice because they paid 3, 4, 3 or 4 lakhs in you know credit card bill payments in a year So that fear of taxation is is very very, you know strong There's also the big use around big reason around, you know, I cannot use it, right? Which is saying that whenever I present the card the merchant says I will charge you 1% more We'll face this, you know, as soon as you step out of Bangalore, you'll you know And you go to Mysore you go to any of the highways the guy will say, you know, I'll charge you 1% more So that inherently sort of builds in from a consumer mindsets and point saying that, you know I cannot use the card because I am going to pay end up paying more Also the digital channels are still not sort of evolved to a state where you can say that It's all all pervasive. So you you cannot leave home saying that I don't need my wallet I can run my entire sort of payment needs just on the mobile From a from a this is from a consumer side. If you look at it from a from a merchant side, there are Even more, you know, sort of grappling issues that are there, you know today There are four quadrants, you know, this is your sweet spot in terms of Where you will find pause it here once it is organized retail You know hotels and all of that where Card is is a given, you know, you don't worry about when you step into a, you know Multi-quiz in the store and asking them whether you'll accept card or not. So it's a given You will have, you know, if you sort of go to a QSR if you go to a digas in Bangalore They may or may not accept card because you know, depending on the throughput and how the merchant feels that Whether this is good or bad for him So this is where, you know, you're you'll find, you know a square or a dongle like devices Prevalent, you know, small merchant who probably does two or three lakhs of business monthly He would not want to go take a large post machine, but to just to keep his consumers happy. They'll have M-posts which is nothing but a square kind of a dongle which goes into the phone that is getting adopted You have a large segment which is sort of completely, you know Untapped the reasons being that They're, you know, banks are not able to underwrite these consumers. There is not enough throughput, you know So every post machine that goes out in the market There is a capex of handling that particular machine, you know So a machine will cost about 10 to 11 grand Is there enough volume for the bank to actually see return on that investment or is the merchant ready to pay Something like a rental so that, you know, their costs are covered The answers sort of remain in between no one, you know negative So there is a From a acquirer side, there is a high cost of selection if I send FOS to, you know Sign up 10 merchants. You will have underwriting that will reject five or six merchants So every merchant that gets acquired comes at a price where You know merchants are, you know, the acquirers are saying I will only do tier one towns where we know for a fact There is enough volume for for the business case to get justified From the merchant side, if you look at it again tax avoidance is a big issue They're always caught in this cash cycle. They pay their suppliers in cash They they get collect money from their customers in cash So getting out of the cash cycle becomes becomes a challenge Also until recently until last year you had most of these smaller merchants having no You know outlook in terms of what taxes they have to pay, right? With GST pretty much there is an inclusion of taxation that is happening So there no longer you'll find merchants saying that, you know, I'm not part of the tax net But you know, everybody is part of that So so the consumer side of the issue, you know, if you look at I'm always sort of earning in cash. I don't need have a need to sort of deposit this into an account and use them I don't find that value that that becomes a single biggest reason And there is also not enough points where you can actually Make that money fungible. So if you have cash, can I go to an outlet put that money without incurring any cost so that I make it digital Those, you know, touch points do not exist today So which is where, you know, all of these reasons sort of contribute to, you know, having a form factor which is inexpensive Which is easy to deploy. That's where the sort of QR comes in What what Barat-QR is doing is that it actually is bundling in various different digital payment methods into one unified interface The QR that I put out, you can pay using your access bank, you know, mobile banking app You could pay using your HDFC Pays app You could pay using your Google Tays Which is pretty much the top three apps used by any of Unaffolding mobile consumer And it also sort of creates a funnel where Merchant banks when they sort of look at merchants, if there are merchants who are actually, you know, driving a lot of the digital payment, then they can look at the funnel whereby they can focus on merchants who are, you know, revenue or credit from their standpoint and probably provide a physical pause or a impulse. You will find a lot of the bank logos at the bottom. What that means is that today, you know, as we speak, there are like 50 banks in the country. And if you look at acquirers, which is the banks that put up the post machine, almost, there are only about five banks that contribute or about 90% of the value, right? 90% of the machines that have been deployed. The reason being that, and these are like HDFC and Access ICACA State Bank of India. The reason why only these five banks focus on acquiring is that, one, there is a huge capex that needs to go in. And number two, they all have a captive base of customers whom they can, you know, drive to these merchants. So from a bank perspective, any large bank that has a large consumer base will find it lucrative for them to actually offer, you know, a huge amount of revenue. And number two, they all have a captive base of customers whom they can, you know, drive to these merchants. So from a bank perspective, any large bank that has a large consumer base will find it lucrative for them to actually offer, you know, the merchant side of the story as well. But when you look at these smaller banks, you know, where there are probably have 10, 15 million consumers, suddenly the sort of ecosystem changes, they can offer it pretty much to their, their own current account holders, their own merchant, you know, and that makes the, you know, business case viable for them as well. So what QR has done is essentially opening up the whole merchant ecosystem to a significantly large number of banks to begin with. So they will now find transactional revenues accruing based on, you know, whatever transaction that happens on this, and it's completely focused on tier two, tier three where some of these banks are very strong. So if you look at a Karur Vesha bank, they are very strong in a Coimbatore Tirupur belt, which, and I say here any other bank would, you know, would not want to sort of invest so much of energy to drive, you know, digital payments in those markets. So from a, from a QR adoption standpoint, you'll find a new breed of banks, which will come in and say that we will want to offer this only to our consumers because we feel that this is the right thing to do. And, you know, when you do that, you also have to sort of be mindful of the fact that this is not a, you know, fleet on street led acquisition where you can send 100 people out to acquire, but simply keep it completely digital. Right. So which means that the banks offer it only to their customers, so they will ensure that their current account holders have a method to adopt, which means you make it completely, you know, digital from an acquisition standpoint. So you don't have to have a paper form filled in, have to have a people, have to have a person going in and, you know, signing up the merchant. So, you know, today we are seeing for the first time a banking product where you don't need an ink signature, you know, you can do it completely digitally, simply because that that merchant is already banking with a Karur Vesha or a Lakshmi Velas Bank. And, you know, we are already seeing some of this happening in the market where consumer, like the way a consumer would download an app, get themselves registered. You have a merchant who's actually, you know, downloading an app, he's linking it to his bank account and he can pretty much start accepting payments from the word go. Right. So this is, you know, very different from the world, you know, in the in the past, which is the physical infrastructure world where it used to take 20 days for the merchant to get the machine because there's a whole logic. Sticks involved in getting him the machine. So today you are in a situation where you can sort of pretty much sit in a central location, call up your merchant and say, you know, you can download and start accepting money from from your, you know, consumers using beam. And, and there is also a merchant incentivization that banks do where, you know, there is a cashback that comes in, there is a offer of, you know, no rental for them. There's a whole goodie bag that sort of gets thrown in to make sure there is adoption that's happening. So this, what this means from an economic standpoint is that, you know, in the traditional past world, if it costed X rupees to, you know, deploy, run, operate merchant business. In the bar at your world, it's almost down to a fourth or a fifth of that delta. So banks inherently will then sort of see value in, you know, even if the merchants don't adopt, or even if there's high level of inactivity because consumers are not paying using that they will still continue to invest in making sure that you know at least the product is a product is out there. So, you know, there's a lot of talk about, you know, app getting adopted. I also sort of mentioned that there's an app that they have to download. But if you go to the, you know, if you go to a small time shop in Panwala, he will never want to, you know, take money digitally. That's, that's the truth of it. He thinks that, you know, if the cash is in hand, he thinks that, you know, that's the best form to sort of take it. But, you know, if we have to drive this adoption, we have done a lot of work around what form factors this can take, you know, can this go into a billing system, you know, where you can integrate into the billing system. They don't need to actually have a hardware. Can you give them an app app has not seen any adoption at all. Variety of reasons, you know, there is no data. I don't want to leave a smartphone with the guy or the girl at the counter because they'll start, you know, browsing some other stuff on the, you know, during the free time. You know, is there a front end web based front end that you can provide if there's a computer, a lot of the pharmacies typically have a computer to place orders. Is there a web based front end that we can provide or a simple SMS would do so overwhelmingly we found that just an SMS is all that that is required to, you know, service the merchant, you know, the payment side of it. The fundamental reason being that while there is smartphone that is there in the hands of the consumer, a lot of sorry, the merchant, a lot of them are not yet, you know, app heavy, right, they keep it because of they use share it, they use YouTube and they use WhatsApp. Anything beyond that, you know, they probably do not see or do not want to adopt because, you know, it just one, they don't understand number two. It probably is not in the, you know, in the language that they they're comfortable with it. So while there is smartphone, there is no app usage is what we figured we had given out, you know, free phones to merchants to see adoption. The only thing that happened, you know, was that, you know, the data would get consumed and when the consumer show when the customer shows up to make a payment. There is no way for them to receive money. So we have gone to a mode where we tell merchants to buy a 500 rupee phone tied to their, you know, till and put a reliance geosim card. So that is the only investment that they'll have to make to ever go adopt digital payments. So, so what that means is that if you if you look at the constraints that I spoke about and, you know, what what it means from a Baratqa standpoint is that we had, you know, it was an expensive proposition to go digital because you have to pay a rental you have to pay an upfront money that pretty much becomes zero. There was a fear of taxation, which was there, you know, if I start taking money from my consumers digitally, will I come into the tax net that GST is actually paving way for a tax inclusion. MDR was a big worry for merchants. Why should I pay a banker, you know, 1% of my hard earned money when, you know, my consumer is ready to pay in cash for the full value, which is where the government stepped in last year and said that, you know, we will bank roll for up to 2000 rupees, you know, the merchant need not pay that value. The government has given a big thrust to this. So any small merchant who takes rather any merchant who takes less than 2000 rupee transaction, there's actually no cost. It's on par with cash as we speak today. There's also this challenge around employee training smaller the shop. You have people at writing probably every two or three months. So you have this constant challenge of a new guy who comes in and he doesn't know how to operate a post machine or you know how to operate a mobile app if it's an applet product. When you make it as it yet proved as an SMS and how you can read an SMS and you know, complete a transaction. That's the easiest way to sort of train employees. There are two hard parts that are still there one around habit change from a consumer side. The other is, you know, how good is it sort of over a cash rate. These two are not there are no quick quick quick fix to this one. We are actually seeing, you know, lighting up of, you know, merchant transactions primarily led by cashbacks because we are all used to that. We've seen that over the last two, three years. Some of the wallet companies have offered it. So we would use a pay team or a mobile quick if there is sorry, if there is a merchant offer that is running or if I'm going to get 10 rupee back. So this, you know, aspect of greed being fulfilled will will actually help drive build habit, you know. So as some of these large internet companies look at use case beyond P2P, beyond paying a rent, you will start finding that they will want to focus on, you know, how merchant payments can be driven. So to that extent, habit forming will take time will take a lot of marketing dollars, which if not the bank, you know, someone like a Google or a WhatsApp will come in and say, we have in it, you know, we have in it all the interest to sort of promote this. From a merchant standpoint, there's also another aspect which is very, very critical, which is around access to finance, right? Today, if a small merchant need, you know, want where to take a loan, if all his transactions were in cash, there is no way for a banker or a asset provider to underwrite that consumer. We all, you know, see some form or other of an alternate lending platform, the radio social media profile, they sort of tell you that, you know, you are at the salary structure. So we can give you a 50,000 rupee loan, you know, in three minutes, right? How does that translate to a merchant, you know, can that digital adoption pave way for access to credit thereby enabling him to, you know, get access to a better working capital and help him build that business, which is also something that's being worked upon. So you will find the payment as a railroad on which credit products will start getting built up. You already have a number of, I think about half a dozen startups that are working in this space, well funded companies like New York Growth, who are focusing on, you know, the pause based, you know, merchant collection and underwriting them based on that. In a mobile world that becomes even more simpler, even more, you know, a lot more data rich. So asset providers will find merchants who adopt digital payments easier for them to underwrite easier for them to collect because when consumers start paying, you know, you'll have a collection like that happens on a daily basis. There's some money that is coming in. So if you're able to create a product where you go to a bank, say that I will run the risk for you, but help me collect from these merchants on a daily basis. So those are the products that will evolve and, you know, probably drive adoption to sort of summarize, you know, this whole QR based payment will see adoption in India in a massive way. As we speak, we have about half a million merchants. Many of us would not have seen a QR code in the merchants whom we frequent, but India is a very large sort of country. So half a million is still a drop in the ocean. We probably need probably 20x of that in the year or two. With that I'll stop. I have about seven or eight minutes to take questions. These are some of the use cases that are there. Can you expand on the SMS part of it? So an SMS is going to the merchant and he's just opening the SMS to show the bar? Yeah. So there is a static. So this is a merchant outlet, the QR code displayed at a merchant outlet, right? You as a consumer would just pick up your phone. He says that 100 rupees is the bill amount. You want to scan this QR, you will enter the amount that you need to pay. You will authenticate at your site. And when you say pay, your account gets debited. The money moves through the payment network and the bank. It reaches the acquiring bank who has contracted the merchant. And all that the merchant needs to know is he has received that money, right? That notification part of it is where the SMS comes in. So you don't really need to have him open a smartphone, toggle into that app and see whether that money has been received. As long as he's trained to read an SMS and say that yes, 100 rupees has been received from you, he should be good. So do we have an idea around the turnaround time this whole process takes and whether it is viable for high volume, high throughput businesses like a restaurant which sees a lot of people coming in? Yeah. So in fact, the first, I mean, it's almost a real time. It's like you, you know, sending a WhatsApp message, right? It pretty much takes the same amount of time subject to network latency and all that. But, you know, the early adopters in this, you know, product is actually, you know, corporate canteens where you, you know, this is being used as a QBusting method. So you have the same meal over and over. It's the same merchant. It's a 40 rupee meal that you're having. So once you have that favorited in your app, you're going to just, you know, pay while you're standing in the queue. And, you know, when you are at the counter, you'll just give your name, the merchant verifies whether the name is there and he's going to hand over the coupon or the plate, right? So actually, this is a big use case when, you know, when it's a captive sort of audience. We see a lot of adoption in bill payments where, you know, Tata Sky had been running this campaign for almost a year. They claim that almost 20% of that traffic has gone to the, you know, QR where the QR is displayed on the TV. So you could pretty much go into your Tata Sky account on the TV. It shows the amount that you need to pay. You can sit on your couch and scan the QR on the TV and make that payment. So you don't have to worry about what is my account number, you know, what's the, you know, bank that I should pay and all that. No, it's sub 510. I can show you what on this. Yeah, yeah, yeah. Yeah, could you comment on the consumer apps which you used to pay for Barats QR? Not all of them have come on board with Barats QR. For example, PayTM, PhonePay, Chiller. So why is that the case? Could you comment on that? Yeah, so if you look at UPI, UPI had unbundled the bank account from the payment method, right? Cards inherently, it's bundled with your banking product. So to put this in context, almost all the banking apps today have Barats QR as a payment method. Okay. And cards operate on a legacy tech where the entire box sits within the firewalls of the bank. So if when you use your card, there are two things that happen. One, you get authenticated for the transaction. So whatever pin that you enter that gets validated. And number two, you know, the money gets debited from your account. So both these actions actually happen within the firewalls of the bank, right? In the UPI world, when it's a PhonePay or a Chiller, those two aspects are sort of, you know, actually being broken. So you have authentication happening at PhonePay's end, but the authorization happens with an underlying bank account. So, you know, so that new method of making payment banks will not be able to take out their card numbers and give it out to a third party app to process. That's how, you know, the technology is structured. So I didn't know if it answered your question, but you will not have PhonePay having a Barats QR option simply because they don't have a plumbing into the bank account directly. Yeah. So the UPI serves that purpose, right? So UPI today, what does it do is that it dips into your bank account and you could have any payment use case on the other side. So absolutely. Yeah. So this QR code will carry the merchants VPA as well. So if you use a Thays or a PhonePay app, you will still be able to pay using your existing, you know, PSP app. Hey, the question on beacon. So when you place a beacon, how does the flow differ? And I think you mentioned about the capital costs when it comes to some of the other modes and how Barat QR is cheaper. Yeah. So when you place a beacon, how is the flow different and what additional capital cost is incurred generally in the whole flow? So what happens is that you have QR as a base, you know, product and what QR does is that it provides merchant information, right? Which is what a postmission also does. It ties a transaction to a merchant information, right? So there are use cases around, you know, if you are to visit a supermarket, if there are offers being driven by by an FMCG company, that's where the beacon sort of comes in. You know, so they're being tested out in terms of saying that in reliance retail, there's a pilot out where they're trying to see if they're able to drive offers when when you pay or pick up certain SKUs. So those, you know, offers get applied as you sort of check out for that transaction, right? So the various methods or form factors in which, you know, this QR can go in essentially is being driven by what is the merchant use case? Like, for example, NFC in the campus example, NFC becomes a great tool to actually make that payment. You don't even have to open your phone. A lot of the canteens have a very poor internet connection. So there, you know, NFC will find relevance. Similarly, if you go to a supermarket beacon becomes relevant because you can put it up on a end of a rack and, you know, whichever consumer is sort of transiting to that, you know, the offer can get extended. Yeah. Okay, thank you. Next up we have Nishant Kumar. He's going to talk about the year that wasn't reviewing payments regulations. Nishant Kumar is a senior policy associated Dwarah research. He will give us an overview of the payments ecosystem in India and evolution of regulation of different entities. Check. Check. It's fine. Okay. Hi guys. My name is Nishant. I work at a place called Dwarah research and I predominantly do policy research, which deals with financial systems design. So my sort of my topic here is to talk about payments regulation and review the, so what has happened over the year. And before we sort of get into what I do and sort of going back into this topic, I just want to show you two pictures. And given that most of you work in this space, this aren't going to be complete news to you, but it's still something that we would like to sort of see is in the space of retail electronic payments. We've seen that volume of payments over the year and given the starting with of the year from demonetization in 2016, we've seen several policy pushes towards increasing retail retail electronic payments. Right. So to just take a look at what has happened over the year in terms of participation, we've seen that there is 11% growth in volumes of all electronic payments. And that is in general a good thing because over the last year, starting from demonetization and several other policy efforts, as well as expansion in the market quite heavily. We've seen growth in terms of all sort of payments modes and you've this growth is sort of typified by the fact that you pay us SD and other small value typically transaction modes which are for small value transactions. You've seen immense growth in that and which could in some sense say that yes, there has been sustained growth in participation in these retail electronic payment modes. Right. And yet this is a nice picture that came out as part of a live mint piece in November 2017. I'm sorry about that, but which basically tells you if you were to look at ATM withdrawals or the amount of cash is still being the most preferred use in terms of payment. Right. So you've seen the the level of ATM withdrawals have come back up to pre demonetization levels and this graph shows you and if you sort of look at the green light here right. It sort of gives you the ratio to the amount of ATM withdrawals over narrow money or M1 M1 is typically this financial term that's used for anything that is cash or cash like modes of payment which is just demand deposits in your bank account plus currency in circulation. Right. So if you see that it it's very interesting that it comes back up almost to the levels of what it was in the early 2016 or 2015 and which would which would beg the question of whether or not we have in in some sense become a less cash economy have we start of truly adopted as an economy in like the most macro term possible the macro sense possible have you truly adopted to actually transacting in more retail electronic payment modes. Right. And this is sort of where we wanted to analyze over the year there have been various of course like the presentation before which talked about Barat qr there's been a lot of industry led efforts. There's a lot of market infrastructure that's being built, but then there's also been a lot of policy changes that has been made in order to sort of incentivize this move towards having more digital payments in general. And that's sort of what I'm going to talk about which is what is the role of regulation or policy in this space and how has it affected over the year. And I'm sort of I probably cheated a little bit in sort of showing you what it hasn't achieved already in this year, but that not necessarily means that I would want to go through what those changes are and sort of see if some of these might have a latent effect and some of these might have an effect in the future and maybe we can sort of gauge whether there are, at least in terms of regulation policy are they moving towards in the right direction. So sort of before I quickly get into what the exact policy changes were, we sort of want to discuss what is the role of regulation in this. And here we want to talk about a little bit about RBI right. RBI is the principle regulator in this sort of space. And then the, in terms of a first principles context you would assume that the role of the regulator here is to maintain certain core principles. There are certain non-negotiables that comes when you're talking about payments and payments regulation purely because of the importance of the function that it offers. In a design perspective, given that we look at financial systems design, from a design perspective if you look at it, payments is usually like the pipelining towards the entire financial system. So whether or not whoever the institutions are, how I connect every transaction between financial institutions, between consumers and businesses, between business and institutions are connected through different modes of payment. And typically we've seen over the last few years, this is last few decades, this has become largely electronic right. So this is a very much an important space for the regulator. And the core principles that the regulator would typically look at is financial stability, consumer protection, market conduct, anti-money laundering and institution neutrality. And this is pretty much like as broad as they are right. So the way you would want to influence or maintain these principles is through sort of regular policy checks and regulation. And this is again from a first principles context, not necessarily saying the regulator is doing all that, but from a first principles context. And although like typically at least in the market, it's usually we think of regulation as rule setting and enforcement. So if we sort of step back and look at what RBI has done over the years, at least the intention towards has been the development of the payment space. And this is in some sense a little too much interest in the fact that they've started releasing visions for their payment systems and payment system regulations since the late 90s. So RBI puts out on a regular basis vision documents which talk about what they plan to have done in the next few years in terms of policy and regulation and how to better create an atmosphere for payments. So the Vision 2018 statement says they wanted to build more less cash India by influencing the payment systems through robust regulation, through responsive regulation, robust infrastructure and effective supervision and customer simplicity. So these are all things that you would typically see in any sort of vision statement, all broad statements that have been made. But if you take a step back and look at it, it's actually a good thing given that the interest is there in sort of developing the market. And this is something that it's often seen as the mandate of a regulator is to also look at the development of an emerging market, especially if it is of primal importance to the system. And they do this typically like there is a lot of, you know, often regulators and policymakers like their five C's, their three C's and all that sort of a framework. But what they do put out in the vision statement is to have better coverage, convenience, confidence, which was an important aspect that we touched upon even in the last presentation. Convergence in terms of making sure all policy, all institutions that perform these functions are at par or almost at the right scale, having a level playing field, and most importantly cost, right? So as a regulator, you do have control over certain cost functions that you can handle. And typically what we've seen with the MDR, for example, is a typical example of how RBI is trying to sort of subsidize cost in order to promote the market, which is necessarily comes from its own mandate of developing the space for digital payments, right? So this is sort of something that I wanted to do before starting to look at exact regulations, which is to just put this idea of there is a regulator who's looking at enforcement and setting rules of making sure that the system doesn't crash. And on the other side, you have also this role of developing the market as much as possible. We could debate about the efficacy of these developments, efficacy of these policy transmissions, whether or not they're even doing the right thing or whether or not they're inhibiting growth, innovation, all that. But in a broad sense, there is this mandate to do this. So now typically coming to what has changed this year, right? So there's been since demonetization, and even before that we've seen a lot of government as well as regulator pushes towards sort of enabling the space. And it's almost really surreal because if you see the number of departments in the government as well as the RBI thinking about regulating, let's say something like PPIs, it's immense. So you had Meti, which was the Ministry of Electronic Information Technology, and you had RBI coming out with rules for PPIs, which you would not see in so much interest in the space. So what I'm trying to say is that the fact that there has been so many institutions involved in sort of trying to influence policy just shows the amount of interest there has been. And if I tied back to a lot of things that have happened over the year has been more or less being influenced by the Vattel committee on digital payments last, which was concentrated in 2016, right? So they came out with medium term recommendations on how to strengthen the digital payments ecosystem. And my colleague Malika I think had a session last year on this, where she sort of broke down all of the recommendations made by the committee. I'm not going to go through all of them, but some of the important changes that have happened can be clubbed and recommendations as well can be clubbed under four big buckets. And if you look at these buckets, they would have been one has been the need or the requirement to have an independent payments regulator, which is not the RBI. And there have been certain, I will come to that in more detail, but that's been a big sort of discussion point across the regulatory space as well as in the media, as well as in the market, whether or not there is some bias with the fact that RBI does control the and operate the payment systems as well as regulate payment service providers. And maybe that is a good point to raise because that might bring out the need for an independent payment regulator. The other sort of interesting recommendation which came out was interoperability. And we have definitely seen some movement on this. Again, I'll talk about that in a little more detail meant to make sure that both from a consumer and a service provider frame of reference, you have interoperability between all payment service providers, including banks and non banks. So that was a big recommendation that came out and which again was talked about a lot over the year. And then there was a few on promoting digital payments and incentivizing cash in general. Again, a lot of these have, these were really small recommendations, which were easy to implement, I would suppose. And there has been, and they've taken different forms and shapes, whereas, and in general, that's something that's continuously happening even without the VATL committee. We've seen that happen over the years. You've had additional charges on ATM withdrawals, for example. You've had charges for you to transact out of your digital wallet into a bank account. So these sort of disincentives have already existed, but then we have seen some more of that and I'll talk about it. And finally, it's about ensuring consumer protection and data protection. This is something that we've not seen as much movement as in this year as we would have liked to seen because this is a really important space. And again, there has been a committee that's been constituted to look at this and generally data prediction in a larger sense or not just finance but also in other sectors. So that's something we hope to cover as well. So the idea was that these are the big recommendations made by the committee as well as a lot of changes that we see in the market can be bucketed under these. So coming to the first one, it was the case that, like I said, the VATL committee had looked at the fact that RBA was performing both these functions of being an operator as well as a regulator. And maybe it would be more prudent to have and it would also increase competition if we had an independent payments regulatory board. And to do this independent body, they had two kind of structures that they looked at. One was completely isolated regulators, which was RBA and IPA, which was one structure that they did look at. And the other one, which has been sort of adopted, has been with having an independent committee within the RBA. And that's something that's happened now, the Payments and Settlements Act has been amended to create this special independent body payments regulatory board within the RBA. And there have been questions on whether or not and what are the functions of these, what are their main mandates and what is going to happen in terms of how are they planning to make it a level playing field for all payment service providers. What are the general mandates that they would have. That's sort of unclear, but what has been clear in some sense has been the fact that the RBA welcomed this move when it did happen and said that it would work much like the monetary policy committee. The monetary policy committee is for those who might not know is a committee within the RBA, which is predominantly and very specially equipped to handle the changing of interest rates. While the considerations on interest rates has been considered by the MPC, the regulator is still the RBA, which then imposes all the rules that have come up from the MPC. So they do sort of envision the PRB to perform in a similar manner. Again, there can be questions about the efficacy of this process, questions about how effective this will be in sort of allying concerns about having a more level playing field as well as creating a little bit more competition in the space between banks and non-banks. For example, because there is general the current narrative is the fact that and that may be true in a lot in a large sense is payments is pretty much a bank led sort of industry. And we're and non-banks are pretty much catching up at most points of time because there is an imbalance in terms of function and power. This is one big recommendation that did come through and and maybe something to also sort of look at in terms of what's going to happen in the future. The other big thing which I did touch upon earlier was the whole idea of interoperability, right? So in October, for whoever was already in the industry, you might already know and in October, we had this whole new guidelines for PPIs that were issued. And this sort of allude to the fact that you will have partial interoperability in the beginning, meaning that consumers who have access to wallet money stored in wallet A and wallet B can now transact between those wallets without having to go through their bank account. And as was in general in the larger scheme of things seem to be something in the right direction, given the fact that they also promised that you would have interoperability with banks, wallets and banks will also be now interoperable in the future. And this is something that came out of the recommendations and also something that industry participants that we had spoken to had said that would be absolutely necessary if we were to sort of compete in the larger market. The picture that I wanted to show you and again Madhu had probably a better picture, which was similar in sort of showing you what is how these transactions happen and the fact that even if interoperability is now enforced, there is some concern of whether or not they would still have to go through the banking system. One of the what the committee recommendations was the access to RTGS, which is the banks payment network is how they would transact with each other at a real time. But that that that's probably not something that we don't have enough clarity about, but I don't seem to be in operation, but it is the case that now you would have partial interoperability through UPI. And that's something that's quite interesting to see how it picks up. I know there's been a lot of concerns within the industry about the deadlines that have been set up. I remember that it was complaints was required before the 31st of December and there was a lot of you know running around to get that done. And what also came out in the guidelines interestingly was a full KYC requirement. And this again is something that could be seen as both positive in the long run, but really, really, and almost a deterrent in the short run for the mobility of the mobilization of digital payments, especially through wallets. Why this was the case is that earlier if you had stored amounts and transacted with a lesser than 10,000 rupees in your through your wallet, you didn't have to do KYC. And now it is the case that almost all wallet providers are supposed to get complete KYC done for all their customers within 12 months of of them having logged in or half of them since the day they start using those wallets. And that comes at a cost because that increases a lot of operational costs for the wallet as well. And in some sense, it can be rationalized over the longer term, but that's something that happened and we don't know if that we haven't really seen the effect of how much interoperability will now impact in terms of growth of digital payments yet. But this is one of the largest things that I would say that happened in the policy space. But not to get too much into the details, but then I just wanted to show you a little bit about why and to rationalize some of these changes is often if you look at function versus regulation. And you see this across the entire financial system is that you have different hierarchy of financial service providers and then have graded regulations for them based on their functions. For example, if you were to take the payment space, you have functions such as cash out having in some sense using the value that is stored by the customer with you and also interoperability. So if you look at the PPA, for example, when post this whole change in the guidelines, you now have partial interoperability, but it does come with a full KYC requirement. So you can somewhat see this as a sense of harmonization to what would happen with that of a payments bank. So payments bank had similar sort of, if you see now that they also have a one lakh transaction limit that can be stored and they also have required a full KYC. So if you see the whole idea is that once there is some sense of the industry has grown large enough or the particular type of institution has grown large enough that you can start rationalizing and moving towards the larger setup of what regulation should be, for example, for a bank. And to give you a little bit more context is that why a PPA would not have a cash out facility available or will have highly restricted use of funds that has been stored with them can be sort of compared with that of a bank which has cash out as well as almost complete good use of the funds that is stored with them. Comes with liquidity and capital regulations. Comes with the fact that now if I am someone who stored money with a bank, the bank has to sort of put them in sort of SLR or sort of purely liquid instruments that they can make sure that the money is not completely lost. In the PPA setup you have an escrow arrangement to make sure that funds are used in the right way in order that could be restrictive. It could not be optimal, but the function there is to make sure that the function overall in both senses is to make sure the funds are kept safe. And also there is liquidity for you to for a customer to pull out cash whenever they want. And there is no sort of crisis that the bank has. But sort of coming but just wanted to show this only to sort of say that moves like these can might not be completely rational but can be some things that cannot be looked at independently and sort of you have to look at what does that mean when I look at harmonization to a larger extent. Don't want to stress too much about the other two but then in terms of promoting digital payments and disincentivizing cash usage, something that even Madhu had sort of alluded to was the MDR. The Vathal committee interestingly had said the MDR was in general a nice move in terms of promoting merchants to start accepting digital payments. The reduction in MDR and the whole regime but what they did say that in the long run MDR is something that should be set by the market. In the long run it doesn't make sense to regulate MDR purely on a functional level. What they should be doing is probably regulating the interchange fee which is the fee between the issuing and the acquiring bank. And not the MDR and not the rate or the fees that is set between the merchant and the bank. And this is something that they did say but if you see regulations or the guidelines that came in December almost a month or month and a half ago MDR was, RBI went in the opposite direction and sort of reduced MDR to now have a component which would be dependent on the size of the merchant. So if there's a merchant whose turnover is less than 20 lakhs then for transactions that are more than 2000 rupees then you had a reduction in the MDR costs if you would compare them with a larger merchant. And this RBI rationalization here was to now I can have more merchants because they feel that the MDR is so low that they would start adopting digital more. And if there are people who have a larger customer base and sort of serve a different sort of customer segment which does not have typically access to merchants that do digital transactions. This would be in some sense sort of enabling both from a merchant side as well as from a customer side because as they see that smaller merchants are accepting they would also be more willing to pay digitally. But then again again this is something that is worth a good days of debate because we don't know how the larger sort of implications are having such MDR. And we don't know whether this would be the case if over time RBI realizes that they would slowly take you know stop this capping of MDR. Then we don't know whether there will be a sustenance or in terms of participation. Right now on the short term it looks good. Again we haven't seen the sort of numbers that go with it. And that's one thing that sort of should point out. Finally on the ensuring customer prediction and data prediction bit like I already said there's the Shri Krishna committee that's going on. My colleague Bani I think should be in the afternoon and she sort of worked a lot on sort of providing recommendations to the committee on the payment side. So that could be something that you anybody's interested could talk to her about. On the customer prediction side there's something that has been sort of mixing in lately has been the idea of limited liability. Now RBI has enforced a regime of limited liability on banks is that now based on whether or not a customer has reported an unauthorized transaction. So if you are a customer and you have an unauthorized transaction and you reported within three days the entire onus or the liability falls on the bank. And the longer it goes there would be some amount of liability that the customer takes. So this sort of limited liability framework has been put into place which is now taking away the onus from completely from the customer to have done, you know to have reported to have had there it is their responsibility to claim any money that has been lost through unauthorized transactions. And that sort of regime has been taken over and this move towards limited liability seems to be a good move towards in terms of customer prediction. But we haven't seen that in in some sense for the non-bank players which is essentially could be something that could be in the range and that could ensure that there is a lot more that there is some amount of consumer protection. And why I sort of say this is I'll come to that a little bit but as much as I would love to give you a scorecard as to how we've done this year. But that's pretty much impossible because a lot of these changes as I said will need some time to see whether or not they've had impact on the on if it's just a highlighting statement. I would have said no because of the fact that we still see cash is the most prevailing and it's almost that it's not even reduced. There's no trend of reduction in terms of cash usage and the preference for cash. So I would have to say that in some sense that they didn't measure up the changes this year haven't measured up. But that is not to say that they will not have a latent impact. It could be the case that we see them a little bit more. And so how we sort of maybe should think about how policies measured up is by using RBI's own metrics and sort of see whether or not there has been an increase in coverage. And this is something that we do want some more clarity on to be something that's often being put up maybe in in some sense like a disclosure could sort of tell you whether or not there's been increased access. We do feel that there has been increase in the number of post terminals and that's something that since demonetization picked up a number that I read somewhere was about 97% increase in the number of post terminals in the last year. And that's immense. But we don't know about the participation and the use of those by consumers. And that's something that's important to sort of measure to make sure that we are on the right track and also to keep ourselves checked right. In terms of convenience, we see a lot of movement. Again, the Bharat QR is one sort of move towards it interoperability is another confidence as well as cost or some things that are still being worked out. You know, the confidence does matter a lot in some sense when we had, we had done a small, my colleagues had done a small sort of qualitative study in rural areas to see whether or not adoption of mobile payments were picking up. And it's often seen the fact that some of the interviewees had said, if transacting by mobile is the most is probably one of the most dangerous things for them because they often relate to it as fraud. And this was a really powerful statement and about 15 of you ease. We, and all of them in some sense resonated the fact that digital payments was not as they did not feel secure in terms of using it. This, this probably is an effort that has to be both from the regulator as well as from market sort of improve the confidence in terms of getting new markets and new customer segments to start using digital payments. Then that there seems to be a lot of work made that needs to be done on that in. Yeah, as I mentioned cost yes we are going through the mdr regime that's the one of the biggest cost reduction factors that we've seen but we don't know the efficacy of how it will turn out to be in the long run. So just to sort of end this is something that I'd already said this. And it's not just the idea of, of payments and payments regulations not just something of primal importance here but it's also of importance to the entire sector. If you look at it almost all products and all sort of services that are financial nature are going through the payment network and so in some sense we see it as the pipeline. You see the movement towards EMPS, which is for a pension scheme you see a lot of insurance providers now serving pension products online and through apps, as well as using some of the UPI based, as well as other USSD based sort of payment modes to start working these products out to the larger market. So what I'm trying to say is that there is definitely an adjacency to a lot of other financial sector, a lot of other financial institutions and other products that payments regulation does deal with. And in some sense that's it's if we were to talk about larger, larger financial inclusion and sort of getting in consumer segments that are not typically included already it's something that and this is why policy in this space might be of really important and could be of high value here. Sort of I'll stop there about nine minutes. If there's any questions, I'll have you look take them now or offline. How does regulation compare the regulation around the world compare with regulation India? It's sort of hard to compare in some sense because again, I mean, it's markets are extremely different in some sense we have very different demographic that we're trying to include very different demographic and also different sort of behavioral aspects that come into play. But in some sense a lot of at least our views have been if you were to give me if I were to give you one country or one regime it would be Australia I suppose because they do have a very pretty robust and more very thoughtful regulations around this space, especially and that's something that we are following the whole idea of independent payments regulator came probably from there is that they do have one as well. There are other jurisdictions that do but in some sense it's a good model to follow. But nonetheless we have to balance that with the fact that our demographic is completely different. There will be the need for a lot of fiscal activity and sort of subsidies in terms of getting people on board. On the regulation side that would probably be the best model but there's anything more specific as to what aspect that I can tell you because that's probably the best role model I can think of. I was just curious if the other ways people go about these like countries go about these regulations. Which one particularly? Maybe about interoperability of like digital payments. So interoperability is something that I think all countries did that at some point all regulatory regimes did tackle because payments were not typically all bank led at you have different sort of. So when you're talking about savings or something it is global to figure that as something that you would have with predominantly with banks whereas in payments it was globally the fact that there were a lot of non bank players involved. So I think recently you had PSD which is the directive which allowed for interoperability between banks and non banks. So it seems to be I mean some countries had done it earlier but it seems to be a sort of hurdle that everybody is trying to cross in terms of making sure that there is access completely. And that's also because technology in some sense is growing together. All different jurisdictions are facing similar problems. Since you mentioned the Shri Krishna committee which is working on data protection and also Tri is working on another data protection. So how do you see that those two playing out will there be what will be the dynamics between the two of those? I have no idea because of the fact that all we know from either at least in the Shri Krishna committee has put out a white paper and asked for questions on consultations and something that they will at some point have to or at least talk about it. In some sense the only sort of the hope or why I did mention it there was that there was one part of the committee does talk about changes to laws and legislation. Especially in this context it's the payments and settlements act that should take care of data protection aspects and that's as broad as they've sort of mentioned it. I'm not completely sure might have to check but that's that's pretty much all there is. At some point they would have to give out more clear right now it's in the car. They just finished for public opinion the time for public opinion. So people are probably giving in their their recommendation but it's the hope that whatever learnings that they do come out with would be significant and would be readily adoptable in terms of making those changes that you'd want in the regulatory environment to protect data. Personal data and consumer data but no real thoughts on how they would interact with those of try for example. Any more questions. All right, we have a little bit of time left. Okay. Thank you. NFL broadcast. That was normal. I'm very unhealthy. Welcome back guys, we have a panel next up on structuring teams and organizations and fintech. It'll be moderated by Adam Walker. And this panel is on how companies need to rethink how they structure internal teams and to be more agile with policy changes and regulations. There'll be time for questions. We'll have volunteers. Hello. Hi everyone. Good morning still. So I'm Adam. I'm a product manager at credits and we'll be covering the topic of hiring for financial technology companies. Because if you're coming from a pure like tech product background or a pure banking background. The experience you'll find in working at a financial technology company or starting one is that the culture is very different right and that will impact the recruiting for your company. So, first like to introduce Chaitra and Lucas and Aditya who is the head of engineering at Instamojo will be joining us in just a few minutes. So to get started, maybe Chaitra you could give a little background of your startup simple as well as maybe tell us what you were doing just before you had started the company. Thanks. Thanks Adam. So, I am the co founder of simple. Simple is a fintech company. We like to think of ourselves as selling peace of mind to customers. What simple does is our model is inspired by the Kirana store Kata. So we work with online merchants to give them the capability to provide a VIP checkout experience to their best customers. It's inspired by a line of credit which is what simple provides and it's an end to end platform. So we take care of the invoicing the billing and the settlement everything. The idea is to eliminate friction at the point of sale and also post purchase. My background before starting simple was so I by training I'm an engineer and I also got a business degree. I worked as a software engineer long back but it kind of feels like in my past life. For the most part after business school, which was about 10 years 11 years ago, I've worked in launching new business initiatives for small and midsize companies. So that's been my main background I would qualify myself more as a product manager. Before I started simple. Thank you. Lucas, why don't you tell us a little bit about your company namaste credit and your background. Thanks. Hello. Okay. So Lucas Pianchi founded namaste credit or co-founded namaste credit, which is an online marketplace for for loans. We're very focused on SME loans and I think what kind of differentiates us is the fact that we do all kinds of SME loans. And when people think of SME loans, they think of unsecured SME loans, but we do all kinds. And so we've developed a platform that speeds up the process improves it engages all kinds of different parties from the lenders to channel partners to the borrowers themselves. Before namaste credit, I had helped build a company called couple partners, which, which we sold to Moody's ultimately. So it was a financial research and analytics outsourcing firm, not very tech oriented at all really, but but I helped build it and bring on clients in the US as a head of BD in the US. And we ended up selling it for about $500 million to Moody's. So after that, wanted to find something more exciting to do than work at Moody's for a while. Before that, I was actually an equity research analyst. So my background is in finance and I'd worked at several banks before. And so myself and my co-founder actually brought the finance experience that that Adam was speaking about just a minute ago. And then we partnered with a CTO based here in Bangalore because this is where all the best tech is built, right? So that's it. Thanks, Lucas. And did you have a welcome. Thanks for coming. So did he has the head of engineering at Instamojo. So maybe if you could tell us maybe a little bit about what you do. And then maybe what you were doing just before Instamojo, although I know you're part of the founding team, the company, right? So please. So I'm one of the co-founders of Instamojo. So I take care of engineering risk and compliance. Before Instamojo, I was a research fellow at IIT Bombay, which was the first position I had after my engineering. At Instamojo, we help small merchants accept payments on the internet. We try to make it so that they don't have to deal with banks. They don't have to deal with paperwork. If they don't need to, they don't have to deal with integrations at all. Right. So we try, like, for instance, if you're a musician and you just want to sell some music online, you should have to set up a website, host your music somewhere, then integrate with the payment gateway, talk to a bank. So the idea is that you should be able to come to us, upload your music to us, get a link and share that with your customers. It's as simple as that. Right. And we try to do this for a wide range of use cases, not just obviously not just files or music. Right. So yeah, the key objective is to make it easy for small merchants to accept payments on the internet. Great. Thanks, Aditya. So I'm going to follow up a question with you about how engineering at your organization is impacted by just the nature of being a payments company where you're obviously regulated, right? But your core product is a software product, right? So if you could share a little bit about how that's impacted the way you think about recruiting at your company, as well as just sort of the DNA, the mindset of the organization when it comes to product. Yeah, so an important part of being in the fintech space is to make sure that there are certain attributes or aspects which you take care of very carefully, right? So for instance, security is paramount. If somebody enters their card number on your page, you don't want that card number to get leaked and be used by someone else. You have to have a very strong bias for correctness, right? I mean, if your bank showed you the wrong balance, you would completely lose faith in them. And these are aspects which kind of differ from, say, a very fast moving product company. Whereas, I mean, you'd really want to be able to focus on deploying things quickly. In a fast moving product company, you'd ideally be okay with a bit of breakage, a bit of failure. Whereas there are many aspects of a payment company where you absolutely cannot be okay with breakage and failure, right? I mean, you're going down, could impact somebody else's livelihood, entire livelihood, right? So at the company, we focus, we silo ourselves into, I mean, we have several silos, so to speak. And there are parts of the company which have a certain kind of DNA, and there are other parts of the company which have a different DNA, right? So for instance, our payment and platform teams have all these DNA attributes which I just spoke about. Whereas our growth team has a very different DNA, right? So if you're setting up a landing page, if you're setting up the registration process, that we're okay with a much more fast moving culture where we're okay with breakage once in a while. Whereas on our payment workflows, we're absolutely not okay with that, right? And how does that impact your release cycles? So typically, in a day, we do maybe five to ten releases. At the high level, we still move pretty fast. What we do is we try to take the best of everything that we know of, that we are aware of as an engineering culture, and we try to amalgamate that, right? So a lot of folks in FinTech are used to very large release cycles where you take an extremely large feature, you build the entire thing out, get it vetted by compliance, legal operations, and then you release it, right? There are security audits in certain industries that you have to take care of. So there's a lot more to do to get something out to a production server in FinTech typically. Whereas one of the best workflows in product companies is that you do a very iterative release cycle, where say you take a large feature down, break it down into weekly sprints, then you take small components of that and just keep deploying those to production, right? We try to take a mix of both, and so we make sure that what's going out is secure. We have a very strong peer review process. I mean, you cannot, so nobody can merge their own code in. You have to get it vetted by someone else. We make sure that the people who are at least vetting the code, they have background checks, which you have to do, for instance, if you are on the PCI compliance, you cannot push something, like not everyone can push stuff to your servers, right? So we try to make sure that we amalgamate various best practices and get the best out of that. Okay. Thank you very much. So I have a question for you both. Have you found that as awareness and as people move from more offline activities to online in their discovery, right, of products, and maybe your companies haven't been around long enough, but maybe you have seen a little bit of this, how that's impacted the culture of your organization where maybe you had more of an outbound activity initially and now you have more of an inbound one, right? And maybe, Lucas, you can speak a little bit about this because most of your clients, right, are more offline. Is that fair to say? Yep. Okay. Great. And maybe if you could talk a little bit about that, how that's maybe impacted. So if you're thinking about things from a business development perspective, how that's impacted the culture of your organizations. Sure. So I'd say our core customer said it's still largely offline. What types of businesses do you work with? All kinds of SMEs. Okay. Give me an example. You can cross the board from schools, educational institutions, retailers, wholesalers of all kinds of things, small manufacturers, et cetera. That basically any company that has turned over between one and 50 crores. That's kind of the core customer set. So the very end customers, which are the ones getting loans through us, basically are largely still offline. And in our space, they tend to work with intermediaries, right? They tend to have channel partners that have people that they trust and know that do things for them. And that goes for loans as well as many other things, right? So what I've found is, especially in India, people tend to have other people do things for them. And so that goes very much in our space. And so what we've done is engaged a number of the channel partners, some of which are offline, but a number of which are also online. And to a certain extent train them to work with us online. And so that's how we have worked, kind of having champions, if you will, that have broader reach out into the broader, say, Indian community of businesses, but that they themselves are fairly adept at doing things online. So that's kind of been the strategy that we've deployed. We continue to do that. I'd say there's been maybe a minor shift of even the channel partners coming online, or yeah, somewhat more significant shift in the channel partners coming online. These are people like chartered accountants, right, that tend to have to do things online anyway, like file taxes for their clients, like file compliance paperwork for their clients. And so that shift has been happening kind of naturally, but we have been pushing it a little more through, again, kind of training them on it, asking them to do this stuff, and ultimately showing them the benefit, right? When you get a big benefit out of doing something in a particular manner, then you'll continue doing it in that manner, or you'll start doing it in that manner, and then do it even more. So in our case, the big benefit of working online is that you're actually able to apply with many different lenders at the same time, right? If you try to do that in an offline fashion, it's kind of impossible. Trying to approach 10 different lenders at the same time is not really feasible. And so doing it online is the benefit that the channel partners get. Okay. And so has there been learning, you know, over the last, it's been about three years since you started the company? Yeah, almost three years. Okay. And so when you first started, and how you thought you'd go about sales, right, and what channels would work, how things had changed and how that's impacted your recruiting. So say from, maybe it was more of an outbound strategy to more of an inbound one, maybe more offline versus online. How has that affected things in your organization? Well, we actually tried to push the online element with channel partners from the beginning. So we actually haven't changed that element too much. I'd say the type of channel partners that we've engaged has changed somewhat. Where today we're working more with channels that were already in the loan facilitation business before, and we have just trained them to do the online portion of it. Before, you know, when we started, we were a little bit more focused on folks that had never done loans before type of thing. And so that was the shift, but maybe they were really active online already doing other things. Okay, right. So there was a little bit of a behavior already as far as doing some activities online. Again, we started with those types of folks, but we found that some knowledge of the loan process is important to set expectations with the end clients as well. And so, again, we've focused a little bit more on folks that are already in the loan business or loan facilitation business, but hadn't done anything online before as such. So we've trained them to come online to do things, shown them the benefit of it, et cetera. Got it. Okay. That makes sense. And Chetra, do you have anything to share on this topic? As far as sales and marketing, how things have changed in your expectations when you're first starting the company? And maybe also, if you could speak a little bit about, is there a regulatory aspect that you have to be concerned about with your business? Yes, absolutely. Okay, yes. So if you could share a little bit about that as well with Simple. Sure. So I think for Simple, when we started off the nature of the business that we were in, we were planning to provide credit as a convenience to our customers. So naturally regulation was a big question mark in front of us. And so for us, me and my co-founder, we had to address regulation even before we were able to raise the seed round. We had to figure out a solution there. And the way we went about it was one is, we spent a lot of time ourselves trying to understand what are the possibilities under law? What are the do's and don'ts that are clearly defined? What is the gray area? And where is their room for creativity? So when you're trying to invent something very new, I think the whole, for us, the entire approach was, we were like the entire traditional payment infrastructure is a legacy of the MasterCard visa era. And we thought that needs to change. And the only way that will change is you have to create something new from ground up. So when you're creating something new from ground up, there's one advantage that it's new. So you're reimagining the world. So you have a lot of flexibility in that sense, but you also need to operate in the real world. And therefore, you need to understand to some extent, what are the boundaries of the actual world that you're operating in. So we spoke to, we reached out to advisors, people who are experts in this space. Some of you must have heard of Shingini. She used to be the CEO of Paytm Payments Bank. Now she's the head of Citibank Retail in India. So she was our advisor. At that time, she used to work with PWC. She's XRBI. So we found a great mentor in her and she really helped us figure out the compliance structuring for our business. We had to do that before going to, you know, even raising our seed round because that was the first question that was asked of us. Once that compliance piece was figured out, then it was about, you know, going up and going ahead and setting up the team. And I guess for us, what our approach to hiring where it differed, especially in the early days to now, so we're about two and a half years old now. In the early days, the most important thing for us since we were reimagining the future was the ability to think based on first principles. So if you look at the first set of people that simple hired, the first 10 people, that was the single most important criteria for us. Being able to think on first principles, not being blinded by how things are, being able to ask why not and what else, you know, what would the ideal solution be? So that was important. And of course now things have changed, you know, two and a half years in. I guess the way things have evolved for us in the beginning from a sales perspective, the way we were very clear that the nature of the business that we were in, going after the long tail would require a lot of feet on the street. And, you know, that was not the model we wanted to go after. So in that sense, we are different from Instamojo, which is, you know, you cater more to the long tail. So we went after mid and large size merchants. Like for almost one and a half years, our one year, our sales team was just one person. So it was the co-founders and there was one more guy. And then we added more capacity. Now in the last, I would say six months, we have started receiving a lot of inbound requests from the smaller merchants. And therefore now we have shifted more towards inbound. You know, we hired a couple of people who can take care of the inbound leads and also reach out to the smaller merchants. But our entire strategy again to go after the long tail is partnering with the likes of, you know, either Instamojo, Rezape, et cetera. So a channel distribution through a payment gateway is what we are looking at as opposed to going and integrating with each merchant ourselves. Then I guess the last question that you were asking. So in one more thing that sort of crops up in simple case is credit risk, right? So we are giving people credit and therefore risk is a big thing. But again there, if there are any entrepreneurs in the room, the question to ask yourselves is on day one, do you really need somebody who's a risk expert? What will that person even do when you don't even know what the set of customers who are going to adopt your service are like how they're going to behave, et cetera. So if that capability exists in the founders, it's great. So my co-founder, Nitya, he was ex-Wall Street. He used to have a credit mortgage back security background. But of course it was in a different context in a different country. However, the fundamental vocabulary of credit and the frameworks of credit was kind of covered. And we managed with that for about two and a half years. However, now in the last three months, of course as we grow up and we scale, now we definitely need somebody who's more, comes with experience, who comes with, who can give us the clout that is required and the discipline that is required around credit. So we are hiring somebody who's experienced. So I guess that's just a framework to think about what would, same thing goes to data science. Like early on, do you really, when you don't even have any data, what will you do with, unless as a founder you're an expert yourself, what will you do with somebody who is like a machine learning or an AI expert, right? That person's most likely going to get bored. So it's important to think about, I guess what your needs are early on. And as they evolve, you start adding capacity on that front. Right. Okay. Thank you. And risk I'm sure is also a very important rate in Simojo. Is there also an element of that for Namaste Credit? Lucas, not so much, right? You're not the ones with the loan book, right? Okay. Great. But maybe if you could speak a little bit about that at a payments company, because I don't think, probably majority of folks don't realize that that's an element of your business model, right? You end up rejecting certain merchants, right? So if you could share more about this activity and maybe some of the folks who are involved with that activity. So yeah, thank you. Okay. So yeah, obviously, risk is one of our most important focus areas, right? And one of the things we did was focus on risk from and from a very, very early point in time, right? Because for us, we make a very, very, very small amount of money in terms of like, say, if there's 100 rupees being transacted, we make a few basis like a fraction of 1%. Right. So 100 rupees being lost implies that's like the loss of revenue on several, I think a few hundred transactions, right? So one merchant going bad can wipe us out, right? So for us, this is something that we focused on at a very early stage. This is some feedback we had gotten from, I don't know if you've heard of DJ Patil, the guy who went on to become the chief data scientist of the United States, right? So he pushed us to focus on risk at a very early point. So one important thing about risk is that it's a function of how long you do it and how well you learn, right? So if you start very late, you're going to get hammered by people who are, because if you already have a lot of money moving in, you're going to get completely hammered by people who are already experienced at pulling money out of you. So this is a function we started very early and we focused on hiring from companies which have a very strong focus on risk. So we'd hired from people like PayPal, Amazon in India, we hired from people like Flipkart. So the folks we have in our risk team bring in a lot of their prior experience. And that's generally our hiring philosophy across the board. We try to bring in people who bring in a lot of diversity and a lot of experience, right? And we largely give them a free hand and allow them to do like what they feel is right. And yeah, they're still here. So we've not been wiped out. So I guess we're lucky. Good. You're risk aware enough, right? To still be here today. No, thank you very much. And another question, we have about maybe five more minutes here and then we'll have another five minutes for question and answer. So I wanted to ask the three of you, some insights maybe for... Oh, this is included. So we have about one minute. Okay, great. Thank you. So just quickly, maybe if you could share some, maybe sources for recruiting, like certain industries that you found fit well with your organization's DNA. My experience has been that, you know, we're a company that has a financial product credits, but we found that our salespeople tend to, the best performers are ones that come from typically doing sales jobs at, inbound sales jobs at services companies like digital marketing services versus former bankers. So I'd like to hear if you guys can share some great sources, some tips for the audience. Yeah. I mean, we are still very small. So we are like a 50% team and, you know, what half of them are product and engineering. So for us, I guess the main source, especially for the product development team is internal referrals. So I think the most powerful source has been using your own initial team and then, you know, use the network of the people that are already in your team starting from the founders to start hiring. Serendipity has honestly played a very heavy role. You know, we've been lucky enough to meet, especially in the early days, the right types of people at sort of events like this that we were randomly attending. And those right set of people knew on many right sets of people and we were able to hire. So I think very, very important for me personally, I would think is especially in terms of your hiring team is hiring the right leaders. And if you hire the right leaders, people with the right networks, you know, they'll be able to bring like the whole queen bee model, right? If you have the queen bee, then the worker bees will kind of come. That has been there. And another thing with respect to hiring that has changed from the beginning versus now is it most functions in the early days, we were focused more on generalists because when you're young, you need people who can do a lot of things well. But I think as you get older, there are certain areas, I guess I agree with Aditya, like what you were saying earlier, there are certain depends on, you know, there are certain areas where you need security, correctness, reliability, but there are certain need, certain areas where you need to be able to build fast and break things, right? So depending on those, you know, the nature of your evolution and your needs at any given stage, specialists start becoming necessary as you grow older. So I guess that's kind of our concept changed. Can you guys maybe give like a few words answer, because I think we'll cut to a Q&A in a moment, yeah. I'll be quick. Basically on the tech side, it's been everything and everywhere, referrals, recruiters, you know, just knockery kind of thing. The main thing being, you know, kind of a rigorous interview process and folks initially, like you were mentioning, that have a broad kind of view and vision and capability set and interest level. And then as you grow, then having more specialized people on the sales side, we actually haven't had a great experience with bankers either and have also not had a great experience or done much actually with digital marketers like you're saying, but rather bringing in folks from a diverse set of sales backgrounds that, you know, basically know how to engage people and train people like I was mentioning before, we were in the business of training people to get online and use our platform and all that. So that's been our experience on the sales side. Thank you. So of all the functions we have or of all the things we do at Instamojo, I think hiring is by far the hardest by an order of magnitude, right? So to add to what everybody else said, I mean, we do all of that. Our primary focus is on hiring from other product companies. We tend to avoid services based companies because we found that the DNA just doesn't like work well with us. Apart from that, we, I mean, like we look at product companies and then we try not to really pigeonhole ourselves into like certain product companies or certain types of product companies there. We try to get as much diversity as we can. Thank you. Thanks everyone. We have room for two questions. Great. Two minutes. One question. Just a reminder, this is a panel, so it'll be recorded. These guys will be available later. If you want to have a more candid conversation, you can find them offline. Hi, I have a question for Chaitra because she mentioned that you insisted on first principles thinking when you're hiring. I think that's one of the most difficult attributes to look for in a person. Could you give an example of how you hired somebody who showed these attributes very early on in the interview process? That's a great question. You're putting me in a spot here now. So I guess for me, there was, you know, I have to go back in time two and a half years, but when you, I don't have, I did not honestly at that time have a very structured like list of questions that if I ask A, B, C and D, I'll get to know whether this person thinks first principles or not. It was, I guess the main approach I take, it's two fold one is get them to talk about the decisions that they've made in the past and ask them why they've made the decisions that they've made. And that's been my main window into ascertaining whether this person thinks based on first principles or not. And also it gives me an insight into their value systems. And I think one super critical thing for us and probably true for any startup is you want, as I think Aditya mentioned, the DNA needs to match. I guess the DNA is nothing but a reflection of the operating values that are important to you as a company and the person coming in. So asking why behind each decision, it could be changing of jobs, it could be a certain project they executed in a certain way. Getting to the bottom of it has helped me. Thank you. Thanks, guys. All right, I think that's it, right? Okay, great. Well, thank you everyone. Also, Chaitra, thank you so much, Lucas. Thank you, Aditya. Thank you so much. Thanks, Adam. Pleasure. Yeah. Oh, okay. And all of us are going to be available outside of the auditorium. So happy to chat one on one with folks. Thanks. Hello. Yeah. Hello. Yeah. Yeah. Yeah. Yeah. Yeah. Okay. Hello, everybody. Welcome to the next birds of feather session on evolution of, on, on the future of boss. We have with us Abhishek Ahegari from pay you. We have Shikant Lakshman representing cashless consumer and we have the chance from Dora research, a few ground rules before we kind of begin the session, the Chatham house rules apply, which is that if you're tweeting or right or, or making notes about the session, you cannot attribute it to anybody. So everybody comments, etc remain anonymous over here. Otherwise, you can, you can talk about it. So what we're going to do in this discussion today is we'll break it down into two parts. The first session, the first section of the discussion.