Attaching a Concept Note on a Payments-related Entrepreneurial Idea I had 4 years ago when I was in India. Although a lot has since changed, some trends forecast in the concept note have actually become reality - especially the emergence of Co-operative Banks as a crucial channel for reaching underbanked & unbanked population in the rural areas. Thus, the material may still be somewhat pertinent today. Opening it up for any entrepreneur or Entity interested in the Payments area, especially in India- with possible applications in other Emerging economies as well. Enjoy and feel free to re-use

1. A concept note
by
Neel Majumdar
l d
1

2. Concept
The concept
• Start an electronic bill payment company in India that would be a white
labelled electronic payments provider to the RRBs, the coop banks and
the Tier 2 and Tier 3 banks
• Competitive differentiation
– Totally focused on the Tier 2 & Tier 3 banks, RRBs and District Central
Cooperative Banks (DCCBs) and Urban Cooperative Banks (UCBs)
– Less expensive
– L
Less complex to implement
l i l
– Flexible and modular
– Externally hosted
– Pay as you go
– Very little customization but serve all basic needs of banks, including
Tier 1 customer service
– Will utilize mobile and kiosk based payments as critical channels to
serve customers of banks Tier 3 and below
2

3. Concept
H It W ld W k
How It Would Work
3

4. Concept
The types of payments enabled by
The types of payments enabled by
EasyBillPay
Phase 1A
Retail (consumer) bill payments
Utility bills – electricity, phone, water, sewage, solid waste
l b ll l h ld
(where applicable), financial services payables, mobile phone
bills and top ups, various government license fees, tax
payments
Phase 1B
Payments to housing societies, schools, universities
Phase 2
Corporate to Corporate Payments
4

5. Concept Rationale
The changing landscape in Indian
The changing landscape in Indian
banking
Indian banks currently under tremendous pressure due
to:
Global financial meltdown and recession
o Profit margin under pressure due to decrease in credit
off‐take and increase in NPAs
o Management and operational focus on core areas of
lending , deposit‐taking and managing credit risk
A changing regulatory environment
Rapid technological advancements
Heightened competition and consolidation
g p
5

6. Concept Rationale
A key trend: the changed environment
y g
favors increased outsourcing by the banks
• Changing landscape in the banking industry is driving
banks to explore the outsourcing option to achieve
efficiencies.
• Total opportunity for outsourcing in the domestic
banking sector estimated at Rs. 11.2 b for FY08.
(source: Valuenotes J l
( V l July 2008
8
http://www.sourcingnotes.com/content/view/352/55/)
– Little over one‐third of this opportunity currently being
pp y y g
met.
– Majority of revenues earned from voice‐based services in
sales and marketing.
sales and marketing
6

7. Concept Rationale
The mix of services outsourced is moving
The mix of services outsourced is moving
up the value chain
Current Future
Outsourced services generally simple Moving toward outsourcing more value
and do not require domain expertise in
d d t i d i ti i added services to quickly bring new
dd d i t i kl b i
banking products to the market and rapidly scale
o Entry level services like data entry, up across locations.
digitization, data preparation and o Bill payments, Mobile banking, Inbound
validation etc. Remittances, Tax Payments, Insurance
o Al l d
Also, sales and marketing activities like
k i i i i lik Payments, D‐mat facility, Market updates
P t D t f ilit M k t d t
loyalty programs, outbound sales and etc.
inbound customer support As the banking industry matures in its
A majority of the vendors primarily outsourcing initiative, demand for
provide voice‐based CRM services to quality value added services is likely to
large banks. These vendors include large
l b k Th d i l d l gain prominence in the long term.
i i i th l t
international BPOs (like IBM‐Daksh, (Valuenotes July 2008)
MphasiS, etc.), BPOs with substantial
focus on domestic market (like
InfoVision, Intelenet, etc.).
7

8. Concept Rationale
Some Recent Examples in Outsourcing of
Value Added Services
Value Added Services Outsourced
Value‐ Added Services Banks outsourcing these services
Electronic Bill Payments HDFC, Citibank, ABN Amro, State Bank
of India, Punjab National Bank, Bank of
India, IDBI Bank, Central Bank of India,
India IDBI Bank Central Bank of India
Union Bank, Syndicate Bank, Corporation
Bank, Kotak Mahindra Bank, ING Vysya
Bank, Centurion Bank, Dena Bank, Bank
of Baroda
ATM Outsourcing ICICI, Corporation Bank, HDFC
Self ‐
Self Bank ING Vyasa Bank
8

9. Concept Rationale
Another key trend: wealth creation in
y
cities Tier III and below
Rural Sector
o Roughly 70% of India’s 1.145 billion population live in 6,27,000 villages
o Not just witnessing increase in income but also in consumption and production
o According to a McKinsey survey (2007), in another 20 years rural India is:
g y y y
Poised to grow bigger than the total consumer market in South Korea or Canada
Anticipated to grow almost four times from its estimated size of US$ 577 billion in
2007
o The urban‐retail split in consumer spending stands at 9:11, with rural India accounting
for 55 per cent of private retail consumption. (India Retail Report 2009—by Images FR
f t f i t t il ti (I di R t il R t b I FR
Research)
o The total number of rural households is expected to rise to 153 million in 2009‐10 from
135 million in 2001‐02, suggesting a huge market.
Tier II and Tier III cities
o Factors like urbanisation, dual income family units, the growing trend of nuclear family
and a fast‐paced lifestyle continue to boost growth
o PC consumption grew 16% in top 4 metros compared to same period last year and 24%
in next 4 metros
o The rest of India posted a year‐on‐year growth of 55%. (MAIT‐IMRB mid‐year review of
the IT industry’s performance in 2005‐06)
9

10. Concept Rationale
Regional rural banks and rural cooperative
b k ld b l d b
banks could be major players in distributing
g
and accessing this wealth
Rural India boasts of a significant financial network:
88 regional rural banks (RRBs) covering 525 districts with a
g ( ) g5 5
network of 14,494 branches (31 March 2006)
3 tier Short term cooperative credit structure consisting of:
o Nearly 1.09 lakh Primary Agricultural Credit Societies (PACS),
l l kh l l d ( )
368 District Central Cooperative Banks (DCCB) with 12,858
branches and 30 State Cooperative Banks (SCB) with 953
branches or a total of 122,590 service outlets.
b h l f i l
o On an average, there is one PACS for every 6 villages
o Total membership in PACS of more than 120 million rural people
p p p
making it one of the largest rural financial systems in the world.
10

11. Concept Rationale
While there are significant challenges to
g g
using RRBs and rural coop banks as
distribution points…..
distribution points
Currently the RRBs and rural coop banks are
ineffective as distribution points due to:
Lack of a core banking system and other technological
enablers
Poor quality of personnel that are not trained to handle
sophisticated systems
p y
11

12. Concept Rationale
RBI’s and NABARD’s actions are
…RBI s and NABARD s actions are
expected to overcome these challenges
The RRBs and Coop banks are set to become more
sophisticated with RBI’s technology transformation
initiative for RRBs and NABARD s cooperative revival
initiative for RRBs and NABARD’s cooperative revival
and reforms programs
Many of the RRBs and State and District Cooperative
Banks are expected to get computerized and connected
to core banking systems in the next 2 years
Simultaneously, NABARD’s Financial Inclusion
l l ’ l l
program should also result in technological innovation
through the Financial Inclusion Technology Fund
(FITF)
12

13. Concept Rationale
All of the environmental factors
All of the environmental factors
converge to make our concept viable
Cost pressures driving
banks to outsource non‐
core functions
Wealth creation in the
rural sector and Tier 2 and Favorable condition for
Tier 3 towns outsourced electronic bill
payments by RRBs and
Cooperative Banks
Computerisation in RRBs
and Cooperative banks
Availability of mobile and
A il bili f bil d
kiosk banking & launch of
e‐governance initiatives
13

14. Concept Rationale
B siness Model
Business Model
Consolidator/Aggregator revenue models
Banks
Fee per transaction
Fixed fee per month/year
Combination or either/or option
p
Alternate Channel Partners
E‐Gov Channels
Citizen Service Centers (CSCs) Tax and utility payments
e‐chaupals
Retail/Agent Channel Partners
Per transaction revenues from retail agents from walk‐in
business
b i
Biller Direct revenue model
Direct hosting of biller bill pay sites (e.g. MTNL, BSNL
etc.)
etc )
Revenue per transaction
14

15. Competition
Existing Competitive Landscape
So, does this concept have competition?
It sure does.
2 primary electronic bill payment service providers
serving the domestic market:
• T h
Techprocess (f
(formerly BillJunction)
l BillJ i )
• Billdesk
15

16. Competition
Techprocess
Let’s look at Techprocess first and its footprint.
• 9 banks, 75 billers
– ICICI Bank
– Standard Chartered Bank
– HSBC
– Axis Bank
s a
– Greater Mumbai Cooperative Bank
– Saraswat Cooperative Bank
– The Shamrao Vithal BANK
– Mandvi Bank
– Karnataka Bank Ltd.
16

17. Competition
Billdesk
Billdesk Banking Clients
40 banks
June 2008 data
June 2008 data
200 billers
17

18. Why we will win
So why will we win (or what makes our
So, why will we win (or what makes our
concept different)
Razor‐edged focus on Tier 2 banks and below
Focus on simplicity
Only offer hosted option
Tie up with channels that are most likely to be used by the end users of our
target banks
o Kiosks (Integrate with SREI Sahaj kiosks in West Bengal Citizen Service
Kiosks (Integrate with SREI Sahaj kiosks in West Bengal, Citizen Service
Centers, partner with e‐governance initiatives)
o Banking Correspondents
o M bil d h dh ld d i
Mobile and handheld devices
Eventually, the same flexible infrastructure can be used to facilitate B2B
payments
18

19. Team
Founder CV
Founder CV Tel: +91 33 2341 3090
Mobile: +91 98 30381643
Neel Majumdar neel.majumdar@in.pwc.com
Relevant experience
• Neel is a Banking and Payments Subject Matter Expert (SME) and currently employed as a Managing
Consultant in the Performance Improvement practice of PricewaterhouseCoopers India (PwC). Neel holds a
Bachelor’s Degree in Civil Engineering from Jadavpur University, Master of Civil Engineering from North
Carolina State University, Raleigh, USA, and an MBA from Carnegie Mellon University.
Neel has extensive •
N l h i Neel is the
N l i th BFSI domain lead for the IT-Effectiveness Practice. N l also represents P C at th M bil
d i l d f th IT Eff ti P ti Neel l t PwC t the Mobile
experience working Payments Forum of India (MPFI).
for both
• Neel has more than 10 years of experience in consulting, project management, opportunity assessment and
multinational
management of new products, strategic business development and management of strategic initiatives that
financial services
have an enterprise wide impact
enterprise-wide impact.
companies and
banks in North • Prior to joining PwC, Neel used to work for Bank of America as Vice President, Enterprise Payments Strategy,
America and in where he was responsible for the creation, development, execution, and supervision of the Bank’s enterprise-
Financial Srvices wide payments strategy across credit cards, debit cards, checks, Automated Clearing House (ACH) payments,
Consulting & online banking and electronic remittances, covering both retail and wholesale sides of the bank. He also served
Business as an SME in emerging payment instruments including Internet Protocol-based payment technologies, mobile
Development in the payments, decoupled debit cards, and web-based consumer payments instruments.
Indian
• As part of his role, Neel represented Bank of America in various payments industry bodies. These include: a)
Subcontinent
"The Mobile Payments Steering Committee" of the Strategic Payments Forum at The Clearing House
Payments Company, b) Council for Electronic Billing and Payment (CEBP) of NACHA.
• .Prior to this, Neel had worked with Checkfree Corporation (recently acquired by Fiserv), an industry leader in
Electronic Payments and Financial E-Commerce, as a Product Strategist and Senior Product Manager.
19

20. Team
Advisors
Sunil Nair, CFO, Asia‐Pacific, Euronet India
Dilip Asbe, CTO, Prizm Payment Services
Rakesh Mahaptra, Founder & CEO, Bimamall, ex‐VP,
Bancassurance, Bajaj Allianz Insurance
20

21. Thank You!
Contact:
Neel Majumdar
Email: neel.majumdar@gmail.com
Mobile: 09830381643
21