September 28, 2015
LTP recently got a chance to talk to the Chief Executing Officer of Pine Labs, Lokvir Kapoor.
LTP: How big is your company and who are your customers?
Lokvir: We managed 70,000 POS terminals in India at the end of financial year (March 2015) and have reached 100,000 terminals in August 2015. We plan to have 150,000 POS terminals by March 2016.
The company processed $5.5 bn worth of transactions in FY’15 (April 2014 to March 2015) and we expect to double the number this year. The company has a 12% market share by transaction value in the country where the total electronic transactions at POS stands at $50 bn in the same period. It is worth noting that 1.3% by volume and 10% by value of transactions processed by Pine Labs was through the EMI facility. At present, we generate 70% of our revenues through core payments, while the other 30% comes from value-added services.
We work with almost all major retailers such as Croma, Shoppers Stop, Arvind Stores, Big Bazaar, CCD, Cinepolis, Colorplus, Costa Coffee, D-Mart, Domino’s Pizza, Favourite Shop, Mahindra’s Babyoye, Haldirams and many others. We are in discussion with many other large retailers such as Reliance and Lifestyle, and would hopefully have them on board soon.
LTP: Pine Labs started by offering petroleum automation retail solutions and has now diversified across industry segments. How did this shift happen?
Lokvir: It was a natural evolution. I was previously associated with Schlumberger and there, we developed a good understanding of the needs of the retail petroleum industry. The opportunity was sizeable as Indian fuel retailers had large-scale operations and had many unmet demands. Hence, we came up with a petroleum automation retail solution called IRIS. BPCL provided us with many opportunities. Over a period of time, payments became our focal point and we started going beyond petroleum companies.
LTP: What do you think is the key difference between you and your competitors? In short, what do you think is your USP?
Lokvir: Increasing efficiency of the payments system is our USP. Our payment platform can interact with various billing applications, de-clutter the cash counters and eliminate the need for multiple POS machines. In addition, we provide the choice of acquirers for the merchants, offer a cloud-based solution and a technology independent of the acquirer. Furthermore, with our VAS solutions such as EMIs, integrated loyalty and discounts, merchants/issuers/networks can directly interact with the customer which was not possible with traditional solutions.
LTP: The e-commerce industry is growing enormously in India. Why are you not so active in this space?
Lokvir: We have a payment gateway and a GPRS POS which is being used by many e-commerce companies for accepting cash-on-delivery and card-on-delivery payments. Though our product is a bit more expensive when compared to other mobile card readers in the market, it offers a lot more. When it comes to online payment gateway services, we feel that there is excessive and perhaps irrational competition in this space. The PGs are offering payment processing service at a price lower than what the issuers charge for the transaction and hence, are paying from their pockets. We were not convinced by this model of operation and therefore, not pursuing this space actively.
LTP: What are your expansion plans? What other services/solutions are you coming up with?
Lokvir: We will soon be launching our product in three countries: Singapore, Malaysia and Thailand. Later, we may look at the Middle East followed by Europe and the US. In the first phase, we will launch in one country and aim to have our first transaction outside India by the end of this calendar year.
We are also integrating mobile wallets into our platform. Our cloud platform allows us to enable wallet transactions on the go at the cloud, with little changes at the POS terminals. At present, we have tied-up with eight wallet companies such as MobiKwik, MoboMoney, Reliance Jio Money, Axis Bank etc. We are also in talks with Paytm and expect the deal to materialize soon. We are also going to launch a tap-and-pay solution in the market in partnership with the Indian banks and Visa very soon.
We are also coming up with a solution called pay with points. With this, consumers can pay with their accumulated reward points at point-of-sale machines for goods at merchants who accept this. The participating members in the program include American Express Membership Rewards, Payback, Axis Bank Edge, Citibank, many public sector banks and others.
LTP: What initiatives do you think RBI and other players in the payments ecosystem should take to drive India towards a cashless society? (Apart from incentivizing customers and merchants, which the government has promised to include recently)
Lokvir: Banks are spending money on installing ATMs which adds to their cost—the installation cost, operations cost and cost of facilitating a transaction. On the other side, if they shift their focus on diverting these transactions to the point-of-sale terminals, they can generate revenues as they charge an interchange fee. Furthermore, banks must also optimize subsidizing customers for using ATMs. The average cost of a transaction at an ATM in India is around INR 20 and banks currently allow five free transactions per customer per account. This should be relooked into to drive payments at POS.
Carrying cash is associated with significant handling and transportation costs. In addition, they also run the risks of theft, loss, counterfeiting and other malpractices. At present, the government has incentivized people to use cash as we are not paying to use it. According to a report by World Bank, India can save up to 1.6% of its GDP if India moves to a completely cashless society. The government should look at these statistics. Customers should be made to pay for using cash. If we move towards a cashless society, the government gets more revenue from income taxes (there is a leakage currently in the system), banks get additional revenue streams and can reduce the cost of managing ATMs while retailers get access to more customers and hence, more sales.
About Lokvir Kapoor:
Lokvir Kapoor is the Chief Executing Officer of Pine Labs and leads Pine Labs’ initiatives in building innovative payments solutions. Lokvir has a strong interest in new payment technologies and their application to changing customer needs. Lokvir brings in 25 years of diverse and extensive experience in identifying new opportunities, setting goals and strategies and building teams that spearhead various initiatives. Prior to joining Pine Labs, Lokvir had worked with Schlumberger in the area of financial management and business development in India and overseas. Lokvir holds a Bachelor of Engineering from IIT, Kanpur and a Masters in Business Administration from IIM, Bangalore.