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FINO Paytech CFO on the firm's new focus areas -- B2C and mobile payments

Rishi Gupta talks about how the PE-backed financial inclusion technology company is focusing on newer revenue channels and emerging opportunities.
Rishi Gupta

FINO PayTech Ltd (formerly FINO Ltd) is involved in the financial inclusion sector providing micro banking technology services besides helping banks reach out to the unbanked through its ‘business correspondent’ (BC) unit. The Mumbai-based firm works with banks to provide products like saving bank accounts, loan products, remittances, insurance products, government subsidies disbursement, among others. Its solutions are anchored around using biometric smart card, hand-held devices and micro deposit machines to perform field operations and biometric authentication.

The firm recently expanded its presence by acquiring the prepaid mobile payment business of erstwhile Nokia Mobile Payment Services in India. Backed by a string of investors including PE giant Blackstone, Headland Capital, Intel Capital and IFC besides multiple Indian financial institutions, the firm has been on a fast growth track and is eyeing revenue of around $75 million in the current fiscal year translating into over 100 per cent CAGR growth for the last five years. In an interaction with VCCircle, Rishi Gupta, the chief financial officer of the firm, discusses the issues and consolidation in the business correspondence space, Nokia Mobile Payment acquisition, margin scenario and how the firm which has largely derived its business through B2B is now looking to generate revenues from emerging opportunities such as mobile payments and more. Edited excerpts:

Business correspondence was touted as the big thing when it started but very few players have attained scale. What is the key to crack this space?

Yes. A lot of players came and went because of the contractual issues with banks or the problems in raising capital. We took the model as a long term business. First, instead of trying and testing the technologies involved in the process, we picked up a technology which is tried and tested. Second, in India, when you are talking about 700 million people in rural areas, you can’t be talking about business model which deals with a few million, it has to be sizable and scalable. Third, it is the team that we have built up over the years. Fourth is the capital.

On the business side, there are two important things we followed. We didn’t depend on one bank for business. Since we are dealing with multiple banks we didn’t have the problem of one bank moving away from the business. We did business with PSU and private sector banks. We did government payment, we got into Rashtriya Swasthya Bima Yojna (RBSY), we got into direct customer engagement and the remittance business. It evened out our cash flows, it helped us to sustain for a longer period of time.

What are the unique operational challenges in this business?

Initially, we had to try and explain what a business correspondent does to banks that were not able to comprehend the service. They thought it was a threat to their existing set up. On the technology-side, there is no challenge. But there are challenges on business correspondent or the actual on-the-ground personnel side. The problem includes how well is the correspondent educated, how much transaction can he/she do, what kind of cash security does he/she have and the installations at the backend, but a lot such problems have been removed over the period.

Managing working capital has been a big worry. This is because of the payment cycle from our principals usually takes about six months to get the bills cleared. This puts a lot of pressure on our operations. We have been able to manage this aspect pretty however, this is a continuous challenge.

The other problem is that many accounts are no-frills and so a chunk of them are not being serviced. While opening an account is one activity in this business, the bigger and important thing is the transaction platform that becomes tricky. I would say, it is still evolving, it is growing.

How significant is the dormant accounts problem?

Dormant accounts are there in any business. I don’t know the exact number, but only 7 to 10 per cent are active (for the sector). FINO does 8 to 10 million transactions a month and back of the envelope calculations would show that only 25 per cent of our customers transact every month and the rest almost three fourth of them are not transacting anything. An account becomes dormant if there is no transaction in six months.

How kind of margins are you operating in this space?

Margin is always shrinking. We broke even in 2010, we made profits in 2011 and we made enough profits in 2012. Our margin is five per cent last year, if we could see five per cent this year, it will be great.

In June, you acquired the erstwhile Nokia Mobile Payment Services in India. What does it mean for the company and is it part of a strategy to derisk the revenue growth from the business correspondence segment?

From the business correspondence side our primary business is business-to-business (B2B) with either banks or the government. We are now focusing on venturing into newer territories in terms of businesses that includes direct engagement with the customer (B2C) and entering the mobile payments space. In the context of the latter we have recently acquired Nokia's prepaid mobile payment business in India. Our team is currently working on designing new products around this newly acquired platform, which operates under Alpha Payment Services Limited. In August 2012, Alpha relaunched with Union Bank of India (UBI) Money (service was already present during Nokia's time, but was dormant for a while) a prepaid mobile payment service for UBI customers.

Given these business interests of B2B and our plans for B2C and mobile payments space, most of FINO PayTech resources go in consolidating and building ecosystems around them. Our objective is managing business with internal accruals, which we believe any sound business organisation should be doing.

How have you been using the multiple rounds of institutional funding and how does the future fund raising pipeline looks like?

We have raised three rounds of capital already. We still have a lot of money that we raised from Blackstone last year. We are also able to meet our capital requirements through what we are generating from the company, what we can borrow from banks and plus what we have as equity, so we don’t have any immediate plans of raising capital in our existing businesses. We are looking at developing a new business as far consumer business and mobile payments are concerned. There could be some business capital requirements, but that business has to grow. Our debt levels are very low at 0.5 per cent, so we can leverage more here.

How has been the company growing and how does the customer base and operations stand as of now?

Our business has been growing at 50 to 60 per cent every year. This year we are expecting a top-line growth of $75 million from $55 million that we clocked in 20011-12. We could manage this, because we could mix both private and public sector banks in terms of getting the business.

At present, we have 32,000 transaction points/agents spread across 26 states, 424 districts provides banking services to over 50 million customers. The company has been in business since 2006 and already control 40 per cent of the market. We are targeting to hit 100 million customers and 100,000 transaction points by 2015.

What are the new mandates you are working on?

We are doing a lot of work on the Unique Identification (UID) side. There is a lot of excitement from our existing business and the new business, even the government is pushing subsidies in the direct payment mode. We are already on multi-government schemes including Mahatma Gandhi National Rural Employment Guarantee Act (NREGA). In the future, the disbursement of the subsidies will happen only through electronic payments or through business correspondents. Our business should see a lot of growth through that.

FINO PayTech and its associate company have together won 10 clusters in the recently concluded bids conducted under the direction of Ministry of Finance. Cluster model approach is yet to take off and there is still a lack of clarity on how it will be executed, so it is difficult to arrive at an estimate from this approach at this point.

Given that you have raised capital from PE investors, at some point there would be an exit opportunity for them. Do we see an IPO for the company in the near future?

The market is not ready. As a company, we are also getting more and more evolved and stable. We want to get in to the market when there is better control on the business. So, I think we are still about some time away from IPO. Last year, we brought the support of Blackstone, so there is no immediate rush to bring in the capital. It is definitely one of the favourable ways for any investors and we would want to go that way. But as of now, we don’t have plans in the next one year.

(Edited by Prem Udayabhanu)


Fino Paytech Ltd. (formerly known as Financial Inclusion Network and Operations Ltd.) is a business and banking technology platform combined with services delivery channel to fulfill the financial service needs. It provides solutions such as customer enrollment solutions, hardware solutions, and operations solutions. The firm also offers services such as business correspondents services, consultancy services and financial literacy where customer are made aware of financial products. It operates under the name Fino. The firm caters to the requirements of banks, micro-finance institutions, government entities, and insurance companies. The company was founded in 2006 and is based in Mumbai, Maharashtra.

Blackstone Advisors India Pvt. Ltd. is a private equity and venture capital firm with $336 billion assets under management. It provides finance for leveraged buyouts, turnarounds, corporate partnerships, industry consolidations, start-ups, recapitalizations and growth capital transactions. The firm seeks to invest in communications, energy, media and entertainment, healthcare, financial services, hospitality and travel, manufacturing, technology, transportation, oil refining, construction, consumer and retail, food and beverage, packaging and pharmaceutical sectors. It prefers to invest in North America, Western Europe, Latin America, emerging European markets and India. The company was founded in 1985 and is based in Mumbai, Maharashtra.

Headland Capital Partners Ltd. (formerly HSBC Private Equity Asia Ltd.) is the private equity and venture capital firm with $3.4 billion under management. It provides capital for expansion and buyouts, early to mid-stage companies operating in China, Taiwan, South Korea, India and certain countries in Southeast Asia. The firm seeks to invest in consumer goods and services, industrial and manufacturing, electronics and technology sectors. It seeks to invest between $40 million and $150 million in growth capital and $10 million and $30 million in early stage in its portfolio companies. The company was founded in 1988 and is based in Hong Kong, China.