Following a rather surprising report in TechCrunch on Sequoia Capital funded Prizm Payments, which appeared to mix up its ATM processing business with point-of-sales card processing business, we spoke with MD Loney Antony, and sought clarifications on what their plans are for the mobile based point-of-sales (PoS) business:
On ATM versus Point of Sales: Prizm handles transactions through ATM and PoS, and a majority of that is through ATM. The total ATM transactions in the country are over $400 Billion. PoS networks, last financial year, processed a total of $30 Billion.
Mobile PoS device: It replaces the physical POS device, wherein the card gets swiped, by putting a card reader on a mobile. It addresses businesses and merchants that are not covered by card payments.
Dealing with connectivity issues during payments: it is as good or as bad as a mobile phone.
Sourcing the device: Working with mswipe, and they’ve got the distributorship. We have the transaction processor behind it. We have the infrastrucutre which connects into visa and mastercard, and we have the ability to take a transaction and authorize it, and give the transactions to the bank for processing, so that the money can be given to the merchant.
Different from mobile payments: There are solutions where there are cards not present, or wallet on the mobile, or the NCPI, where you link your card to your account, and you’re transferring. This is not like that. It faciliates a card present transaction.
Verification of payment: you can sign on the smartphone, or take a slip and take a signature. If it is PIN based, you can enter the pin on the mobile
Target segments: One are is not covered by card payments is the delivery business – pizza delivery, wine shop delivery, and now they can pay by using this solution. In e-commerce people choose CoD because they want to pay when goods come home. Home delivery is a key target segment.
However, there are several small merchants to whom the bank doesn’t give a point-of-sales device, unless they have a certain number of transactions. The bank takes on the cost of device and processing, and the merchant pays the bank 1-1.5%. Now lower value merchants will get these devices, which is how this is disruptive. In our case, it’s a similar approach. There is a percentage that comes to us, and there’s a settlement activity. Because you’re not deploying a PoS terminal, you’re bringing down the processing cost, and can pass the cost to the merchant. Cab services in the main cities are what made square popular.
Card base in India & Transactions: The credit card base was about 24 million a couple of years ago, which is now 18 million cards. However, overall spends have gone up over the years. You’ve taken out the inactive cards. The number of debit cards have been growing at the rate of 50-60 million cards per yaer. As of March 2011, there were 280 million cards. Average transaction on credit cards is roughly Rs 3200, and on debit card, it is around 1500.
The last financial year was the first one, wherein on PoS, you had more debit transactions than credit transactions. 18 million credit cards did close to 330 million, while the debit cards (280 million) did 340 million.