Digital Point Of Sale Machines Set To Take Over ATM Machines.

Deepak Chandnani, CEO (South East Asia and the Middle East), Worldline in an interview with BW BusinessWorld discusses the digital payments ecosystem. He also discusses the increase of digital PoS across the country. Deepak states that since November 2016 there has been a 140% rise in PoS terminals across the country and tend to increase even more.

Has the installation of new PoS terminals changed the game in terms of transactions?

The number of PoS terminals jumped 140% within a span of months since November 2016. The spotlight is now squarely on digital payments, and PoS terminals are one of the most important conduits for digital transactions. Transactions have gone up with new and dormant card users now using their cards for small and large purchases. Categories like grocery and restaurants have witnessed a transaction increase of 100%+, buoyed by small transactions. This has incentivized more players to enter the market, seeking to provide cost-effective, easy to use and niche PoS solutions. It has also widened the pie as there is something for everybody. Merchants and banks are looking for new-age, lightweight and secure solutions that can be integrated into their existing systems smoothly. Hence, a number of start-ups and large players are looking to create their space or garner a larger share of the market today. Today, POS terminals are also enabled with Bharat QR and UPI, enabling more and different types of cashless payments. Apart from traditional transactions from credit cards, debit cards and prepaid cards, now transactions are also coming from new methods like QR and UPI, hence adding to the number of transactions and not taking away from it.

How are banks influenced to roll out PoS terminals across the country? How does Worldline bridge the gap?

Banks play a major role in the digital transformation of the country. They have a wide geographical reach, are well-regulated and trusted by customers and have the wherewithal to provide an expansive suite of services to different segments. In that sense, banks are well-equipped to enable the spread of PoS terminals in India.

Banks already have an existing relationship with merchants. The latter have accounts with the bank and avail loans from it. Hence it is natural for banks to extend the relationship to more services like providing POS terminals and acquiring card transactions. Worldline bridges this gap in services by working directly with banks to reach out to merchants and provide cashless payment acceptance, deploying machines and processing transactions for them. Worldline works with numerous public and private sector banks and has deployed about one-third of the POS machines in India today. Another way in which Worldline contributes to the spread of POS terminals is through aggregators. More non-bank entities are entering the fold and acquiring merchants. Worldline deploys terminals for them though it is ultimately processed through bank partners. The third leg is by providing value-added services. Its value-added services like Fraud and Risk Management (FRM) have become important as many first-time card users and merchants are entering the system. In addition, Worldline offers services like EMI and dynamic currency conversion on PoS.We also have our own payment gateway and work with several banks and merchants. With this range of services, Worldline helps its customers contribute to the Digital India roadmap and financial inclusion initiatives of the country.

There have been numerous questions raised on the viability of the PoS business in recent times and it is all but certain that if the number of transactions doesn’t go up, the business would be put under a lot of pressure, is that true?

Firstly, post demonetization, there was a large influx of PoS terminals, taking the count from 1.2 million terminals to 2.88 million terminals. Though it accounts for less than 20% of merchants, the lowest in the world, it can be improved over time. This rise in terminals was complemented by the rise in the number of cards. We saw the number of transactions rise significantly – there was a spike of more than 3 folds in December and today it has stabilized at around 2.2x of the earlier normal. Hence there has been no deterioration in the number of transactions per POS terminal. Secondly, aggregators have also started providing value-added services. They facilitate loan collection, EMI, DCC etc. on POS, that has improved the viability of the POS business. Thirdly, not all merchant categories behave the same. While there are categories which have a large number of transactions that make the business viable, there are emerging categories as well. Here, the transactions are low initially but over time, as is seen with the steep rise in transactions across industries, one can expect the business to turn viable. For example, with the incentives given by government on card transactions at petrol pumps, the category turned viable for players.

Will there be a decline in credit and debit cards with the increase of new digital payment options?

A number of naysayers are quick to sound the death knell of existing payment options. However, I believe they will coexist. For example, when cheques and cards were introduced, cash did not die out. Neither will cards die out after the introduction of a slew of new options. Every product serves a set of customer needs that another may not serve because of which it becomes her preferred way to pay. Likewise, customers may use multiple payment methods for different types of payments.

In the last 3 years, a great number of cards have been issued that started getting used during demonetization. It is true that the number of transactions per card is still very low. Australia has 40,000 PoS terminals for a million people while Brazil has 25,000 terminals and India is at the lowest, having not more than 1,000 terminals per million people. This shows that the headroom for growth in card transactions is huge, especially with the new payment methods like Bharat QR, BHIM and UPI. But the change in behaviour has started and will happen over a period of time.

How soon do you see a shift in the transactional behaviour of consumers with the rise in PoS?

The shift is happening as we speak. The way people use cards is increasing and evolving by the day. Consumers have started using debit cards for small purchases, a change from the earlier habit of using cards only at ATMs or for purchases above a specific amount (sometimes insisted upon by merchants). Categories like liquor retail have also shown a large increase in transactions as more merchants are equipped with PoS machines now. During the festive period of Dhanteras when people generally buy gold and other valuable goods, we saw an increase of 64% in card payments for jewellery. I think we have arrived at the inflection point from where we see a marked shift in card usage.

What is the business strategy of Worldline when it comes to India?

India is a dynamic and interesting market to be in right now and we are glad to be one of the biggest players here. We work with 13 of 16 public sector acquiring banks and 11 of 17 private banks in India providing a host of services to suit their needs. We also manage more than 2,000,000 cards for several banks and issuers. We provide payment gateway services to a host of banks, educational institutions, government organizations etc. We also provide value-added services like Fraud & Risk Management to merchants as there are so many new merchants in the digital ecosystem now. Electronic Toll Collection (ETC) is another service through which we are enabling digital payments for our customers.

Going forward, we plan to expand and consolidate our leadership position in India in the field of digital payments. We are developing solutions on new technologies like UPI and Bharat QR and are also working closely with our global counterparts to bring solutions like IOT and Blockchain to India in the near future.

How would Worldline create scalability and awareness for PoS terminals especially in the rural areas?

We work in conjunction with banks to deploy terminals in urban and rural areas across the length and breadth of India. The government and banks are spearheading the initiatives of digital payments and are creating awareness on the ground with customers and merchants. We support and enable their services through our capabilities. We have a large team of field engineers who work diligently to deploy PoS machines and train merchants. We also have a very strong network infrastructure to support and process the millions of transactions processed across India. Worldline also builds solutions that enable digital payments conveniently. We already have close to 1 million acceptance points including physical POS terminals and non-physical acceptance methods like QR codes. We also enable biometric payments and cash withdrawals at PoS, helping the rural populace keep pace with payment innovation.

Has the company received any investments or has it been a part of any investments recently?

Worldline has been investing continuously in the Indian market in anticipation of the growth in digital payments and has been supporting its partners in their endeavours. In addition, Worldline is also making investments to acquire technology which can make processes efficient and more scalable. Last month, Worldline acquired 100 percent of the share capital of MRL Posnet for up to c. INR 6.5 billion (approximately € 84 million). MRL Posnet employs approximately 130 highly skilled payment engineers and operates an innovative and state-of-the-art terminal management platform, enabling cost-efficient deployment and management of new terminals. The combined strength of MRL Posnet and Worldline will help us deliver best-in-class solutions and build technological synergies for our future propositions.

What is the aim of Worldline in India when it comes to a number of transactions?

Presently, the number of transactions is very low in India and there is a lot of scope for growth. Worldline has the appetite and the wherewithal to drive this growth with our tools, technology and people. We can contribute to the expansion of physical and non-physical acceptance points through POS terminals, QR codes, payment gateway etc. In terms of non-cash payments, India lags behind a number of developing countries. As India moves ahead in increasing the percentage of non-cash transactions, we wish to continue being a major partner in that journey as global e-payments our chosen field of expertise.

Will pay later structure work in India? Will it see a rise in credit cards as well?

In India, we saw a rise of credit card issuance and usage in the 90s with the younger generation leaning towards credit. In the last 5 years, the real growth has come from debit as new customers entering the system are more conservative about borrowing. Globally, Europe is a market that leans towards debit usage as opposed to the US where customers prefer credit. Currently India displays more European behavior with the preference for debit. However, it is difficult to predict patterns of pay later usage as consumer behavior depends on numerous factors like socioeconomic changes, behavioral psychology, employment market etc.

Where do you see the company in the coming 5 years? Will they provide any other services in India to improve the payments process?

Today, the payments industry and its innovation is driven largely by fin-tech and disruptive technologies. As we are globally focussed on digital payments, we are working on several areas like Blockchain, IOT and AI and aim to bring these into India in order to make payments frictionless, instant & secure. Given India’s size, growth and composition, it gives us a chance to participate in this roadmap and provide new technology that will change the way issuance and acquiring instruments operate. They will also make the process more efficient, cost-effective and better.