Building Indian Mobile Banking: mChek CEO Sanjay Swamy (Part 5)

SM: Are other telecom operators adopting this model? What is the business model of your relationship with the telecoms?

SS: mChek’s vision is to be a global consumer payments brand. The business model is inherently transaction-based, where we receive a percentage of the transaction. Over a period of time other telecom operators will be launching the product, and we have a few operators conducting pilot tests now.

SM: The transaction revenue is paid by the receiving parties?

SS: Yes, that is how the VISA model works. You typically never charge the consumer. The only exception is when you are doing a consumer-to-consumer transaction, in which case the sender pays. We have several verticals to receive revenues. We get a small revenue from the merchant as well as from the bank whose card was used, and there are potential advertising revenues. Every transaction has a text receipt and there is an opportunity to place coupons in those. That could be very targeted and is something we have started working on now.

Right now the focus is on cross-promoting the service. We started with a single service, and soon merchants started coming to us. ICIC Prudential, which is a life insurance provider, came to us and asked if they could receive their premiums through our service. We launched that three months ago and the response has been incredible. Their premiums can be $2,500, so we are talking about $30 transaction fees. Now all of the other life insurance companies are now approaching us and looking into that model.

In India there are a number of transactions where you have to collect money from a consumer who is remote, and you need an elegant, clean was to collect that money. The other thing we look at is prepaid cell phone users. India has 300 million cell phone users, a figure which is expected to grow to 600 million in three years; the average revenue per user is $7. When you multiply that by 600 million users, you can see how much money that is. If 10% of that industry goes electronic, we are looking at a $5-$6 billion industry that has moved into the banking system from the cash economy. That has a tremendous impact on the banking system because it enables 600 million people to get into the banking economy, and their money stays in the banking system.

SM: What do you think about the smart cards being used for this type of banking?

SS: I think it is passé. It was there, it did a good job, but it is getting past its time. I think it is safe to assume that everyone will have a cell phone, and that the cell phone completes the loop instead of just being a pass-through. The SIM card in the phone is really a smart card; the cell phone just puts in on the network. I think it will help more people get into banking, and it will help them increase their savings.

There are people who are receiving money, there are people with whom the money is spent, and there are employers who are paying. We are saying this is a method that can close the loop with all three of those groups. If we can achieve 70-80% success, that represents a large chunk of money, and that is the advantage of mChek over smart card solutions.

SM: You definitely see traction in the telecom bill payment and insurance payment sectors. Are you seeing tracking in the utility sector? That would require you to work with the government, correct?

SS: Absolutely. We are working on it right now and are going to start that service in a few months. There are a few companies who act as aggregators. We work with them and they already have relationships with the utilities. The biggest problem is the status of their IT systems; they are not so modern. That is why the aggregators are so helpful. A complete real-time transaction system does not necessary happen in utilities, so payments still may be required to be done three days in advance. It is amazing how ‘real time’ their systems are when it comes time for them to cut off a user.

This segment is part 5 in the series : Building Indian Mobile Banking: mChek CEO Sanjay Swamy
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