Last week, the Reserve Bank of India (RBI) extended the deadline for implementing the new rules for recurring online transactions to 30 September. When the RBI first notified the rules in 2019, BillDesk—one of India’s largest payment gateway providers—acted swiftly and developed SI Hub in partnership with American payments giant Visa to facilitate the e-mandates (standing instructions) on recurring payments. In an interview with TechCircle, BillDesk co-founder and director M.N. Srinivasu spoke about scaling SI Hub and potential growth trends for this financial year. Edited excerpts:
Why did you set up SI Hub?
Towards the end of 2019, RBI came up with the guidelines on processing certain card-based recurring payments. At BillDesk, we understood the implications of the guidelines. We understood fully the complexity of what was to unfold. The key part of RBI’s guidelines was to essentially change the way an existing authorization or authentication worked in terms of who took the responsibility for a recurring payment mandate. Historically, it has always been the merchant side. As a customer, you go on to a merchant platform, set up a recurring payment and the bank authenticates and authorizes. What RBI’s guidelines, in essence, were trying to do was to place a significant part of the responsibility on the issuer bank, to say that banks need to keep track of all mandates by a customer on a card and provide flexibility to customers to stop payments or make changes.
This is a seminal shift from the way card payments work. When you think of this as a solution that has to work across banks and merchants, it’s fairly easy to see why you will effectively need one unified platform. That’s how SI Hub was born, to create one hub where all participants could connect.
What does it do for banks?
Specifically, SI Hub is positioned for the issuer banks on whom this compliance burden has been placed in terms of the RBI mandate. It helps the issuer banks attend to the e-mandate, registration and transaction processing businesses in a manner that is compliant with RBI’s requirements. It’s largely focused on issuer banks, helping them meet RBI guidelines and compliances. At the same time, it offers incremental functionalities to the acquiring banks and payment aggregators, who form part of the larger ecosystem of payment processing.
How has SI Hub scaled so far?
The original deadline for banks to achieve compliance was 31 March. Over the last year, because of the pandemic, from a bank perspective, the timing of getting onto the platform had complexities in terms of internal priorities. However, beyond the banks, there is a larger play here in terms of the rest of the chain. Payment aggregators and merchants are also doing minor tinkering on their side to be compliant with what the issuer bank should meet.
From a platform perspective today, SI Hub is one of the most robust solutions in the market. It’s being built based on the years of experience that we have in the domain. We have been partnering all large banks in India for more than 20 years. So, it’s been an easy choice for banks to make to integrate onto this platform. Given the happy position we are in, what we would expect is that all large issuers will integrate to this platform. The incremental timeline (till 30 September) offers breathing space to align the internal processes to conform. However, what we would expect is largely that all card issuers in India would get integrated onto the platform and this will become the platform of choice in the marketplace.
At the same time, we are cognizant of the fact that this is India. There will be copycat solutions that will emerge over the next few months and other players will want to build similar solutions with reasonable functionalities. However, as an open platform, SI Hub is freely available to all, including competitors, to assess and learn from.
There has been talk that the company wants to sell its business.
There is no merit in that. BillDesk is the largest digital payments business. It’s a profitable business. It’s been of the size and scale that is technically an IPO (initial public offering)-size company.
Do we hear IPO talk?
We have the size and scale for, let’s say, a very successful IPO for being a very successful and interactive firm. So, we constantly evaluate that possibility. However, it will be a function of investor needs, market timing, etc.
Given that the environment and the regulatory space is also evolving and cleaning up for payments, it’s a good time for us to focus attention on that (an IPO) to see if the timing is opportune.
How did FY21 close at BillDesk? What are your growth projections for FY22?
BillDesk would top at about $100 billion of throughput for FY21. We would have added a level of TPV (total payment volume) that the rest of the market combined wouldn’t have added. For FY22, from $100 billion, we will perhaps go to about $130 billion.
At an industry level, what we will see is an increase in small value transactions, because a lot of things such as FASTag, which are mandated digital use cases. Second, there will be more and more government businesses coming online. We will see flows to government in digital payments increase. We will have to see how e-commerce transactions grow as we balance the pandemic behaviour as in digital vs offline. Given that calendar year 2021 is a year of big regulatory changes, the most significant thing will be the degree of regulatory changes and compliance processes. I would expect this to be a regular good growth year and not necessarily an outlier.
Read the full interview at TechCircle.in
