Worldline, a leading player in the digital payments and transaction services space, is seeing double-digit growth in its India business, according to Deepak Chandnani, its CEO for South Asia and Middle East. Every time a card is swiped at some point-of-sale (PoS) terminal, there are four visible players — the customer, the merchant, the card issuing bank (of the customer) and the card acquiring bank (to which the merchant submits the charge slip and collects his payment).
“We are the fifth element here which makes sure that the whole transaction goes through smoothly and all the reconciliations are done at the backend. We are invisible. You see only the other four players. We are like the duck that is gliding smoothly while paddling furiously underneath the water surface,” says Deepak, explaining in a nutshell what his business is all about. That role gives him a bird’s eye view of all the digital and card payments happening across the various banks and the changing trends in this space. Excerpts from an interview:
Digital payments are growing very fast and are more linked to the consumer and the business trends that are happening now. Therefore, whether the economy grows at 6 per cent or 8 per cent, it is not going to make that much difference.
First, digital payments are bringing a lot of efficiency into the system. The speed is faster, less expensive, and clearer and has an easier trail to follow. That will be of great value. Every transaction is faster and traceable. Of course, you have to be careful because the consumer is not there face-to-face. So you have to ensure two-factor authentication to avoid fraud and have good risk management systems.
Why has the credit card base been stagnant during the last four years at around 19-20 million?
I am equally disappointed about it. Twenty million cards are not even 20 million people, since many have two or three cards. Therefore, you probably have only about 15 million people. However, it is picking up a bit now. The issuance of credit cards is a function of a bank’s appetite to take risks.
Given the rollercoaster ride of the last few years, banks have been cautious. Now more banks are jumping into the fray and beginning to issue cards. You will see growth.
Is it a profitable business to be in?
Yes. It is.
But many burned their fingers in it….
That happens all over the world. In the good times, the business makes a lot of money. In the bad times, you lose a lot of it. It is a detail-oriented business and you have to understand it well. It is a business with a lot of moving parts — different segments, with linkages to the economy, and you need good analytics and risk management systems.
Today, banks have a lot more information on their customers. Besides, there are credit scores and other ways to check exposures. So why is the appetite lacking?
In the card business, you have to make money by lending at high interest rates — since you do not make money on fees, and there are establishment costs. Now, who is going to borrow at 2 per cent per month? Someone who needs it badly — which by definition is high risk and you get adverse selection. So, the credit card business will always be about appetite to lend.
What are the trends you see in the digital payments space?
It is going to grow and we are seeing that already. Digital payments are growing at 35-40 per cent a year, of course, on a lower base. Payments at point-of-sale terminals are growing at 12-15 per cent a year. The likes of Flipkart and Snapdeal have changed consumer habits dramatically. Now consumers are getting used to comparing and buying off the Net — still a bit clumsy now and then — but the habits have changed forever. There is no going back.
Newer and better technologies are coming up and that is the other play coming into our space. Both demand and supply sides are changing and there is going to be an interesting interplay in the next three to five years.