In a world inundated with overnight successes and viral hits, the tale of Innoviti founder Rajeev Agrawal is refreshingly actual. His long-meandering career as an entrepreneur has encompassed several milestones over the route of 15 years. From its inception as a wi-fi hardware systems manufacturer in 2002, Innoviti has urged its course into virtual payments and SME lending, with its flagship product UniPAY which as in line with the business enterprise, is presently processing extra than $3 Bn really worth of transactions in over seven hundred cities each year.
A Ph.D. Graduate from IIT Bombay, Agrawal exudes the quiet self belief of a man who is aware of what he's doing. Speaking about UniPAY’s center era, Rajeev makes use of an interesting analogy involving Google Maps. He explains, “We have adopted a comparable approach as Google maps, which seems ahead and tells you which of them road has less visitors. It additionally factors out the alternative roads that can be taken. This is precisely what we do with a transaction.”
When a transaction leaves a device, the UniPAY technology attempts to look in advance to check the reliability and speed of the direction along which the transaction is supposed to manifest. It also attempts to discover if there’s any higher route to be had. At any given time, the algorithm keeps on analytically switching the method to ensure that it's going to happen the quickest and inside the most reliable manner.
Over the ultimate 365 days, Innoviti has branched out into SME lending as properly. Although reputedly disjointed, the flow, Innoviti CEO Rajeev Agrawal assures, became the herbal outcome of the corporation’s sustained efforts to have a look at problems throughout the virtual payments supply chain, and not just on the customer level. While UniPAY pursuits to facilitate the movement of money and the switch of information, the SME lending service is supposed for imparting working capital to the growing populace of small traders in the country.
To a top notch volume, Innoviti’s achievement may be attributed to the founder’s love for numbers. In our hour-long communication, Rajeev Agrawal shared several numbers which might be indicative of Innoviti’s inspirational voyage from 2002 to the prevailing. So, allow’s take a peek at a number of those numbers:
From Wireless Hardware To Digital Payments: How It All Began
Despite changing its route numerous instances inside the ultimate decade, Rajeev keeps that Innoviti changed into started out with the perspective of building a robust product commercial enterprise in India. The concept become to create a non-linear revenue version that is based not on the number of clients, but at the fee of the product. The challenge-subsidized fintech firmm made its debut with brief-variety wireless hardware that allowed users to set up portable wireless networks (WiFi) in homes, inns, restaurants, and petrol pumps for payments.
According to Rajeev Agrawal, Innoviti’s foray into virtual bills become the result of a satisfied coincidence. In 2007-08, there has been a need for a wi-fi payments terminal generation that might be delivered to the clients, in place of the patron having to visit the terminal. Developed particularly for the client market, the hardware product was expected as an answer for making fee terminals wireless. This eventually paved the way for UniPAY, as we comprehend it nowadays.
Rajeev recollects, “At that time, there was additionally a protection problem surrounding the usage of card swipe machines, mainly in restaurants and hotels. Web PIN wasn’t in use then. The product we evolved allowed enterprise owners to soundly bring the terminal to clients.”
It was around the same time that India’s fledgling virtual bills region acquired its first important improve with the arrival of huge retail chains like Reliance Retail, Future Group, and others. The beginning of Innoviti’s UniPAY product line can be traced returned to 2008, while the company partnered with Reliance Retail to build a dynamic bills platform that would permit customers to not best transfer money, but also transmit the facts related to the transaction, in phrases of who’s paying, the amount, and the bill range.
UniPAY = Google Maps Of Digital Payments
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The payments platform changed into in the beginning supposed for offline organised retail, specially large outlets like Reliance Retail, Inox, Tanishq, etc. With in addition improvement of the middle era, UniPAY changed into quickly able to process a specific transaction with a bank that might fee the least quantity of price.
Using this era, outlets had been able to immediately integrate the transaction information into their ERP device, thereby decreasing the type of guide attempt and blunders that could appear otherwise. Since its launch, the platform has developed extensively to encompass some of value-brought features. Today, UniPAY procedures near one-5th of all virtual bills made at massive retail stores in the us of a, amounting to a staggering $three Bn transactions yearly, claims Rajeev.
Operating in about 700 cities throughout India, the UniPAY platform has undergone a close to 100% increase between March 2016 and March 2017. Immediately after demonetisation, the company noticed an nearly 100% growth inside the transaction volume in addition to the quantity of customers. In the last 9, there was a sustained boom of round 30%.
Despite the encouraging numbers, Rajeev Agrawal keeps that the actual gain of demonetisation turned into within the qualitative issue of being instrumental in starting up numerous previously closed off segments to digital payments, which include medicinal drug, training amongst others.
Wielding Technology To Attain Speed, Reliability, and Flexibility
For Rajeev, speed, reliability, and versatility are the 3 key tenets of any suitable product business. He says, “We realised, having been within the space for greater than seven years, that one of the essential challenges that the virtual space is dealing with on the ground degree is that each the customer and the merchant aren't very secure with virtual transactions because of the unreliability of it.”
Fundamentally, humans discover coins much greater comfy and that is because of a number of problems with virtual transactions. For instance, at times, the virtual transaction is going through, however the message does no longer come; or the cashier swipes the cardboard twice. At other times, the transaction is completed efficaciously, but the bank debits the quantity two times. As said via the face of Innoviti Rajeev Agrawal, the proliferation of virtual bills answers has been very restricted beyond tier-I cities, even after demonetisation.
This elemental problem of reliability is what Innoviti sought to solve with the Series A investment it raised from founder and previous chairman of Infosys, NR Narayana Murthy’s Catamaran Ventures in 2015. The goal was to re-architect the UniPAY platform to create some thing that is speedy, bendy, and ultimately, reliable. With UniPAY NEXT, the company has controlled to expand a solution that assures merchants and clients that a transaction will occur inside seconds of the cardboard being swiped.
Coming back to the Google Maps analogy, Rajeev Agrawal adds, “When a transaction leaves a system and has to head proper up to the financial institution of the cardholder and are available again, alongside the way it travels through a couple of routes.”
So, How Does Innoviti Ensure Speedier Transactions?
According to Agrawal, the primary point of attack is conversation. At any precise factor, relying upon the community’s place and load, the reliability and speed of different routes of communication are different. With the help of superior sensory algorithm, the organization’s UniPAY platform relays this statistics to the consumer at real-time.
The group at Innoviti explains, “In many approaches, the superior set of rules additionally appears at the previous transaction that has long past down different routes. We essentially do the same as Google Navigation, most effective within the digital payments area. Google appears on the cars that have gone down the road before you. Through GPRS, Google tracks the number of vehicles as well as the chance of the road being congested.”
With the appearance-ahead sensing algorithm, UniPAY NEXT has controlled to reduce down the transaction velocity from the common of 7 to round two seconds. “When we communicate approximately reliability, it virtually way for every transaction that has been initiated, how many succeeded and what number of failed. The reliability of payment getaways is a public information. The reliability inside the u . S . Today runs round eighty-82%,” adds Rajeev Agrawal.
The UniPAY device, on the other hand, has been able to achieve reliabilities of 96%. Over time, higher reliability allows construct consider and confidence among cashiers and merchants.
SME Lending Service: Providing Credit To India’s forty eight Mn Small Merchants
“Our entire aim inside the digital payments space become that we ought to move cash, but we must transfer the facts of the transaction as well. A commonplace hassle we've got seen inside the bills space is that a customer often does now not have good enough cash to pay for the transaction, and therefore they require a mortgage,” solutions Rajeev when asked approximately the cause behind Innoviti’s foray into the nevertheless-nascent domain of SME lending.
The genesis of the SME lending provider, came about while traders on the UniPAY platform approached Innoviti about a new product concept. The hassle of insufficient funds that retail consumers automatically face is exactly the type of trouble that outlets ought to deal with while shopping for from huge suppliers. Rajeev maintains, “For a retailer, there are solutions – taking a mortgage from a banking group or requesting the supplier to extend the credit to him. However, the basic troubles of moving money, moving statistics and providing money in a shortfall remain the same, whether or not you observe the consumer-to-merchant interface or the service provider-to-provider interface.”
In reality, those problems remain the same across the supply chain. At the small service provider level, the problem of insufficient supply of credit score is an particularly crippling one. Given that India is home to greater than forty eight Mn SMEs, tackling the problem at large scale, despite the fact that tough, is truly vital to the u . S .’s monetary boom.
Operating within the UniPAY platform, the SME lending service makes use of the merchant’s credit records to decide his/her creditworthiness. Based on the statistics, the employer creates a credit line which can be then utilized by a small merchant to buy stock from a supplier. A stickler for accuracy, Innoviti founder and CEO Rajeev Agrawal is brief to factor out that Innoviti serves simplest as the middleman platform. He adds, “We do not provide the credit score from our books. We are only the platform. The loan is furnished by way of mainstream banks.”
160K Loans, $seventy eight Mn Disbursement: Innoviti Striving For Financial Inclusion
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Since its launch in 2016, the SME lending product has dispensed between about 160K loans to over 30,000 small merchants in distinctive parts of India. The yearly disbursement volume of SME lending tiers from $62.Three Mn (INR 400 Cr) – $78 Mn (INR 500 Cr). The average ticket size of loans is around $312 (INR 20,000), with the payback period being no longer greater than 15 days. Given its small value and quick period, the loan is simplest meant to permit merchants to shop for trade goods from providers and promote them to clients.
At the instant, Innoviti is working with three companions for its SME lending provider which consist of Kotak Mahindra and NBFC. When requested if Innoviti is seeking to onboard man or woman traders, Rajeev had this to say, “We are not looking at character/non-public creditors because by using and massive, the cost of capital for a financial institution could be very low. Because banks have get entry to to contemporary and savings debts, the value of capital is usually very low.”
While for distribution, it presently works with banks and charge companies to acquire new clients in tier-II and tier-III towns. Through its virtual payments platform, Innoviti also gives patron loans within the shape of credit card EMIs, further to supplying SME lending. To bolster the carrier in addition, the enterprise will soon start accepting Bajaj EMI on the equal platform.
Underwriting Relationships, Not Just The Recipients Of Loans
In the SME lending section, a not unusual hassle is the dearth of verifiable facts approximately the service provider’s credit history, which continually will increase the chance of default. In a country with 1.3 Bn population, there are simplest around 220 Mn PAN cards. Despite the authorities’s endured efforts to sell economic inclusion, 19% of India’s population remains unbanked, in step with an Assocham India-EY joint observe.
More often than now not, intermediaries like Innoviti should depend upon the facts of credit score bureaus to ascertain the small service provider’s creditworthiness. The unhappy truth stays that a major section of India’s small service provider community, especially in rural and semi-city regions, haven't any place by any means in those credit bureaus.
Unlike most competitors, however, Innoviti has come up with an modern, and equally effective technique to the hassle of defaults. Instead of underwriting the small service provider, the loan is issued towards the service provider-provider relation. For this, the center generation in the back of the SME lending product tracks records without delay from the provider and evaluates the connection index between that particular merchant and provider. And with this, it creates a credit profile, that can then be used to create a credit score line. “This means that the unsecured mortgage will b used to the merchant most effective to pay to the stated provider,” provides Rajeev Agrawal.
As a further step of protection, Innoviti disburses the credit score directly to the dealer, for this reason eliminating even the tiniest danger that the merchant would possibly default. Its modern fee of default, if you’re wondering, is much less than zero.7%. Rajeev argues, “Two of the main motives in the back of mortgage defaults are borrower reason and problem in loan repayment. We had been able to knock out the purpose problem because we're giving the credit score strictly against a relationship. Because the borrower doesn’t get coins in his hands, there may be no question of misusing it. We minimise the second one hazard through proper profiling of debtors. Business balance is an crucial criterion in terms of danger control against loan defaults. We want a sure consistency within the service provider’s relationship with suppliers.”
Rajeev Agrawal On Navigating Through Challenges In The Digital Payments Space
Although opportunities for boom in the digital bills phase are boundless, the sector has its truthful proportion of demanding situations as properly. Talking about the primary hurdles Innoviti has had to conquer, Rajeev Agrawal highlights the reality that the whole monetary generation area is a surprisingly regulated one. With conservative partners, like banks, as the primary participant, attractiveness of innovation on this ace is tough, due to the fact you have to convince a number of human beings that the era in query will upload fee.
The 2d ache factor relates to the lack of product understanding that keeps to foremost the u . S .’s commercial boom. In India, product improvement has been in large part restrained to IT. Innovators and hassle-solvers are extra focussed on enforcing existing technologies, in preference to building them from floor-up. This shortage of technical skills is acutely felt within the payments area, where new technology usually have low penetration.
In an age where extra than 2.Five quintillion bytes of facts are consumed daily within the shape of emails, movies, pics, tweets, and content material, the danger of cybersecurity breaches cannot be absolutely removed. As a part of a current observe, the Centre for Software and IT Management (CSITM) at Indian Institute of Management Bangalore surveyed the risks associated with digital payments inside the us of a.
The have a look at exposed a barrage of significant privacy issues with all of the offerings mentioned above. For example, whilst in many apps like Freecharge, the e-wallets are not at once connected to 1/3-party companies like Bigbasket and Uber, Paytm allow for computerized linkage with the vendors, which will increase the dangers even similarly. To combat protection concerns, Rajeev and his team at Innoviti have evolved technology which are compliant with PCI requirements.
According to Rajeev Agrawal, Innoviti differs from opposition in two approaches. Firstly, the agency focusses on the 3 center tenets of transaction: velocity, reliability, and flexibility. Cost is not one in all them. The 2d component is that Innoviti is asking at charge answers throughout the supply chain, and now not simply at the retail stage. The deeper the engagement with customers, the simpler it is for the agency to live on competition, Agrawal believes.
A Glimpse Of The Future & Hitting Profitability In 12 Months
Despite cut-throat competition in the digital bills space, Bengaluru situated Innoviti seems to be right heading in the right direction. Fifteen years after it took its first step, the business enterprise has blossomed into a formidable company with of a workforce of extra than 150 human beings throughout places of work in Mumbai, Chennai, Delhi, and Hyderabad. Additionally, it has retailers in 22 cities around the united states of america.
One phrase that you may not often stumble upon within the startup global, with its swanky office homes and multimillion-dollar salaries, is “frugality”. That is also the word that Rajeev Agrawal uses to describe the way Innoviti has been run since its inception. He states, “We have been very old college inside the manner we characteristic. In 2007-08, because the payments area turned into now not very evolved, we grew the enterprise very lightly. As a result, we have stayed coins wonderful and worthwhile most of our profession.”
That changed in 2015-16 whilst the enterprise’s SME lending product made its debut. The problem with quick-time period, small loans, in keeping with Agrawal, is that it could work most effective with a completely deep integration of generation with the lender. Any type of guide system will, consequently, erode the profitability of the process. To be capable of build such advanced technology, but, calls for investments. This is whilst Innoviti raised a Series A in June of 2015. Recently, in July 2017, the organisation secured any other $18 Mn (INR a hundred and twenty Cr) in a Series B investment round led by using Singapore-based totally SBI-FMO Fund. The round become joined in by means of Bessemer Venture Partners and existing investor Catamaran Ventures.
Post the July 2017 fundraise, Innoviti’s focus has shifted to unexpectedly increasing the UniPAY NEXT product line in terms of market penetration and enlargement. The enterprise in addition seems at developing the SME lending product right into a complete supply chain-based totally product. And as soon as the platform growth takes place, the 0.33 herbal improvement would be the market expansion of the SME lending product line.
At the inauguration of India’s first in-store UPI facility developed by means of Innoviti
For Rajeev Agrawal, the chant is to in no way prevent innovating. The enterprise is running tirelessly to construct technologies that facilitate speed, reliability, and versatility. One of its leader dreams is to strengthen increase via the combination of multiple charge channels like Bharat QR and e-wallets into the now-old POS device. In March 2017, as an example, Innoviti partnered with NPCI to increase the united states of america’s first in-save UPI-based totally bills facility designed to be used in Reliance Retail. Additionally, the employer is likewise looking to capitalise on UPI’s on the spot cash switch generation and is currently inside the process of introducing UPI at B2B level.
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Although the release of its SME lending carrier in 2016 did set the corporation again some months, founder and CEO Rajeev Agrawal is assured that Innoviti will hit profitability within the subsequent 12 to 18 months. While $23 Mn funding is nothing to write home approximately, specifically for a employer that has been operational for the final 15 years, Rajeev firmly believes that a touch goes an extended manner on the subject of investor cash. According to him, “The whole payments and lending enterprise is a distinctly worthwhile one, so you don’t need to search for funding to run the business.”
As a person with foresight, Rajeev is nicely aware about the monstrous capacity the Indian digital payments enterprise has, which is some thing as a way to keep growing as access to Internet and smartphones will increase. As consistent with a latest file by Google and Boston Consulting Group, virtual bills is projected to attain $500 Bn via 2020, contributing 15% to India’s GDP. Further, by 2020, non-coins contribution inside the client bills segment is predicted to double to 40%.
In the country’s retail phase, mainly, virtual payments has ushered in a typhoon of revolution. At present, round 10% of the whole retail spending is done digitally through POS machines, e-wallets and different solutions. According to Rajeev, virtual transactions within the retail section stand a hazard of achieving 30% within the coming 5 to seven years, furnished the contemporary increase rate is maintained. With the government doubling down on its merchandising of digital bills solutions, consisting of UPI, BHIM, and Bharat QR, many on line gamers like Google, Amazon, WhatsApp, Paytm, and Hike have additionally entered the distance.
The arrival of big names like Google and Amazon has made opposition on this area undeniably strong, which could show unfavourable particularly for smaller companies. Saturation is any other key problem within the digital payments space, wherein the adoption of digital technology is largely constrained to tier-I and tier-II towns. Thus, which will realize the goal of economic inclusion, it ought to be supported by way of a strong infrastructure that makes the transition to virtual solutions simpler and extra effortless.
For Innoviti founder Rajeev Agrawal, but, the solution lies in bringing alternate and innovation on the grassroots level. He concludes saying, “A swiftly developing Indian financial system with fledgling infrastructure needs a extraordinary method to the shipping of payment solutions. An method that first makes a speciality of making every transaction manifest, and takes place fast. Innoviti, with its tremendous experience and relationships within the payments space, has embarked on the adventure of delivering this easy promise of speed and reliability in payments.”