India Inclusive

India Inclusive

Fintech & Financial Services

IDFC and Khosla Ventures-backed Novopay has been conceptualized by thinking deeply about the concept of financial inclusion and by analysing a variety of use cases for the unbanked population.

Founded by a team of professionals with work experience in Aadhaar, telecom and mobile money, Novopay Solutions, was established in 2013 to promote financial inclusion and cashless transactions across India.

Sridhar Rao, co-founder and CEO, takes us through the thought process he had before prior to setting up Novopay. He narrates, “Over the last few years, the telecom sector has been growing well with authentication happening at retail points through mobile phones. Similar growth has been witnessed in the banking sector.” However, this well-regulated banking sector has not been able to percolate beyond a point. For instance, a bank customer from the economically challenged background, is unable to use a debit card as there is no ATM in his/her area.  “How is this financial inclusion, if we don’t provide the right infrastructure for a person to transact?” asks Rao.  To enable such a person to transact from the account directly (in terms of payment or partial withdrawals), it became evident to the Novopay team that an ATM like proposition was the need of the hour.

The founders of Novopay looked at this whole story and created a mobile-based solution that enables banking and payments for consumers at retail points. The company is working on a low cost model and aims to deliver scale through this, as it believes that is the only way to build a financial services business.

Getting financially inclusive

The company’s product is an android app which is provided to a retailer as most consumers do not have an android phone and don’t understand the know-how of it. “We enable the retailer with a smart phone app and he services the customer for banking and payment needs,” says Rao. If the retailer is equipped with an Aadhar device, one can also withdraw money using Aadhar finger print scanning and instant authentication.

Traditionally, domestic remittances have always happened through desktop and laptop devices and the retailer’s investment has been higher. Through Novopay’s mobile phone app, even a small retailer, can conduct the activity without heavy investment. The company’s banking partners include Ratnakar Bank, Axis Bank and IDFC.


While on one hand, financial inclusion activity is taking place, on the other hand, we have also hit upon on the ability to service e-commerce and logistics companies that rely heavily on the cash on delivery model.


Creating relevant products

While Novopay was incorporated in 2013, it launched its product formally in April 2014. “We were in the development stage in 2013 where we were meeting banks and doing a lot of pre-business launch activity,” recalls Rao. It started with Bank of India and opened almost 70,000 bank accounts. “We saw a bigger opportunity to start with in remittances and propositioned to the banks for Aadhar-based withdrawal, but none of them were ready for it,” he says. Hence, for the first two years it ended up doing different things with different banks. Effectively, during this period, it tested its concept, checked out what works and what doesn’t, and expanded its network. It now has around 40,000 retail points across India and in the last financial year, it has recorded transactions worth nearly  Rs. 410 crore.

After starting remittance, the company entered its next phase, the bank-backed wallet.

The company launched bank wallet (mobile wallet) in October 2015 and has opened 3.5 lakh accounts so far.  “A person can deposit money into his wallet at the shop, he can withdraw money and send the money from his wallet,” says Rao.

Facing up to challenges

“The fact that we are guided by the rules and regulations of the RBI as they stand does put limitations on what we can do,” states Rao. Legally, the company can do only few things under the current circumstances and thus, depends on its banking partner. “So the banking partner’s ideology has to be in sync with ours and it should be comfortable with our technology,” says Rao. In fact, Novopay has provided IDFC bank with technology for its payment and loan management.

Customer literacy is another other big challenge.  “We circumvented it by bringing the retailer into the picture,” says Rao. The company had to sign up enough retailers at the right places to do business.

“The biggest challenge in any financial activity is viability as it is more like a social enterprise,” says Rao. The charges are minimal and the company needs volume to break even. While Novopay is working on these volumes, it is also looking at other options that will make its operations more viable.  The company is in the process of tying up with corporates to service their requirements.

“While on one hand, financial inclusion activity is taking place, on the other hand, we have also hit upon on the ability to service e-commerce and logistics companies that rely heavily on the cash on delivery model,” says Rao.  The company’s shops (that it has a tie-ups with) are fast becoming locations where logistics companies deliver cash. “There is security of cash, a quickness of cash remittance into the account and the nuisance of counting cash is taken away,” explains Rao. By doing this, the company also realised that it is enabling more transactions for the retailer.

There are a few other corporates that want disbursal of wages to temporary employees.  “Microfinance companies have also shown interest in working with us as they are completely dealing in cash. We are now looking for more apps where this system of retailer and app can be used to service the need to move more and more transactions into the cashless system,” says Rao.

Novopay has recently signed up with an insurance company and is coming out with an insurance product, specifically in the life and vehicle insurance sector, focussed on the economically challenged section of the society.


As financial literacy works on a wafer thin margin, multiple transactions are important for the company.


Going to market

The company’s marketing activities are below the line and at the ground level. “The consumer we are talking to is not someone who can be reached through advertisements and the retailer that we work with needs to be met and serviced,” shares Rao. Hence, its whole marketing strategy is at the field level. The company’s team is spread across 20 states and they work with the retailers. “Effectively, our marketing is also done through our app. We have a direct connect with the consumer as well as the retailer courtesy the mobile app,” adds Rao. For those who do not have a smart phone, the company reaches out to them through the SMS route. The retailer who has the app gets regular feeds.

Exploring the path ahead

“We are on an exploratory phase as this industry is new. Though banking has been in existence for years in this country, the change in policies, electronic movement, Aadhar enablement and so on, has only happened in the last couple of years,” says Rao.   This huge environment change has opened up a lot of business opportunities for companies like Novopay.  Not just this, as financial literacy works on a wafer thin margin, multiple transactions are important for the company. “Therefore, we are putting as many transactions as possible on the app, so that there is diversity and when the volume scales up there will be insurance, bank deposit , withdrawals and so on,” says Rao.

The company aims to be huge in terms of scale from a retail network and a consumer transaction point. However, it also looks to evolve with the industry. Going forward, Novopay expects Aadhar alongside the mobile wallet and the Unified Payment Interface, to push its agenda further. “Through this effort, we aims to service millions of consumers across the country in the coming years,” concludes Rao.


Snapshot: Novopay Solutions

Year: 2013

Founders: Sridhar Rao, Srikanth Nadhamuni, Gautam Bandhyopadhyay

Incubated at : Khosla Labs, Bengaluru

Investors: Khosla Ventures, USA and IDFC Ltd, India

Industry: A mobile-based solution to enable banking and payments for consumers at retail points with an objective of promoting  financial inclusion and cashless transactions

Poornima Kavlekar has been associated with The Smart CEO since the time of launch and is the Consulting Editor of the magazine. She has been writing for almost 20 years on a cross section of topics including stocks and personal finance and now, on entrepreneurship and growth enterprises. She is a trained Yoga Teacher, an avid endurance Cyclist and a Veena player.

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