In five years, MSwipe, a mobile point-of-sales solutions company, aims to reach merchants in 200 more Indian cities, terminalise 5,00,000 merchant gateways, and clinch more business by signing up partnerships
Here’s how Square Inc, the San Francisco-based merchant services aggregator and mobile payments company came into being. One day, Jim McKelvey, a computer engineer and skilled glass blower, missed out on a US $2,000 transaction because he couldn’t accept a credit card payment from his prospective customer. To ensure that this never happens again, in 2009, he, along with his friend and co-founder Jack Dorsey (the creator of Twitter), and Tristan O’Tierney, developed Square Register, the first mPoS (mobile Point-of-Sale) application for small and mid-sized merchants. Today, five years hence, the company offers a range of similar services in the U.S., Canada and Japan, and records US $15 billion in annual transactions, or US $14 million in volume, per day.
Taking a leaf out of Square Inc’s success, in March 2011, Manish Patel decided to come to the rescue of small and mid-sized merchants in India, and founded MSwipe Technologies Pvt. Ltd. “Earlier, when I was running a chain of beer and wine retail outlets, I realised that securing a PSTN-based (landline) PoS terminal from a bank was a painful task. The device itself would cost between Rs. 5,000 to Rs. 15,000 and the installation terms such as infrastructure requirements, terminal charges and transaction fee were onerous for a small merchant,” recalls he.
As a first step, Patel secured licenses for South Asia from Roam Technologies, a Boston-based end-to-end mobile commerce company. He then spent a year re-engineering the technology to suit the Indian market, and lobbying with banks, gatekeepers (Visa, MasterCard) and regulators, on security issues pertaining to card processing and data security. “Since it was a non-linear device, things such as security over public network were a big concern. In fact, it took a great deal of convincing to get the merchants and their customers on board as well,” adds he.
Eventually, in 2012, the company launched its first product, the MSwipe mobile swiper. For Rs. 2,999, the merchant would secure a box, consisting of a dual-sim mobile phone with the PoS application pre-installed, a sim card with data connectivity and a physical card reader with a 3.5 mm jack. “When the card reader is plugged in, the application will launch, following which, the merchant should swipe the customer’s card, enter the card details and the customer’s mobile number, and secure his/her digital signature. The customer would then receive a receipt on his/her phone and the money would be deposited in the merchant’s account by the following day,” explains Patel.
In December 2013, following the Reserve Bank of India’s mandate that all installed PoS terminals in the country should be replaced with EVM (Europay, MasterCard and Visa) compliant PoS solutions; it launched the MSwipe WisePad, an EMV compliant terminal. “While it is similar in terms of security and speed, unlike the first device, a WisePad is Bluetooth enabled and does not require physical connectivity. It also allows merchants to cancel unsettled transactions, review the last 30 transactions and view the day’s summary,” shares Patel.
RBI’s mandate of making all devices EMV compliant has created a huge technical barrier for many small players. We own the IP and the hardware, while other players have to buy the terminals. So, this tips the scale in our favour, in terms of cost.
Today, MSwipe offers three kinds of products to its merchants; the MSwipe Swiper, the MSwipe WisePad, and the MSwipe phone, priced at Rs. 1,650, Rs.4,500 and Rs. 4,750 respectively. Currently, it has reached 8,000 merchants across 350 cities in India, and 1,000 merchants in Sri Lanka.
The company has built three revenue streams; first is the merchant aggregator business, where MSwipe’s sales team sell its devices to the small merchants directly and charges them a monthly rental of Rs. 275. Second is by providing its hardware and services to banks, who in turn offer it to their customers. And, third is through international licensing.
Seeking external funding
Over the last two years, the company raised Series A and Series B funds from angel investors and venture capital investors. These funds will be channelised towards developing the merchant aggregator business, and acquiring new customers. “We aim to reach merchants in 170 more Indian cities and install over one lakh terminals. We also plan to work with more partners, say banks and payment solution providers, to go-to-market faster” states Patel. In July 2012, MSwipe partnered with Axis Bank and Prizm Payments, to introduce Swipeon, a mobile PoS solution, to the bank’s customers. MSwipe’s current partners include Axis Bank and Corporation Bank.
Standing out in a crowd
Patel indicates that the differentiation for MSwipe lies in its ability to provide end-to-end solutions, instead of being a mere supplier of hardware. At MSwipe, the entire solution, including the application on multiple mobile platforms, the payment gateway, and the encrypted card reader, has been developed in-house. “RBI’s mandate of making all devices EMV compliant has created a huge technical barrier for many small players. Here, we own the IP and the hardware, while other players have to buy the terminals. So, this tips the scale in our favour, in terms of cost,” he explains.
A second differentiation is its merchant management system, a platform for managing the merchant’s payment network. “The system ties into our transaction processing platform, so the moment the information is uploaded; it is available online for review,” says Patel.
Furthermore, the company is in the process of developing a cash register that Patel believes will alter India’s cash register market. “A traditional cash register is expensive and costs around Rs. 15,000. The one we are developing is a sleek device that can be integrated with any tablet. A merchant can download the electronic PoS from his online account (on MSwipe), and integrate the online cash register with any tablet, and hold every day transactions at a fraction of the cost,” he explains.
According to him, the biggest growth driver is the sheer momentum at which the payment solutions business is growing in India. “95 per cent of the economy is cash. Even if this moves by 5 per cent, the opportunity to grow will be massive. So, our focus for the next five years is going to be to terminalise 5,00,000 merchant gateways, and build a strong merchant customer base which has the ability to accept any form of payment from its customers,” says Patel. The mobile payments space in the country is still very much in its nascent stages and Patel believes MSwipe can make a serious dent, considering its early-mover advantage.
MSwipe Technologies Pvt. Ltd.
Founder: Manish Patel
Products: MSwipe Swiper, the MSwipe WisePad, and the MSwipe phone, priced at Rs. 1,650, Rs. 4,500 and Rs. 4,750 respectively
Reach: 8, 000 merchants across 350 cities in India, and 1,000 merchants in Sri Lanka.
Five year plan: Terminalise 5,00,000 merchant gateways and become a market leader in this space
Concept in brief :
Manish Patel founded MSwipe Technologies Pvt. Ltd. in March 2011, in a move to allow small and mid-sized merchants to accept all forms of payment from its customers. Today, MSwipe offers three kinds of products to its merchants; the MSwipe Swiper, the MSwipe WisePad, and the MSwipe phone, priced at Rs. 1, 650, Rs. 4, 500 and Rs. 4, 750 respectively. Currently, it has reached 8, 000 merchants across 350 cities in India, and 1, 000 merchants in Sri Lanka. With the Series B funding raised in early 2014, from DSG Consumer Partners and existing investors, Matrix India Partners and Axis Bank. MSwipe aims to reach merchants in 170 more Indian cities and install one lakh terminals, and plans leverage business by working with more banks and insurance agents. In the next five years, it aims to terminalise 5, 00, 000 merchant gateways and become a market leader in this space.
Where did the money come from?
2012: First round of angel funding from a group of investors including Praveen Chakravarthy, former head of investment banking at Anand Rathi, and Deepak Shahdadpuri, founder and managing director, Beacon India Private Equity Fund
January 2013: Series A from Matrix India Partners and Axis Bank
February 2014: Series B funding from DSG Consumer Partners and existing investors, Matrix India Partners and Axis Bank