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Dial ‘M’ To Swipe

A point of sale machine that is reliable, cheap and mobile? MSwipe combines all three in an easy-to-use kit -by Venkatesha Babu. Manish Patel, 46, trained to be a doctor, but always had entrepreneurial zeal. A few years ago, while running a chain of speciality retail liquor stores in Mumbai, he ran into a problem that lakhs of merchants face. “While I wanted to accept cards for payment, the point of sale (PoS) equipment was tethered to a landline, expensive and difficult to use.” Last-mile connectivity through landlines and tethered PoS terminals requires uninterrupted power. Also, these PoS cost between Rs 5,000 and Rs 15,000. India has an issued-card base of 300 million (20 million credit cards, and the rest debit). But usage is low as there is no inexpensive and mobile way of accepting cards. Most of the 280 million debit cards are used to withdraw cash from ATMs. For a card-issuing institution like a bank, increasing card usage is beneficial as, instead of having to invest in more ATMs, it would earn transaction fees. In May 2010, social media maven and Twitter co-founder Jack Dorsey had launched Square, an e-payment service, where a mobile phone could accept a credit or debit card with the help of an attached card reader. A flat, low and transparent fee made Square a success, processing billions of dollars. Inspired by its success, Patel examined a similar solution for India. He sourced knowhow and an exclusive licence for South Asia from Boston-based Roam Technologies and launched MSwipe in March 2011. But, while the US is a large smartphone market, India isn’t one yet. So MSwipe spent a year re-engineering Roam’s technology. Also, banks and card associations (like Visa, Mastercard, Amex, etc.) had set views on how the card processing industry had to work. And data security was a concern. “They had some apprehensions as ours was a non-linear device. What happens to card-holder data when it is travelling over a public network, was one issue. Since there are three parties in each transaction, there was no charge-back protection. And as these card associations are international, they have set protocols. Indian banks are very hidebound, unlike their US counterparts. So we had to get a waiver from the card association and also convince banks to start using our technology, which meant that while on paper we are two years old, in reality we have been operational for only a little over four months,” says Patel. MSwipe also worked hard to keep costs low and convince all players to agree to use its product. “In a conventional terminal, say, at a petrol pump, after presenting the card, one signs on a piece of paper, agreeing to the terms of payment. We believe that in India most of the transactions will be sub-Rs 1,000. So even a printer and the cost of thermal paper is a no-no. A low-cost pre-printed booklet is sufficient for the signature, with other details entered by the merchant. Margin is 1 per cent — the processor gets 10 basis points; majority benefit goes to the card issuer and the association. I am proud that we helped set the framework in the Indian context.” Also, since the card swiper is hardware encrypted, Patel says it can’t be used as a skimmer to filch data. “Our security levels are way ahead of what is legally mandated.” For the trader, MSwipe offers a merchant box for a one-time fee of Rs 2,999. The box has a dual-SIM mobile phone with PoS application pre-installed, a physical card reader to be attached to the phone, and a SIM card with data connectivity. The merchant can immediately start accepting cards. The money is transferred to the merchant’s account the day after a transaction. MSwipe charges a flat Rs 275 per month from each merchant, including data charges. “We want the merchants to have a smooth experience. We have already signed up 5,000 merchants across 245 cities, and are adding 1,500 merchants a month.” MSwipe initially received angel funding from Anand Rathi Financial Services’ CEO Praveen Chakravarty, Beacon India PE Fund MD Deepak Shahdadpuri, and an unnamed foreign investor. In January, Matrix Partners invested an undisclosed amount. Rishi Navani, MD of Matrix Partners, felt MSwipe was an early leader in the low-cost mobile PoS sector. “Manish knows what small and mid-sized merchants face. We are excited to partner with him to address this market.” What about competition from telecom companies that are launching their own money-transfer solutions? Navani says, “There has been little traction on that. There are various regulatory challenges. The former CEO of Paypal is part of Matrix USA. We have examined all pros and cons.” Also, the digital wallet services can be used only if both the parties have the same service provider, says Patel. The funds will be used to enhance footprint and roll out new products, says Patel. “Technology and backend are in place. It is now a question of scaling up. MSwipe should not just help record card sales, but also cash sales, track inventory, and maintain profit-and-loss accounts.” Patel reveals that they are working on a PIN swiper (helps an mPoS accept a PIN) and an EMV swiper (a certification protocol for security chip cards for data). “The day you start using your card for even routine small transactions, we would have arrived. I am not worried about competition as we have a headstart. I am more interested in growing the mPoS market rather than worry about marketshare,” says a confident Patel. (This story was published in Businessworld Issue Dated 25-03-2013)

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