“Electronic bill payment will no longer be considered a value-added service”

Electronic payment and digital bills have been offered as services for quite some time now. But they didn’t catch the imagination of customers as expected. M N Srinivasu, director, IndiaIdeas.com tells Stanley Glancy how the company’s offering, BillDesk, will bring about a paradigm shift in the electronic bill payment space

How is Billdesk’s offering different from that of other products?

When people conduct financial transactions they prefer to do it with banks. Most service providers started off offering such services directly to the customer. Customers are worried about issues like security and privacy of personal information. According to a McKinsey report, online financial transactions haven’t taken off in the APAC region and especially in countries like India, thanks to such concerns. For customers, the comfort factor is greater while transacting with banks directly than with a third-party service provider. Our core model involves working directly with banks. We work as a service provider for the bank. Banks present our service directly to the customer in the form of a bill management service. Another key differentiator is that we do not charge the customer for the transaction. We already have tie-ups with some of the top banks in the country, including the likes of SBI, Union Bank, Bank of Baroda, IDBI Bank and ABN Amro Bank. Ten banks have already gone live and a few more are expected to go live in the next few weeks.

Since you do not charge the customer for transactions, what is your revenue model?

We charge our customers for the technology that we offer. We also have a services management division wherein we manage the bill payment services of banks. On the front-end, the customer will be dealing directly with the bank but we will be managing the services for the bank at the back-end. Currently, these two areas account for a major portion of our revenues. Other than this, we bill banks for each transaction conducted using our system. If the billing volumes are large then we charge Rs 2-3 per transaction. From smaller volumes, we charge anything between Rs 6-10. We have tie ups with more than 50 billing companies from a wide range of verticals like electricity, telecom, cellular service providers, insurance companies, ISPs and credit card service providers. LIC, BSES, Hutch, Mahanagar Gas, MSEB, AirTel and Hughes Tele are some of the companies we have tied up with.

How will banks and billing companies gain by opting for Billdesk?

Increasing competition in the banking sector has forced banks to offer value-added services to retain customers. New banks that have entered the fray are offering a host of value-added services to attract customers. For existing banks, especially the monolithic public sector banks, it is a question of survival. These banks are offering value-added services to reduce churn and retain existing customers. Banks also save on processing costs. The cost of processing a single cheque is anything between Rs 6-8. If you consider the economies of scale the savings are massive. As the volume of transactions conducted online grows and a critical mass is attained, banks can make larger savings.

With customers reluctant to transact online what kind of opportunities do you see in the online bill payment space?

In 2001, only four to five banks were offering these services but by 2004 we expect at least 25 banks will offer electronic payment. It will become a standard product that each bank will offer. It will no longer be considered a value-added service but it will be a basic service, which every customer will expect. The market will be worth Rs 250-300 crore in the next two to three years. Security is not a concern as technology has found a way to handle these problems. Banks are still concerned about key issues like confidentiality and privacy of information. Also, all payments by the customer are not routed through us but is made directly to the billing company. Other service providers are also now opting for the indirect model. The problem is in convincing people to convert to electronic mode of payment. Customers in the cities are more likely to opt for electronic payment due to various reasons, including access to better infrastructure, lack of time to spend on paying bills, etc. Our strategy is to align with large banks, as they are the ones best positioned to build business.