From lottery to loans, will Payworld hit the jackpot?

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Gurgaon-based Payworld is betting on the concept of ‘Phygital’, a mix of physical and digital properties, to ensure financial inclusion of its not-so-tech-savvy target audience.

When Sugal & Damani Group started operations in 1991, little would they have guessed that a fledging lottery business would be the gateway to building a new-age Indian financial services company for low-income groups.

Started in 2006, the aggregator of financial services caters to low-income groups in urban India along with focusing on populations in semi-urban and rural India. This also includes a vast majority of migrant workers who still rely on physical bank branches.

Praveen Dhabhai, Chief Operating Officer, Payworld

Explaining the reason behind starting up, Payworld’s Chief Operating Officer Praveen Dhabhai explains, “We believe that 95 percent of India needs to do a digital transaction and they need assistance.”

What is interesting is how the company is leveraging its old assets to ensure digitisation.

As a part of their services, Payworld empowers these groups to perform basic banking services such as money remittances, SME lending, loan and bill repayment facilities, and consume other digital services including recharges, train and bus ticketing as well as insurance.

These are services a modern-day payments provider delivers digitally through an app.

However, Payworld is betting on the concept of “Phygital”, mixing physical and digital properties, to create an ecosystem for its not-so-tech-savvy target audience.

Leveraging the already existing distribution network of its lottery business, Payworld has equipped these retail points with their software to sell financial services to their walk-in customers.

The solution can be run on desktop (Windows) as well as on the Android and Windows mobile platforms. The company also claims that the system can be accessed through pure SMS or a Java feature phone.

Praveen says that these retail points are not in high streets, but street corners in chawls and hovels, where the concentration of low income groups is higher.

“A majority of our audience is from bottom of the pyramid. And this segment knows their neighborhood kirana stores really well, usually coming to buy biscuits and other small supplies. Hence, in our case it is the retailer who targets the customer,” Praveen adds.

At present, Payworld has reached 630 cities in India across 23 states. Further, the company states that there are over 100,000 retailers using the Payworld software to sell financial services to walk-in customers.

How it all started

In 2006, the basic framework of the idea was developed with recharge facilities. Noticing that retailers used 10 different smart phones to recharge, the company decided to aggregate these services, setting off on the Payworld journey.

Soon, realising the value of aggregating services, the financial services company spread its wings across bill payments and added new services.

The challenges during setting up included creating software that could be used by people who don’t generally use them for business, while reaching out to retailers across India with a limited budget.

Payworld started by providing software and hardware at a time when stores didn’t routinely have basic computers and phones. It then started developing software that could do transactions even through a basic feature phone as they became common among store owners.

When internet and hardware became more common, Payworld developed software that could be installed in their devices. At present, the company provides financial services though a web portal and android app.

How does Payworld stack up?

Mitul Damani, Director, Payworld

According to Praveen, Payworld last year clocked 100 million transactions across 24 million unique users. The company earns revenues on per-transaction basis from the various services that they sell. The commission differs for all services and can even vary vendor to vendor.

The firm charges a surcharge on money remittances. Like other mobile wallet players, it takes one to three percent on recharges, eight percent on bus tickets, charges Rs 20 for booking a railway ticket and Rs 40 for booking tickets for air-conditioned coaches.

The company has partnerships with NBFCs like Capital Float and loan aggregators like Happy Loans and Rupiya Exchange. It disburses loans to SME, starting from Rs 25,000 and going up to Rs 1 lakh. Consumer loans begin at Rs 10,000.

In the future, Payworld plans to provide investment options in liquid mutual funds as well as loans to consumers, through access to transactional data.

At present, the firm is aiming to reach Rs 3,700 crore in transaction volume even as it tries to increase its retail presence. Last fiscal year, the company had achieved transaction volumes of Rs 2,300 crore.

However, despite being a forerunner, Payworld failed to get a Payments Bank licence in 2015.

In 2014, their parent company, Sugal & Damani was involved in countrywide IT raids, due to reporting inaccurate lottery sales figures and evading taxes.

The way ahead

According to media reports, Payworld is now in talks with strategic investors for funding. Payworld is reportedly aiming to raise as much as $100 million through the deal.

Speaking about the competition, Payworld believes that the most common misconception about them is that they are competing with other mobile wallet companies.

However, Payworld gets its differentiation through targeting newer income segments, working on the ‘Phygital’ model.

This opens a new pool of audience for the payment platform as it plans to grow the market.

Although one cannot deny that payments as a business model hasn’t been profitable in the country, with Indian wallets like MobiKwik and Paytm morphing themselves actively into financial services as well as digital services provider.

Perhaps this could be why Payworld is experimenting with newer revenue models, planning to introduce lending to customers as well as trying to get into high-margin liquid mutual funds.

Signing off, Praveen states, “We are focusing on people who don’t have the bandwidth and knowledge to use a debit card to fill money in their wallets and then do a transaction. We are targeting people who are more difficult to reach.”

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