How former colleagues turned to entrepreneurship over chai
Chennai-based M2P Solutions connects banks, payment networks, financial institutions, businesses, and merchants to create an interoperable payment platform.
While most of us have, at one point or another, spent time discussing business ideas at the tea stall close to office, there aren’t many who can claim to have seen them turn into reality.
For Madhusudanan R (37) and Muthukumar (41), however, tea-time discussions from their time at Visa in 2011–12 did bear fruit. Madhusudanan says, “I was leading Visa’s efforts around new product development and Muthu was leading the engineering efforts for Movida, Visa’s mobile joint venture with Monitise UK. The migrants that we were in Mumbai, besides the usual topics, conversations would drift towards challenges we faced individually in taking products to market, some of them attributable to banks’ ineptitude in embracing digital quickly, leave alone helping their clients go digital.”
They started noticing recurring trends and identified white spaces in B2B payments solutions. After many discussions, in late 2014, they started M2P Solutions and brought in Prabhu R (34), a family friend of Madhusudanan’s, as a co-founder.
Building on the idea
“While we were tracking and researching the B2B space and the idea was getting solidified into a startup, there was a lot of action around consumer payments and the investors’ appetite for digital payments was yet to peak. However, we realised everyone was peddling their own app or creating their island of closed ecosystems,” says Madhusudanan.
Having been in the space for over a decade, they realised that the key to success in payments is to get the network effect and the right economic model. They also realised that the incumbent technologies weren’t ripe for small-ticket low-value transactions and were convinced that if mobile payments were the future, they would have to solve adoption challenges and overcome further challenges of interoperable mobile payments on the merchant side of retail payments.
Building on the idea further, the trio started M2P as a payments-as-a-service company (PaaS) and the platform YAP.
Digital payments platform
YAP provides an integrated bank-grade digital payments platform encompassing all retail payment assets in India. This includes wallets, cards, transit, QR, NFC, UPI, and tokenisation solutions.
The YAP API engine supports over 200 APIs covering all retail payment products and services.
Madhu says, “We have over 40 companies connected to our payments engine and over 60 consumer-facing products covering over a million users on our platform.”
DCB Bank and YES Bank are their sponsor banks for the payment programmes.
“The first programme with DCB Bank was a prepaid card linked to gold loan accounts. While we started up as a programme management unit for the bank, we quickly realised that the vertical of digitising payments for small-ticket loan disbursements with collection would be a killer product, and we started dwelling deeper into the vertical and in the next couple of quarters, over a dozen NBFCs and microfinance companies including Madura Micro Finance, Belstar, SKS Microfinance (now Bharat FInancial Inclusion), Utkarsh Micro Finance, India Infoline, and Muthoot Finance started using our platform,” says Madhusudanan.
Revenue model
Soon, they expanded the offering to include prepaid cards across Rupay, Visa, and Mastercard networks, and power white-label digital wallets for banks and over the past year have added products like UPI, NETC toll payments, NFC, HCE, AadhaarPay, and BharatQR. They also power the digital payments suite for Equitas Small Finance Bank and claims that the freshly minted BharatQR merchant platform is deployed at over a dozen banks across the country.
In its second year, the company has processed over Rs 2,000 crore in annual payment volumes, and claims to have grown 4x from the preceding year.
The revenues are from three fronts — the volume of payments processed on the platform (typically annuity revenues), a line of revenue from the number of cards issued, and subscription fees for the API connections.
It also claims to cater to multidisciplinary startups in the country which include the likes of
- Payments (SafexPay, PayVega, Slonkit)
- Corporate / expense management (Paysack, Cinqo, Techmojo),
- Alternate lending (Stashfin, Olly Credit)
- Retail / financial inclusion (BharatPay, Payzello),
- Merchant payments (Benow, Trupay, Slonkit)
Madhusudanan adds, “We help these startups focus on their moat, while not worrying about payments technology or the associated back-office heavy lifting that is required with banks.”
Banking on experience
After starting as a three-member team, M2P is now 25-strong.
Madhusudanan has 15 years of experience in payments, and in his last role as head of prepaid and financial inclusion products for India and South Asia at Visa. Most recently, he led Visa’s efforts around leveraging UIDAI for rolling out products, working closely with the government. He also incubated several market-first products around healthcare and inclusion.
Muthukumar, who has spent over 20 years working across Asia Pacific (he has worked in Japan, Singapore, and India) in technology and payments companies, is now leveraging his experience to deliver cutting-edge technology solutions. Prior to starting up he was the technology outsourcing lead at PayPal, and before that led the engineering efforts for Movida.
Prabhu comes with over 12 years of experience in managing large IT platforms across Verizon and CTS, and he has experience in managing business-critical functions and systems.
Bootstrapped so far, the company is now looking to collaborate with strategic partners to drive growth. Madhusudanan says, “From the inception stage we were running two startups within the company — a B2B payments solutions business generating revenue from the outset and a build-launch-test-fail-iterate-repeat mode on the mobile acceptance side, as this space is still evolving. To that effect, we are funded by our customers.”
Market landscape
India is headed for an exponential increase in digital payments over the next few years. A Google-BCG report sees the industry growing 10-fold to touch $500 billion by 2020 and contribute to 15 percent of India’s GDP.
With the government pushing initiatives like Cashless India along with the introduction of new payment modes like UPI, Aadhaar Pay, and USSD payments, people and businesses alike are discovering the comfort of making payments online.
While there are many capital-rich companies like Paytm and Mobikwik that have one of their business verticals in payments, there are also Instamojo and Razorpay, which look into segments like home entrepreneurs and small-sized businesses.
Talking about the future, Madhusudanan says, “As we look ahead into 2018, we want to build on our leadership position in the B2B payment solutions space and intend to process over $1 billion in payment volume by the next financial year. We aspire to break into the top five merchant acquirers in the country and build our own suite of products around lending and invoice discounting.”
They are also exploring geographical expansion to markets in the Middle East, Africa, and Southeast Asia.