How Novopay bridges the gap between banking services and unbanked sectors

The past 10 years have dramatically changed the face of digital India. From a growing smartphone user base, which is now expected to touch 820 million users by 2022, to robust internet infrastructure, the changes have been huge and rapid. And Srikanth Nadhamuni and Gautam Bandyopadhyay were ready for it.

The duo launched Novopay in 2013 with a vision to make banking accessible, affordable, and simple for Indians, including the next billion. The AI-powered SaaS-based core banking platform is today enabling millions of customers to remit money, withdraw money, make payments and avail a variety of banking and consumer-related products and services. More recently, it won the award for the best technology company for fintech solutions at India FinTech Forum’s IFTA 2020 Awards.

The beginning

Srikanth is a technologist and entrepreneur with over 30 years of experience in CPU design, healthcare, e-governance, National ID, banking and fintech sectors. In his illustrious career, he worked with Nandan Nilekani on the Aadhaar project as head of the technology team for the UID Authority of India since its inception in 2009 and created the UID Technology Centre in Bengaluru. Gautam is a seasoned professional with 26 years of experience in digital lending and banking, payments, core banking, financial inclusion, digital commerce, mobile payments, mobile commerce and product management. Starting his professional journey as a banker, Gautam went on to join Infosys in 2001, where he played several roles from product management, consulting, global deliveries to Head of Innovation at Finacle (Banking Product) unit.

The startup saw the duo bring the perfect mix of both their skills to the table. Three critical tools resulted in the flagging off of Novopay. The first was Aadhaar adoption, the second was the ubiquitous presence of the mom-and-pop retailer network in India, and the third was the growing number of smartphone users.

Elaborating on the three pillars, Gautam says, “We noticed that Aadhaar was already becoming a powerful authentication and KYC framework with financial protocols such as DBT (Direct Benefit Transfer), AePS (Aadhaar enabled payment system), and e-KYC built around Aadhaar. So Aadhaar became a critical tool for the startup.”

The largest employment generator in India is trade. As a trader’s nation, despite the rise of the e-commerce sector, there is a large number of mom-and-pop retailer stores. “There are around 13 million retail stores and back in 2013, we realised we could use this network to distribute financial and non-financial products,” he says.

And another key part was the adoption of the Android smartphone. “In 2013, the smartphone sales in India jumped 3x to 44 million, making it a user base of 200 million. We noticed that the retail sector was fast adopting digital models. The shopkeepers were used to conducting some basic digital transactions like topping off mobile recharge,” shares Gautam.

Building on these factors, the duo envisaged Novopay as an “Electronic Delivery Network” to deliver sachet-sized products and services assisted by retail shops, delivered through an Android phone and riding on the Aadhaar railroads.

The Novopay difference

The duo noticed the severe lack of infrastructure to deliver financial services to the unbanked and underbanked section of India. Onboarding the right people was another challenge, along with partnering with banks. “I’m talking about 2014 when API banking was not in trend. Integrating with banks was very difficult. So we ended up building the entire technology stack ourselves to reduce our dependencies on our partners. And that led to us building very robust products,” says Gautam.

Through its state-of-the-art technology platform that is cloud-native, mobile-first, API-enabled, and AI-driven, Novopay aimed to fill the void and change the game. The co-founder explains, “Using our technology at the ground level, we are distributing payment products digitally so that people don't have to walk into bank branches to do transactions.” Their technology platform supports digital onboarding, digital lending, digital payment, and digital distribution solutions. Speaking about it, Gautam says, “There's a very high degree of automation that we brought using technology to the company. The dashboard helps us to monitor the transactions and monitor our retailers digitally without being on the ground. It helps us enable their transactions securely.”

The team also credits their growth to their large distribution network on the ground and the recent COVID-19 pandemic, which accelerated digital adoption.

Today, Novopay has partnered with over 80 enterprises to deliver services at the lowest incremental cost. Their services include bank account opening, Aadhaar-based deposits and withdrawals, domestic money transfer, micro-insurance distribution, savings products such as FD, RD and digital gold, micro-loans, bill payments etc.

Scaling with .in domain

Novopay’s target segment was 600 million customers at the bottom of the pyramid in India, so as per Gautam, Novopay.in was a natural choice of extension. “Our target market and customer segment was such that it made immense sense to reach out to them using .in extension,” he says, adding that it was a seamless process to reserve the domain name.

Their online presence led them to achieve significant milestones such as managing Rs 10,000 crore loan book on their platform – servicing 3.5 million customers, powering 20,000 partner outlets, servicing over 11,000 pin codes across 500+ districts, and more.

Like Novopay, the National Internet Exchange for India (NIXI) is helping hundreds of startups across the country to get a .in or .Bharat domain. Apart from cost-effectiveness, another advantage of getting a domain name from NIXI is that one can choose from 22 languages. This will help businesses be more visible to the right audience.

Gautam believes that the current ecosystem is supportive and there is space for new players to make a mark, as Novopay did.

The way ahead

What started with just six-seven people has led to a company with 325 employees and over a thousand distributors across the country. “We are looking to serve the needs of 600 million underbanked and unbanked customers. In five years, we aim to grow 20x - 50x the size that we are today. Now, we are levelling up by building a bigger retail network, with more products and services, and by powering the technology needs of more banks,” he says.

The ‘Shaping India Inc's Online Growth’ series chronicles the journeys of startups and SMEs in India and how creating an online presence on the .in or .Bharat domain powered their success stories.