By Madushka Balasuriya
Innoviti, a technology firm from India, wants to change the way you make payments. Already among the leaders in the Indian payment space, Innoviti is now looking to bring its EMI (Equated Monthly Instalment) solutions to Sri Lankan shores.
EMI, for those unfamiliar with the concept, is nothing new. In fact many of you reading this will have likely made a purchase from a store which houses an EMI-enabled terminal. It is essentially a method of transaction which allows a customer to purchase a product via a series of monthly instalment payments as opposed to paying the total sum in one go.
Yet despite no obvious downside, in Sri Lanka it’s estimated that only 10-15% of all point-of-sale (POS) terminals are EMI-enabled, something which Innoviti Chief Business Officer Rajesh Prasad sees as a massive growth opportunity.
“Sri Lanka is very similar to India, though the size is different. The country has 1.4 million credit cards for a population of 22 million, whereas if you like at India a population of 1.25 billion has only 35 million credit cards. So the percentage of people having credit cards in Sri Lanka is much bigger,” explains Prasad in an interview with Daily FT.
“Having said that if you look at the EMI transaction size, in India the monthly credit card transactions is roughly about 20,000 crores with total EMI transaction roughly about 2000 crores, which is about 10% of the credit card spend. In SL you have a spend of something like 1500 crores per month as per the regulators figures, but EMI transactions are only roughly about 2.8%.”
This lack of EMI growth in Sri Lanka can be put down to a few things, according to Prasad. Traditionally an EMI service requires card issuing banks to approach stores and set up EMI-enabled point of sale (POS) terminals at each individual outlet, a task which can be rather time-consuming. Once done it also only allows customers with cards from whichever banks have set up individual EMI terminals to purchase items through instalments – drastically limiting the potential customer base for EMI transactions – while at the same time requiring consumers to call the banks directly to confirm the EMI conversion.
“We have 13-14 credit card issuers in this country, with every issuer trying to increase their EMI size. That’s the reason you get SMS’s of schemes you can buy at 0% interest, etc. But then as a consumer, at the time of purchase you don’t get this option. So what you’re expected to do is that you need to call the call centre of that bank and then convert it. So the chances of the consumer converting that into EMI is much, much less,” he notes.
“Second issue in Sri Lanka is that there is no particular service or solution provider which can integrate with multiple issuers and offer a solution. The banks have to deploy EMI-enabled terminals in all the stores individually, which is a huge infrastructure cost and it is a hassle.”
This is where Innoviti comes in. They want to bring in their own ‘acquirer independent’ EMI platform to help multiple issuers, merchants and acquirers in Sri Lanka increase their EMI transactions. This platform will function as a sort of middle man between issuing banks and merchants; doing away with the need for banks to work directly with merchants, it will allow stores with Innoviti’s tab-based solution to offer customers EMI options instantly at the point of sale for a range of pre-determined cards.
“We have a technology platform and the way it works is that we want to make it acquirer independent. For example you have an electronic store, you already have a POS terminal to do the authorisation transaction of the card but the terminal is not capable of performing an EMI transaction. What we want to do is deploy a separate tab-based solution which captures only the EMI details,” explains Prasad.
“So this captures those details over the network – let’s say an app – and takes the data into a server in the cloud, where your EMI details are saved. All those details are then captured by the store itself and those details get passed on next day morning to your issuer bank, and they convert those transactions without you – the customer – having to call anybody.
“At the point of purchase it takes the details from the consumers and there’s a technological firm behind it where the data gets captured into the systems and it gets passed on to the issuer in a very seamless manner.”
A win-win solution
Key to the success of this service however is tying up with local banks. Innoviti is already in discussions with a few large issuing banks in Sri Lanka, reveals Prasad, while the firm has also made headway with some merchants and e-commerce retailers in the country.
What this allows is for Innoviti to simply be able to walk into a store and offer a merchant their tab-based solution – which runs parallel to any existing POS terminal – and instantly open up EMI transaction capabilities in all the banks that have come on board as partners.
This is generally considered a win-win for banks, merchants, and customers alike; customers without large amounts of liquid holdings will be able to stagger their payments and thus increase the range of products available to them for purchase, merchants will see an increase in sales, while banks in most cases will charge interest on the payments.
In terms of implementation and running costs, typically what happens in these transactions is that there will be a business arrangement between the issuing bank and the merchant to bear certain costs; to promote a certain good the merchant may bear the cost of that maybe 4-5%. What Innoviti promises is a solution that sees banks bear the brunt of the cost, which Prasad feels they’ll be happy to do.
“It’s a commercial arrangement where we charge per transaction from the participating entities, which is primarily the issuing banks. The main cost comes from the issuing banks because they’re the people who get the maximum benefit. The percentage depends, anywhere between 0.5-1%.
“Right now there’s nobody in-between who can take the pain away both from the retail side as well as the bank’s side. This is where our solution comes in. Our primary focus is first introducing the solution, helping them to do a pilot, helping them to expand their business, that is the main focus.
“We believe that our solution is far more efficient than what is there at the moment. It could possibly take away their existing constraints, it could take away their existing operational challenges so they don’t have to do anything of managing the transactions, etc., we do all those aspects. And it becomes a very seamless affair for them.”
The implementation possibilities for Innoviti’s platform is also seemingly limitless, in that it enables merchants to offer the service on any good or service above a pre-determined price. This has vast implications for not only the retail sector - where white goods have already been utilising EMI payments – but the health, travel, and online sectors as well, all of which remain relatively untouched in terms of EMI offerings.
“This is a facility to encourage the customer. Between the issuing bank and the merchant, they can decide what amount EMI can be offered. Say anything above Rs. 10,000 can be offered on an EMI basis. “There is a huge potential here. For example, the travel sector, the health sector and other sectors, the consumers there want this service. Because the economy is growing and they want to spend, and EMI has a huge potential to grow, be it in the retail sector, in health, education, everywhere.
“But you don’t have a solution which can give a piece to the issuer and which can take away the pains of managing the entire operational aspects of that EMI. This is where we want play in terms of product.”
In Sri Lanka, Innoviti is working with 3DH International to bring their brand of EMI solutions to fruition in the country. Prasad believes that while the concept of EMI has been around for a while, the scale of potential his company is looking to tap in to is an offering that is unmatched in Sri Lanka.
“There is a huge potential in this country. In fact as per one study roughly at least $ 300-400 million worth of EMI transactions should be happening in this country, but the total yearly EMI transactions in this country is only about $ 35 million. There is a potential to at least be tripled if we increase it to 10% of credit card spend.
“Frankly I would say the kind of solution we want to introduce, and the way we want to introduce, I do not see competitions from that perspective.”
Pix courtesy Innoviti