Note to readers: Media reports of startups in India are typically focussed on the founders and investors. Little is known about other leaders who are doing important work. Startup Sages is a series of articles that will profile key personalities from the world of startups who are driving change, building interesting products or pursuing vital projects.
The last two decades have changed the way India banks. From shopping for the latest cellphone on e-commerce websites, buying air tickets to withdrawing money from ATMs or the government directly transferring money to beneficiaries for social schemes, technology has made banking easy and accessible.
Private lenders like ICICI Bank and HDFC Bank and government-owned State Bank of India have led the digitisation of financial services, features that have simplified banking.
Behind these front-end transactional platforms, there are technology partners who remain silent and largely remain unknown but they are the reasons we can transfer money in the dead of the night, pay bills and do banking from the safety of our homes as coronavirus rages.
Nagaraj Mylandla, a businessman from Chennai, can take some credit for the change. His FSS Technologies, or Financial Software and Systems, might not be as popular as a Paytm or a PhonePe but ask any banker, they will talk about the critical role the 30-year-old company has played in payments technology in India.
FSS powers almost every form of digital transaction undertaken by consumers today. From ATM withdrawals, card payments for online and offline transactions to point of sales (PoS) settlements, FSS powers most of these systems.
For a customer, it is the bank, whose name or logo they can see, doing the job but banks are not technology players. They help in the settlement of funds but the entire process is usually outsourced to vendors. FSS is one such player and perhaps the dominant player in the digital payments space.
“I have had only one focus in life, customers. Customers take care of you if you take care of them,” said Mylandla in a video interaction from his suburban home in Chennai.
Mylandla’s reputation in the industry validates his claim. Ask any banker who is acquainted with the payments landscape and they will vouch for Mylandla’s “clean image and good reputation”.
Doing business and cracking deals with banks for so many years is not easy but FSS has done that under his leadership.
“He is an extremely hard-working leader who has managed these business negotiations with banks extremely well,” said a top executive with decades of experience in the payments space.
When he started, it would take Mylandla months sometimes even years to bag just one deal from a large bank. From 1989 to 1999 he put up as a paying guest in Mumbai, India’s financial hub, and walked around Nariman Point from one bank headquarter to the other, looking for business for his company.
Today, FSS supports 600 million cards, works with the likes of State Bank of India, HDFC Bank, ICICI Bank and Axis Bank, has a presence in 25 countries and employs more than 3,000 people.
One of the most respected venture firms in the country, Premji Invest, promoted by billionaire businessman Azim Premji, is a large shareholder in FSS.
Also read: Startup Sages | Meet Professor Zerodha
Humble beginnings
From his early days as a banker with the Chennai-headquartered Indian Overseas Bank, Mylandla knew he had too much ambition and energy for the job he was doing. After 18 months, he left to pursue a business administration degree in Nebraska, the American state from where famous investor Warren Buffett comes from.
Mylandla learnt a lot about technology in banking and saw a huge potential for it in India. As luck would have it, India was looking to shift to a core-banking system from the branch-led business. Indian banks needed technology to make the change.
Mylandla started as an employee of ACI Corporation, an American banking technology giant, driving their business in India but he split and formed FSS in February 1991.
Starting a company was the easy part but convincing banks with millions of customers to partner with a ‘startup’ for their technology layer was quite another.
Seemingly innocuous information came in handy. Mylandla knew 12th or 14th floors were where the offices of deputy general managers (DGM) and GM, were. He would loiter around the corridors, hoping to meet the banks’ decision-makers.
Hours spend pacing up and down the corridors, pestering executive assistants and waiting on couches of visitors lobby paid off.
The country’s largest lender State Bank of India became his customer in 2000 and by 2007, the FSS client list had expanded to other Indian PSUs.
The HDFC Bank connect
PSUs were later arrivals. It were the private banks that shaped writing FSS’s story. Mylandla’s timings were nothing but perfect.
As FSS was looking for business, players like HDFC Bank, Axis Bank (then UTI Bank) and ICICI Bank got their banking licences. As a startup, it is always easier to sell to one. HDFC Bank became one of FSS’s first customers in 1996.
An older acquaintance with CN Ram, HDFC Bank’s then IT and digital head, helped him pitch to the bank and eventually convince its top leadership to give FSS a chance to build the technology layer for the lender.“We were a six-member team, we had to rapidly scale up our team to work on this project,” Mylandla said.
A year later, Axis Bank joined his list of customers and ICICI Bank, which had chosen another player, came to FSS in December 2000.
The early 2000s saw rapid digitisation of the banking system in India, led by the private sector lenders. Technology players like FSS saw their business boom.
“After those few initial years, it was all about scaling up to cater to the requirements of the banking ecosystem,” he said.
The growth phase
Today, FSS is a professionally managed company but Mylandla has not forgotten the days when he had to run the business singlehandedly. Like a typical entrepreneur, he sweated it out in the driver’s seat to grab new business opportunities, ensured his customers were happy and hired the right set of people.
Even if that meant wading through knee-deep water during Mumbai’s monsoon to reach office in Andheri or spending nights at bank headquarters to ensure that the system updates were carried out smoothly.
“Today FSS is not dependent on me anymore for day-to-day operations but there was a time when I used to spend the nights at banks while deploying critical projects,” he said.
FSS has three major verticals—services for government banks, private banks and new business within which fintech projects like Jio Payments Bank, Bajaj Finance and Airtel Payments Bank are housed.
In terms of services, what started with ATMs has now expanded into card issuance, merchant acquisition, digital banking, payment processing and others. FSS powers digital payments across all forms from card payments to UPI, IMPS and even Aadhaar-based transactions.
At a time when there is a buzz around the indigenisation of services, Mylandla is sure Indian companies can match the service and product innovation of global players.
“We have faltered in our services but every time we have maintained transparency with our customers and ensured we came back quickly—it is this level of service which has helped us grow in this business,” he added.
For Mylandla, integrity is the cornerstone of his business. Whenever there was talk of cutting corners or compromises to save money, he preferred to walk away, Mylandla said.
“This is a characteristic I used to look for among my employees as well,” he said. Mylandla calls it holding on to his middle-class values.
And that perhaps is the reason he is not impressed with the valuation-hungry startups. Fintechs surviving on external funding would last only as long as someone is willing to pump in more money, Mylandla said.
There was a high chance of them getting gobbled up by banks or larger players like Visa and Mastercard. Unlike many other countries, banks in India are extremely strong, hence fintechs will only do well when they partner with them rather than compete with them.
“I did not build FSS through external funding, I took money when banks themselves approached me,” he said.
Into the future
Mylandla is 66 and he lives on a 30-acre farm on the outskirts of Chennai, close to the city’s IT corridor. He spends his day growing vegetables, fruits and flowers. He continues to be the managing director of FSS but has reduced the number of executives who report directly to him.
His wife, Sharada, heads marketing, son Archit leads the transformation and strategy team. His daughter is settled in the United States and works with Tesla in San Francisco.
The business has stabilised in India and the company wants to expand. FSS is already doing business in all the Gulf Cooperation Council member countries. It is now looking at Commonwealth countries in Africa and is has made a start with South Africa.
"The aim is to make FSS a global brand in the next five to six years,” Mylandla said.
From around 80 percent of the business volume coming from India, the target is to reduce the revenue share to 60 percent and get 40 percent of the business from outside.
Even on this growth path, Mylandla is careful about keeping the business clean. “Historically I have walked away from deals where integrity could not be maintained, even now I stick to that principle,” he said.
Global business could make the company consistent in terms of the revenue quarter on quarter. This is also the reason Mylandla hasn’t taken the company public. He is hoping once global banks start using his systems, there will be more consistency in his business through the year.
“Indian banks tend to give out purchase orders only towards the second half of the year, which makes my business consistent year-on-year but not quarter-wise,” he said.
A listing on the exchanges is not his top concern, being the next Infosys or TCS, in terms of the creation of software products, is.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
