Payment companies will become graveyard like telecom unless they do this: BillDesk co- founder Srinivasu MN

Tell us about your background. We know you met your two co-founders Ajay Kaushal and Karthik Ganapathy at Arthur Andersen in 1999. Then you all started BillDesk at the height of the dotcom boom. Tell us a little about that.

That's correct. Firstly, we have been people who operated our business under the radar. We have not leveraged the media or put out constant updates on any of our activities. I passed out from IIM Ahmedabad in 1990, worked with ITC for about nine years and joined Arthur Andersen in 1999. Ajay Kaushal is from IIT Madras and IIM Lucknow’s 1992 batch. He worked with SBI Capital Markets and then joined Arthur Andersen. Ganapathy is from IIT Bombay and IIM Bangalore’s 1995 batch. He joined Arthur Andersen after his MBA.

So, Arthur Andersen is where we commonly met in 1999. By the third quarter of 1999, all of us decided that it would be good to start our entrepreneurial venture. We put in our papers, it took a quarter or so to be released from our last job. Now we mentally say that December 31, 1999 was the last day we were employed. January 1, 2000 is when we started off. We spent the first 90 days ideating on what to do and incorporated the company in March 2000.

Entrepreneurs often start a startup to solve a problem they have faced. What problem did you see in 2000 that prompted you to start up? With your educational pedigree you could have joined another consulting firm. Or were you inspired by Amazon in the US, the other dotcom companies that were thriving at that point?

In the 2000s, India had not even seen the internet. At that point there would have been less than 50,000 internet users. There was nothing digital happening in India. Amazon was not famous outside of the US, Google was at a nascent stage.

I'm sure there are many things in daily life that would have been frustrating us. But honestly, that was not a motivator for starting up. I think it's just because of what was happening globally. We used to drive back from Nariman Point to Bandra (in Mumbai) from work and keep chatting. It occurred to us that if we want to take a risk to do something and truly realize our potential then that was the age to start. We thought we had enough work background to feel confident about something. What we did not have was any meaningful savings. Corporate salaries then were not what they are now. But we thought it was worth taking the plunge.

We had a clear view that there were going to be massive technology-led changes in financial services. We thought that an opportunity would come from the intersection of technology and financial services, both of which we understood fairly well.

We were clear that we will give it a shot, and not question anything for the first three years. The first time we reevaluate our decisions will be after 36 months. Fortunately for us, the 36 months passed by and we never recalled our plan to reevaluate.

So for 36 months, you decided, you're not going to look back on this. In hindsight, it was great because things worked out very well for you. But there's also a danger in thinking that way. Because if you might have been facing some very obvious obstacles in that period, you would have missed those signs. It could also have sort of backfired.

What you just highlighted was a minimal risk, that we would miss the obvious sign that something is not working. But we bet on ourselves fairly strongly. One thing we all knew is that we were not looking for overnight success in any manner. Secondly, we commonly agreed that a market like India takes more hard work as compared to other markets in terms of technology, internet penetration.

All of us had to be in the same boat and that alignment came naturally to us. We were confident that whatever we will do will work out in some format. See some of it is because when you have had a great corporate career for 10 years, you believe that you can pull something off.

Was it a conscious decision to not be out there in the media and talk about the company’s milestones? Do you think in hindsight that helped you build better? Or do you think there could have been more opportunities than it would have given you.

Not leveraging PR (Public Relations) was not a conscious decision. I think it has more to do with how we are naturally as individuals. We were building a B2B model that worked on collaborating with banks and financial institutions on one side and merchants- utility companies on the other. For us the biggest endorsement was going to be if we delivered well for one bank, automatically the word would travel. So, promotion was important but it would not be through the media. Word of mouth was the medium of promotion.

By 2003, all the top banks joined our platform. And as I sometimes jokingly say, the last time we made a proper pitch for a client to join our platform was in 2003. After 2003 it has always been one client passing on its testimony to another. And we have never regretted that, it has worked out very well for us.

That said, the same strategy would not have worked for businesses that have started in the last three to four years. So, I guess if we started today, we would take a very different approach. We would have been spending a lot of time on social media channels to figure out how to profile our business.

When the deal was announced, many said ‘finally’, because we have been hearing that BillDesk was on the block for a while. What finally prompted the sale? Was it a push from your Private Equity (PE) investors, or was it just fatigue for the three of you because you have been building this for two decades now?

All the speculative coverage that has happened over any number of years, you will not find a single quote, from our side, ever validating or lending credence to it. I have always put it down to saying that the media is a bit fascinated with us.

Nothing that speculated about this company has ever been proved right. We never shared press releases on our investments, nor did we deny or accept the speculative articles. I do understand there has been a competitive angle to it of our competitors believing that we will get fatigued and it'll be a good sign of a transaction. As to why finally, it has got nothing to do with us running the company for 20 years, we are good to go for as long as it takes.

Earlier in 2021, we began the process of evaluating how we go about doing an IPO. Some of our investors have been there with us for 15-16 years. So we had a responsibility towards how we provide liquidity to investors. When we were on the IPO path, we were reached out to by Prosus. And this was not the fourth or fifth time we spoke, rather the first time we engaged.

They had an interesting offer; we took it to the shareholders. The interesting thing about Prosus is one, they have the right mix of financial investment and business strategy. Secondly, it provides us the necessary backing and impetus to grow. It also allows the right exit for shareholders who have been there for long. The fact that Prosus also has a business in India in terms of PayU adds to the scale of what can be achieved on a combined basis.

How long will you stay on after the deal is done? Will it be for the next two years, three years, is there a non-compete attached to this deal?

Unless the media wants us out, we are there on the platform building it. The only thing we understand is digital payments and our passion for that continues. One the transaction consummates, massive scale is possible and that’s our only focus.

But see, compared to 2000, when you said three of you didn't have any savings, today, each of you are worth hundreds of millions of dollars. You can start a company of your own or become an investor. So, what are you planning to do with the money that you made from Billdesk?

The best investment I can make is to invest it back in BillDesk. But the money is one outcome of what you do- it is a great outcome, not taking away from that.

But you have to focus on building something, and there is at this point of time, no reason to think beyond the BillDesk platform. Clearly, our intention is to stay and build. We do understand that the nature of the game changes now given the scale, and I'm hoping our experience helps scale up in a very smooth and accelerated manner.

So, what exactly is the next step for BillDesk after the buyout?

We are the largest player both in the bill payment space and the payment aggregation space. We serve the largest e-commerce companies on the aggregation platform and a large part of the ecosystem that relies on digital payments. And we built the bill payment market model in India.

PayU has a very robust presence within the SME segments and in what is called the longer tail of the e-commerce market. So that's a great complement to what the BillDesk platform has.

When you are putting up two teams together, you suddenly have a larger ability to do things, it just adds to the multiplier effect. This is going to be relevant in the context of where Indian digital payments are and the way the market will grow from here.

This is a game of scale. From now on, it's going to be about how people scale and deliver. The advantage this combined platform has is that most other players in the market still have to figure out the right platform by which they can build sustainable models.

There are very few other industries, which have changed as much as financial services in the last 20 years. Take us through how BillDesk has evolved over the years because you have to keep up with the changing industry right?

The need to innovate and pivot comes when you are a follower in the market. But if you are leading the market and setting the pace for how the market evolves, that's not the way one thinks.

When we launched in 2001, online payments did not exist anywhere in the world. Today, our model has become the defining way in which bill payments happen in India. It is now a regulated model.

That platform essentially relied on BillDesk signing up with utility companies on one side, and banks on the other side. The proposition essentially was that customers could make bill payments very easily. In 2000, the internet was not in vogue and websites were only information websites. So we said the customers would trust their bank.

Our proposition to banks was very simple, with an aggregator they don’t need to sign up each individual utility. Similarly, the utility didn't have to sign up with 50 banks. For customers, they could now just log in to their bank’s platform and see what bills they need to pay in one single window and make a payment.

Around 2005, we flipped the model to say that we will present the customer all banking options on the utility’s website. Our intent from a customer perspective was to cover all the electronic channels a customer is comfortable with. Over the years, Third Party Application Providers (TPAP) emerged and we are fortunate to be partnering with most of them.

How do you see digital payments and fintech evolving? There is a lot happening in the space with new guidelines and a boom in fintechs offering financial services. What is your view on how this space will be going forward? And there are so many players, will that change too?

What distinguishes the Indian fintech market compared to the rest of the world, is that we have a very proactive and progressive regulator in the form of the Reserve Bank of India (RBI). That is important because when people build businesses, you want to know the landscape against which you are building.

The regulatory framework has been consistent in making sure that customers are protected. That is an important factor in India, given the different levels of different digital literacy. The pace at which we are digitizing does not allow a slow education of customers. So it is good that this appropriate framework exists and it is evolving based on how markets move. We are one of the most vibrant markets with a huge opportunity and that is why there is going to be competition.

The market has enormous potential and is going to rapidly evolve into a degree of maturity. But what players need to figure out is how do you build sustainable businesses that are also viable.

Payments in India already operate with very thin margins. So, when you say it is going to be a game of scale, what will it entail in terms of the value per transaction?

Talking about scale and margins, look at what happened in the telecom space. All participants five years ago had enormous access to capital and had access to customers. Yet, we now have come to a situation where from a market of 12-13 players, most don't exist anymore.

Fintech is not very different from that, because at some it is an ecosystem responsibility, how they want to grow. If the players in the ecosystem behave in an irrational manner, saying it is a race to the graveyard, and I can get there faster because I have got more money, it will end up like the telco space with a couple of large dominant players and innovation starting to suffer. The good part for fintech is that players are compelled to behave more responsibly due to regulation.

What are the next big opportunities that you see for PayU plus Billdesk? What kind of synergies do you see going forward for the two of you? How will you operate?

Clearly, when you do a transaction like this, we expect to build on synergies. We believe the combined platforms will have great heft to bring bigger innovation. A combination helps to accelerate innovation within these two platforms. There are other adjacent areas of businesses that PayU has interest in, and we look to see what synergies can be extracted.

Basically, you just need to scale from here, because we have everything else. India already has the most efficient way to move money at the cheapest cost compared to anywhere in the world. So you can’t innovate beyond some point. When you can move $50 million at near zero cost, what else can you do? Scale, that’s about it.

You managed to keep BillDesk’s role integral to all changes in the digital payments ecosystem. But are there any challenges that you anticipate for BillDesk in the near term?

It's a competitive market, India is a hyper-competitive market in every space that you can think of. In an ideal world, India has a phenomenal opportunity to build viable businesses at a global scale. One of the reasons India doesn't come up very well there is because of this hyper-competitive nature, where cost-cutting has become a huge basis on which people want to compete.

If that changes India even within digital payments, or even other spaces of digital commerce, it has a phenomenal market opportunity. Challenges for the market would essentially come from this line of thinking for players. If you're constantly looking to see how you burn more to stay ahead in the race, I would urge people to look at the telco space as a possible early glimpse into the future of their own spaces.

Do you invest in other startups? Will you become an angel investor? That's something we've seen a lot of entrepreneurs do.

We have invested time whenever anybody sought it from us. People have asked us for money too of course, which we have obviously given. But in the past, most startups or anybody in the space who thought it relevant to reach out to us have always come to us for advice or guidance rather than for money.

Now that you've been acquired, you've given your investors an exit, despite that would Prosus want to take BillDesk public someday?

This is a question you should be asking Prosus.

But in terms of your vision, would you be open to listing someday?

Structurally, it is a shareholder decision. In that context of Prosus being the common shareholder it will largely have to be their decision. Probably, Prosus having invested there will be a point in time when it makes financial sense to list it somewhere for Prosus to get its own return. But that is going to be a choice for Prosus to make finally.

How did you and the other co-founders spend time on the day of the deal announcement? Did it feel a little surreal? You said you stopped being an employee on December 31, 2000. But in a sense, you've sort of again become an employee 21 years later. So, what was really running through your minds yesterday?

No it was not surreal. This is just an event, nothing has changed post signing, nothing is going to change in the foreseeable future. Firstly, the entire regulatory process has to go through. I have to deal with the same business, client, and customer issues today that I did four days ago. But yes, since it was a big announcement, we spent most of the day talking to employees to try to address the entire organization, addressing them in groups and trying to get their feedback.

You could also say we spent time not taking calls from the media. I'm not being facetious here, because that was what happened. But when we were flooded with media calls, we thought talking to employees is more important.