Monthly Archives

May 2015

    shutterstock_102041923

    According to the Reserve Bank of India (RBI), as of February 2015, India had over 20.86 million credit cards and 538.03 million debit cards-in other words, quite a bit of plastic money. In fact, these numbers are only going to increase in the near future, what with India’s major banks allowing everyone with an Aadhaar card to open bank accounts. Now, to throw a spanner in the works-debit and credit card players, pay attention-a majority of all monetary transactions in the country are still carried out via CASH!

    A dearth of debit and credit cards in India is clearly not the reason for this huge gap. So, what is? Well, for starters, the country had only 1.09 million point-of-sale (POS) terminals as of February 2015, again, according to the RBI. The reason for this dismal number is simple-a POS terminal is an expensive proposition. And the clincher-the viability of such equipment is contingent to achieving a certain minimum transaction volume. Needless to say, these conditions effectively exclude small and medium-sized merchants and create an overcrowded marketplace for the big players.

    Meanwhile, the marketplace itself is flourishing. According to stats released by the India Brand Equity Foundation, in 2013, the total size of the Indian retail market was $490 billion and is expected to reach $1.3 trillion by 2020. This potential naturally implies that every retail company-irrespective of size, turnover, etc-will rise to the challenge with rupee signs in their eyes. And an increasing number of POS terminals will magically appear.

    The journey for small and medium-sized merchants, however, remains an uphill one-and not just because by and large, they still faithfully propound the virtues of fixed point of sales (POS) devices. As a small side note, it is, in my opinion, an appropriate time to point out that these devices entail a substantial amount of upfront investment (in the form of rentals)-not to mention high cost of maintenance. In fact, fixed POS devices are no friend of merchant acquirers either-think of the funds required for maintenance and all kinds of logistics associated with the machine!

    But, wait, there is a light at the end of the tunnel. The magic portion for these players is a payment device which entails little or no expense in terms of deployment and maintenance. Moreover, the solution ought to adhere to approved standards of transaction and data security via PIN authentication and all security certification standards. And last but certainly not the least; it should leverage both the mobile device and plastic money to the fullest.

    Enter the mobile POS (MPOS). It wouldn’t be an exaggeration to state upfront that this solution is labelled as “disruptive”, potentially driving down the price of regular POS terminals by as much as 50 per cent and offering significant value adds such as EMI payments, mobile top-ups, payment analytics and even cash and check reconciliation via its mobile app.

    Another plus in its kitty is the fact that cash-on-delivery (CoD) has emerged as the most favoured payment method in India. Customers are not always comfortable with making a prepaid transaction on a new website. So, the next best thing is to opt for CoD. Given that small and medium-sized businesses in India mostly accept ‘cash-only’ payments, owing to the large fee entailed in card processing deploying MPOS makes good business sense. It opens up an affordable channel to accept alternate forms of payment, from cards to the mobile handset. For the big boys of retail, MPOS could provide support in managing the workforce, sales force etc. by providing mobile-based inventory management, automatic sales records, etc.

    There is little doubt that MPOS has received an enthusiastic response, especially keeping in mind the spate of platform launches last year. However, its long-term success is contingent on a very fluid factor-the uptake of technology by the small and medium business (SMB) segment.

    Accounting for over 17 per cent of the country’s GDP (according to a joint report by NASSCOM and Frost & Sullivan), this segment is very crucial, to say the least. Traditionally, its relationship with technology has been a difficult one, as it chose to adopt IT in a selective manner. Things changed soon enough, though. Despite its size, the SMB segment faces many challenges, such as fragmentation, unorganized growth and scalability issues, to name a few. Hence rose the need to streamline operations, standardize processes and enhance productivity and quality of products and services.

    Today, led by the retail and hospitality segments, the SMB sector remains one of the biggest spenders in this regard. To illustrate, as per a report released by NASSCOM in association with Frost & Sullivan, the Indian SMB market spent about $8.7 billion on IT in financial year 13. Of this, 45 per cent was spent on hardware, while 40 per cent was on IT services (implementation, support and training) and 15 per cent was on software licensing and software as a service (SaaS). Going forward, the segment’s pockets will continue to be deep-the SMB segment is estimated to witness a 15 per cent year-on-year growth, which will propel the IT spending in the sector over $18.5 billion by financial year 2018.

    Of all the overall technology solutions available, industry experts reckon that cloud adoption on will be a key element to transform the SMB ecosystem. The platform’s inherent advantages such as low CAPEX and TCO, flexible storage options and easy data management is beckoning these players. As a result, SaaS adoption by Indian SMBs is growing at a CAGR of 25 per cent and is expected to reach $370 million by financial year 2018. A significant portion of SMBs would continue to focus on business software and enterprise applications, mainly for an integrated business view.

    That apart, these players have realised the value of an all-encompassing presence online. Subsequently, they have their own digital store front or tie-up with e-commerce majors, like FlipKart and Amazon.

    To illustrate, Amazon is offering various interesting services and tools to Indian SMEs, in addition to the “Sell on Amazon” facility.  For instance, it has opened up the global markets for products manufactured by Indian SMEs, with the help of Amazon’s Fulfillment by Amazon facility-where Amazon will pick, pack and ship to customers directly.

    Moreover, the big boys of e-commerce, including Snapdeal, Flipkart, Amazon and eBay are coaching small traders on how to use a computer, send emails, click a photo and upload products. It doesn’t end there-apart from the bells and whistles, also on the agenda are more serious tasks like warehousing and inventory management. The bottom-line is simple and a win-win situation for both parties. Use digital literacy as bait to lure more sellers into the booming e-commerce marketplace. More users imply more products which ultimately imply more customers.

    To conclude, the point of this blog wasn’t to extol the virtues of MPOS, but to remind my readers that the SMB segment is rising-and fast. The secret sauce for success, therefore, is for players to create a mash-up of MPOS-based payments with frills like inventory management, customer relationship management, campaigns and loyalty management programmes, offers and coupons, et al. Voila? Not quite yet. Cash is still the king.

    May 21, 2015 0 comment
    0 Facebook Twitter Tumblr Pinterest
    iStock_000030704710_Large

    If there is one key take away from my extensive field study for one of the top mobile money (read remittance) service providers in India, it is the eye-opening and refreshing revelation that ‘commission’ to the channel (agents mainly and distributors somewhat) is no longer the decisive factor in favour of a choosing a service provider over others. A distributors case is little different and he still gets lured by high commission but it is ultimately the retailer who perform day to day transactions and generates volumes and thus ultimately lucrative revenues for everybody up the chain including distributors.

    A retailer’s interest and continuous activity in any mobile money service provider primarily depends on below factors in order of importance:

    •     An easy to use and stable system
    •     Regular retailer engagement and quick issue resolution
    •     Commissions
    •     A wide range of services

    Retailers prefer ease of transactions and quick issue resolution over a small increase in commission. Most retailers have their own other businesses (stationary, Xerox/printing, general store etc) and hence do not want to chase the service provider over issues of failed transaction etc. They need a system where minimum manual input is required over mandatory information, less toggling among the pages on the website, etc. Quick issue resolution is also critical as a disgruntled customer whose money hasn’t reached the destination beyond a reasonable period of time creates ruckus at the retailer’s shop which affects existing as well potential customers. These cases may be few but has significant impact as this is really a word of mouth business.

    Sure, commission still plays its part when a sales officer of a service provider is luring the retailer into the system but certainly is not enough by any means to keep the retailer’s interest in using the service. These days, most retailers do not have to deposit money, pay fees or invest in a computer or an internet connection to get on-boarded with a particular service provider. In all likelihood, the retailer already has the required infrastructure in place for his other business (ticketing, printing, or may already have a money transfer service provider). What is required to keep the retailer’s interest in a particular brand (if there is such a thing in remittance business in India) or service what is most definitely needed is the ease of performing transactions and sound issue resolution (and prevention wherever possible).

    There is fierce competition in the market with similar commissions offered by all the service providers. And since there is no additional cost a retailer sign-up with multiple service providers. In my field study all the retailers in the sample employs the services of three or more service providers. On-boarding a retailer is easy but the essential task is to keep him engaged and interested where the above listed factors holds the key.

    There is also a phenomenon with some retailers where they charge a fixed service fee from the customers irrespective of the commission given by the service provider. They could do so because of their location advantage (no other retailers in the area) and lack of reasonable customer awareness.

    Finally, a retailer does not like to toggle among various service providers for different services. As an instance, if a customer approaches the retailer for money transfer as well as a mobile recharge, the retailer would ideally prefer to do both via the same service provider whose portal he has already logged in. In short, the more the services provided by a single service provider, more are the chances of retailer opening its portal for fulfilling one of those services. Hence a service provider should aim to provide as many other ‘not so lucrative’ services along with the ‘cash cows’ viz. money transfers give a one-stop-shop solution to retailers.

    Retailers are the critical arteries of mobile money ecosystem. They’re the subscriber’s first and usual ongoing point of contact with a mobile money service provider. It is nothing but absolutely critical to win their mindshare to gain competitive advantage over the competitors.

    May 13, 2015 0 comment
    0 Facebook Twitter Tumblr Pinterest
    shutterstock_140797474

    Stiff competition between telecom companies has given rise to a multi-SIM market.  To add to this, consumers are flooded with alternatives means of communication and are exposed to a variety of services and offers.   To add to all this, the VOIP calling service have been eating into international calling revenues, messenger clients have reduced P2P SMS revenues significantly, leaving  telecom companies and communication service providers (CSP’s) under tremendous pressure to re-engage with customers.

    Traditional engagement models of setting up a call centre, allowing consumers to manage their account by setting up a well designed website and sending out segmented offers over SMS, emails and OBDs are absolutely not enough.

    Consumers expect much more – they want to know the best offer for their usage pattern. If their current communication service provider does not let them know and offer them one, they will switch to another who would. To continue to enjoy a customer’s patronage, an operator will have to offer what the consumer wants.

    How one engages with the consumer is critical.  The segment and blast model is not working.  Waiting for the consumer to contact the call centre is not a good idea either.  Marketing professionals are looking for opportunities to engage with consumers – not just communicate.  The main difference between engagement and segmented communication would be understanding the consumer’s context and offering an interactive medium to fulfil the offer instantaneously.    The context of the consumer changes every moment.  Looking at transactional data along with context would help identify what would be the right offer for a person.  For example – a roaming customer gets an offer as soon as he lands in another country.  If the history suggest that consumer transits from a particular country every month , it would be appropriate to give a offer in final destination country , rather than transit country.  Understanding the context is very critical – and this can be derived from past usage transactions.

    The second important point of engagement is using every opportunity to interact with the consumer.  Every interaction should be recorded for future use – what offer was made, did the consumer like the offer, did the consumer take/reject the offer.  Does the consumer want similar offer to be made at later point of time or wants to be left alone are important indicators.  Offers on post call notification, balance enquire, website, bills, etc are important.  Improving the user’s experience of these tools can enhance consumer lifetime value significantly. Another important tool that the communication service provider or telecom operator can use is an operator branded application that can be made available on consumer devices.  The application should be able to offer full capability to manage the account, discover services, subscribe/unsubscribe to services, calibrate usage and offer right plan for the consumer, avoid bill shock by setting up thresholds and alert users on cross thresholds. Having an engaging loyalty management system can also be used to reduce churn and improve CLV.  We have already seen some operators using these tools effectively and improving the ARPU by 5-7 per cent.

    Having understood the importance of context and tools to improve engagement, we need to find an answer to the all important question of “How do you use analytics to know what the consumers want?” There are several tools available in the market that claim to have data analytics capabilities.  However one has to be careful in choosing the right tools and identifying the partner with whom you can work in getting right results. This is critical because there is no one solution that fits all.  The data has to be carefully studied, right parameters identified and right model constructed to get desired outcome.  These assumptions, behaviours may change from time to time, which means you need to revalidate/reconstruct the model from time to time.  You need to work with right tools and partners.  Some vendors sell the tools, expect that you build the model and get right outcomes, while some vendors are SI’s who offer services using third party tools.  One has to find right partner who understands communication service provider or telecom operator sage and retention and can offer the right tools, ready to use prediction models and provide best in the industry processes to deliver desired outcomes.

    Person who bought “A-service” also has bought “B-service”– is not the only use case for use of analytics, In fact, I would say, if the communication service provider or telecom company want to use analytics – this should be the last use case.   In a highly competitive (multi SIM) environment, having a solution that would let the communication service provider, engage with the consumer as soon as one registers on to the network and offer a relevant plan resulting in retaining the consumer.  Communication service providers and telecom companies are seeing huge churn rates, understanding possible churn candidate before user decides would give an opportunity to do something to save the candidate from churning.   If the consumer has just dropped off an off net call due to reduction in balance, can you offer a loan – the amount can be based on the user’s credit rating – allowing consumer to continue to use the service – while ensuring that operating company does not see mounting defaults.

    The declining subscriber-led growth has made it imperative for communication service providers and telecom operators to look inwards towards their consumers, understand their needs and offer them the best user experience.  The transaction data that communication service providers and telecom companies have will become the biggest asset that will help them in getting increasing wallet share.  Many telecom companies have tried using the tools from various vendors, some have succeeded, some are have seen marginal results.  Time is right for every communication service provider or telecom company to take control of the situation, look for right solutions, right partners and ride the analytics based growth wave.

    May 6, 2015 0 comment
    0 Facebook Twitter Tumblr Pinterest