Cash card transactions are much higher in India. Why?

There are two types of e-commerce transactions on Internet. First, the consumer who makes the transaction on his behalf or family or for a friend and secondly an agent (ICT kiosks, Internet Cafes, etc) who completes the transaction on behalf of his customer.

Indian e-commerce industry minus IRCTC is almost like we are still in infancy stage. So it is clear that insights from IRCTC would help us in understanding the e-commerce trends. Fortunately, every month, IRCTC publishes actual statistics on transactions with complete details on its website.

If you observe statistics of any month, first thing is that you would wonder that cash card transactions are like 1/3 rd of total transactions (rest are credit or debit or netbanking). And in fact, cash card transactions growth rate is much higher than all other modes of payment. Then you start feeling like you have never heard of them anyone using it, but how come such large number of transactions?

Being an insider in this industry I would like to you give you a detailed story behind this wonder. First, let us see the business model of a cash-card company:

Platform: It is two sided. Cash-card companies just tie-up with numerous merchants/service providers (like telecom or ticketing etc). And later they start acquiring agents to use their technology platform. Typically these agents are: ICT Kiosks owners or Cyber cafes or computer education centers or the latest PCO/STD 2.0 etc.

Target Audience: Who all can’t goto a website and/or can't pay through credit or debit card for remote payments. This means, those agents become the middlemen between the remote customer and the service provider.

Commission: Most times, cash-card companies get discount from the service providers (usually 3% to 5%), a portion of which would be passed to their agents (for example air ticketing works in this manner!). Otherwise, customer is charged (for example, IRCTC don't give any commission to cash-card guys and so, agents would charge customers on top of the ticket cost).

Other revenues: Of course there could be a small percentage of direct consumers who would use the cash-card on web. But that is not what makes significant cash-flow for a cash-card company.

Future: So it is obvious that cash-card transactions would become much higher than credit or debit card transactions when cash card companies can acquire much more agents (in particular rural areas) along with more service providers (such as electricity/water distribution companies).

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Now comes the biggest disclosure: In fact, strength of any payment card system lies with the following three points.

1. They must tie up with as many merchants as possible.
2. Technology/process that makes the consumer to use the card for payment.
3. Card distribution should be efficient.
   

Now, how are the famous credit card companies (VISA or MasterCard) placed in the above points. Firstly they are accepted with innumerous merchants. Secondly consumer can use the card at merchant outlet or online or telephone or SMS or etc. Thirdly, Banks issue credit/debit cards to the consumers on behalf of VISA/Mastercard. Now coming to the costs of this ecosystem of digital payments is usually less than 5% of the value of the transactions (VISA, Banks, Merchants share this 5%). As the Mobile payments is getting matured, this value is getting closer to 3%.

Of course, companies involved in this payment ecosystem also have additional revenue through other value added services such as interest charged to the customer by providing them credit, etc.

Generic methodology for recruitment

I used to hire software engineers, test engineers, documentation specialists, etc for my previous company, ControlCase India. I have followed the methodology mentioned below for all the new hires in that company.

Must:

1. Understanding of concepts: Check the candidate whether he could understand well-enough which he claims to have been.
2. Explanation skill: Can he explain the things which he understood?
3. Problem solving through construction: If he does not know a concept, can he pick-up things when given hints?
4. Drive for quest: Does he wait for hints when stuck-up or he has passion for do-it-self?
5. Suitatability to Job profile: Does he have sufficient skills for the job that he applied?
6. Matching candidate aspirations: Does ControlCase match his aspirations of learning new technologies?
7. Suitability of pay-out: Is the candidate worth of his expectations monetarily?
8. Ethics: Does he follow ethics?

Desirable:

1. Passion for experimenting: Does he have interest in experimenting new things?
2. Helping tendency in non-core: Can he help us in things which his job profile does not require?
3. Timing flexibility: Is he available as and when need arises?
4. Friendly nature: Is he interested in collaborative environment?
5. Adjustable mentality: Can he adjust with our facilities if we can't provide of his choice?
6. Minimal dependency: Can he take initiatives way-forward or waits for assistance?
7. Long-sighted philosophy: Does he want to collaborate with ControlCase for short-term or long-term?

You may then like to ask me how I should check all these in such short interviews/tests. For more details in this regard, you may contact me (my contact details are mentioned on the top of the side-bar of this blog).

Great news for Entrepreneurs : One-Person Company

Government is planning to accept "One-Person Company" (OPC). Difference between Sole proprietorship and this new OPC is that liability lies upon the firm but not on the individual. Let us all hope that this bill will during the winter session.

Meanwhile, I have been looking at Bank Account for a sole proprietorship firm, I have found that the cheapest way to do that is through ICICI, just with 5000/-. However they require any one of the registration papers (such as Shop establishment, Service Tax, IT returns etc). Another interesting bank in this regard is : Kotak Bank, where-in you need to maintain the balance of 10000/-.