Prime Venture Partners Podcast

India Fintech 2.0 - Wallets, E-commerce, Uber & PayTm with Srikanth Rajagopalan, Anshul Rai & Sanjay Swamy

• Prime Venture Partners: Early Stage VC Fund • Season 1 • Episode 143

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Introducing Prime’s special series on ‘Fintech in India - Past, Present and the Future’. This is the 2nd episode titled ‘India Fintech 2.0 - Wallets, E-commerce, Uber & PayTm’ in a 3 part series.

In this special series of episodes, Sanjay Swamy, our Managing Partner speaks with industry stalwarts Srikanth Rajagopalan and Anshul Rai. Srikanth is currently the CEO of Perfios Account Aggregation (AA), an off-shoot from the Perfios legacy. Anshul is the Co-Founder and ex CEO of Happay, his claim to fame is Happay’s celebrated exit to CRED for $180M. 


In this episode, Sanjay from his personal experience of working on the ‘Aadhaar’ project explains how the growth of the fintech sector is fueled by the revolutionary implementation of the world’s largest biometric ID system. Srikanth talks about how Amazon solved the ‘cash-on-delivery’ problem using wallets bringing it from ~70% to ~15%. And Anshul narrates the remarkable journey with humble beginnings of building ‘Happay’ with multiple pivots to eventually exiting to CRED. 


This episode sets the stage for a perfect finale in the next episode where we dive into the world of ‘UPI’, ‘Lending’,’Compliance’ and ‘GenAI’, stay tuned!

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Srikanth Rajagopalan:

And said here's a ticket. Order the SMS just go. Take a printout of the app.

Sanjay Swamy:

Two industries get a distribution through one, but then the actual product was actually from somewhere else.

Anshul Rai:

We work on a lot of research projects. We may not have a direct impact on business.

Sanjay Swamy:

How does one build a sustainable business by selling to Indian banks and financial services providers?

Anshul Rai:

Zero dollar spend on marketing, scale to 200,000 different upside.

Srikanth Rajagopalan:

It's a permanent virus for life. It was a trust issue, not a payment issue. That problem has still not been solved. By the way, people don't look at the 15-16 years.

Sanjay Swamy:

They look at that 15-16 seconds of pain but maybe I'll talk a little bit about the Aadhaar experience there, and that was a time where I think you know everything was. You know the end goal was there that India should be able to transfer benefits with minimal leakage, because Manrega and all these programs had anywhere from 10 to 90 percent leakage is what they would say and I think that was an opportunity. And I think that was an opportunity and really I have to credit the government for allowing Nandan and team, shrikant Pramod all of them too and Sanjay Jain to join to really look at this as a new age infrastructure for the next 100 years or the next 50 years and say, okay, what is the current state of the art, not what has somebody else done? Right, because the default expectation was that everybody would do a smart card and in fact I had written a blog about if you're going to do a smart card, do the SIM card, because it's a network enabled smart card. You get all the benefits of a smart card and I thought Government of India could certainly, if mChek could put a client on two telcos, government of India could probably put a client on all telcos and everybody would have a very secure element which is linked to their ID. But I think we went two steps even further and said there should be no token at all. You are your ID. The device isn't your ID, right, or the card, although people still use the word Aadhaar card today.

Sanjay Swamy:

But the decision to go all biometric, you know, do a one-time sweep of the population and get everybody in the system, was a really almost ludicrous solution right to the problem. But it was such a, you know, because we said we don't want to inherit anything, right? Yes, banks had some KYC data, telcos had some KYC data, but the best thing to do is start de novo. And that was a two-year phase where I got to see a little bit of how the government thinks and really how much of competence there is in the government, because we kind of like to, you know, private sector and that entrepreneurs try to cynically say well, you know, the smart guys really don't go there, right? But we saw, interacting with several of the IAS officers and, of course, someone like Ramsevak Sharma, who is later shown you know five times over, including the whole pandemic distribution of the vaccine and stuff.

Sanjay Swamy:

So we found some extraordinary people there and the bar was very high. But the constraint for the government is you cannot say that, oh, 0.1 percent of the population doesn't have eyes and hands, so it doesn't matter right because you have to serve everybody in the as the government, right.

Sanjay Swamy:

So you do not have a choice and so everything you do has got to have a mechanism of doing thing at complete scale.

Sanjay Swamy:

Um, and then of course cost and all these things also.

Sanjay Swamy:

You know, at the end I don't know if you all know, but adhar was basically like a 50 rupee per enrollment, which at the time was about a dollar, right, and india enrolled the whole country within that price point. Biometric devices that used to cost two thousand dollars, you know, for an iris camera, by the end it was a, you know, one and a half dollar part added to a cell phone and any phone could become an iris camera, right? So I think the world has benefited a lot from how india adopted, because nobody was buying, you know, let me buy 25 000, you know, flatbed fingerprints cameras, right, people would buy 25 and all of a sudden india was ordering them at scale and it was sort of a very unique experience. But I remember the work I did there was sort of on looking at applications of Aadhaar, and that's where Shripati and I actually worked together and with Bala as well, and Raj Mashruvala was sort of very core involved with Pramod and Sanjay on the choice of the biometrics, the mechanism.

Sanjay Swamy:

They actually innovated a lot there. So, for example, the choice of the biometric system was, you know, in all of these bidding government things, you have L1 bidder, l2 bidder and so on. So the business, actually they were not paid for the software, they were paid on the usage of the software, right. Maybe some flat fee plus the usage and the usage were paid on the usage of the software, right, maybe some flat fee plus the usage and the usage was based on the total cost of ownership. So if you improved your algorithms and the cost of doing your biometric auth came down, you would get next quarter, you will get I don't know 70% of the business, whereas the second guy will get 30%. So they kept them sort of motivated to continue to keep improving their systems, right.

Sanjay Swamy:

So it's sort of very unusual things that the government did, and you know this whole idea of doing authentication and then eventually EKYC.

Sanjay Swamy:

These are things that were sort of game-changing, right, because all of a sudden here's a digitally signed confirmation of, you know, your proof of ID, which is valid in the court of law, because India had this. You know adoption of digital signatures very early on and I think that you know people will look back at it and we've seen several studies now that say that you know India's leapfrog banking what should have taken 45 years has happened in six years in India, etc. So it was a extraordinary, you know, experience, and this one has actually been something that I've been privileged enough to be part of but also shared around the world, and then later on, the work that happened on the whole India stack, which led to sort of a lot of the stuff you're doing now with account aggregator and so on. So we'll trace that journey a bit, but in parallel, the wallet story started right and maybe, anshul, you can share a little bit about your view, because that was around the time you were getting into entrepreneurship and so on.

Anshul Rai:

Yeah, so our journey started, I think after I finished my two years at Microsoft. We started with we said in BMTC buses, when you pay 10 rupees, that guy will actually write 2 rupees at the back of the ticket and hand it over to you and say that you can collect it later. And then you are like why should?

Anshul Rai:

I or give you a toffee. So you are like, why should I leave my 2 rupees to this guy? We should solve this problem. It should be a solvable problem, so literally the first idea that we started working on was that how do we make these transactions cashless? The very first product that we built was a RFID reader that we can give one reader in every bus and, like RFID cards that can be loaded. You can basically give like 500 rupees cash, we'll tap it to the reader, we'll get loaded with 500 bucks and then every time, whichever bus you go to, you can keep using, consuming that 500 rupees cash. What's the product we've made? We went to BMTC. Of course, we were not lucky enough, like ISCTC, so I mean, people are expecting favors. Uh, we were not lucky enough like isctc.

Sanjay Swamy:

So I mean pay us 20 rupees.

Anshul Rai:

no, they people are expecting favors. We really, of course, had no money, uh, to crack any deal with them. And uh, and we realized that, look, as a very young startup, it's super hard to have a esu as your first customer. Like you can't crack it Right. And um, and they say, okay, what problem are we trying to solve? The problem that we're trying to solve is the of this whole small change people still paying in cash why don't we take it a notch above and then solve it for a generic peer to peerpeer right? And that's when we said, look, let's build PayPal on mobile numbers, right? So PayPal, at that point in time, you know, every account is basically linked to an email ID. We said, everyone has everyone else's mobile number in their mobile right, but they don't have their email IDs. So imagine if I can actually make payment to sanjay directly to his mobile number, uh, and then sanjay can decide whether he wants to transfer that money to his account or utilize that essentially a wallets play. Um, we said, okay, let's now pivot from this whole bmtTC idea to a focus on peer-to-peer.

Anshul Rai:

We, to be very frank, didn't know there is something called PPI, license required by RBI and whatnot. We actually only built the product, said, okay, let's build the product. And just a few weeks before we were trying to launch, we were told look, this is a regulated space and you can't just do it. Right, please go and talk to the regulator. So like of course we didn't have again, we didn't know how to apply for the license, of course we didn't have any money to apply for the license. So what do we do? So what do we do? What I did, I think, went to RBI, downloaded the list of people who already had the PPI license. I said we'll go and partner with one of these guys. Maybe someone will have a good set of APIs that we could consume and we could use whatever powered by ABC From that entire list that I saw.

Anshul Rai:

I said that no one will talk to us. We are just two of us. No one will talk to us. I found one guy. There's an entity called Zipcash. The founder is ex-Microsoft. I said let's catch him, he'll at least meet. I'll use my Microsoft link, I'll message him, messaged him on linkedin actually, look, I'm x microsoft founder trying to build something in the space. Can I come? Sure, so I went to his place, uh, based out of mumbai. But I realized that, uh, they had zero tech in at that point in time, right like they had license, but they weren't doing much about that license. So I literally sat with the CTO there, wrote the specs and said, okay, now please develop the entire infra at your end so that we could consume.

Sanjay Swamy:

Let me develop it for you on the weekend.

Anshul Rai:

So that he could consume, and we finally launched after a couple of months. We launched the wallet business right and said powered by zip cash. One interesting learning at that point in time in wallet business was look, the loading was happening through a PG, a payment gateway, and you need to make at least 2 plus to make some business out of it. So the one experiment that we did I said if I need to pay Sanjay, let's say 100 bucks, the money that will get deducted from my account will be 100, but Sanjay will get only 98. I said everyone started shouting at us. I said 100 rupees will go, 100 rupees will get 98. Business will not work. I said ok, then how do we make money? Then we started putting thing ok, the merchant will pay us because we are making some life easy. And then we started putting a proprietary, non-interoperable QR codes at the different merchant locations.

Sanjay Swamy:

So which years is this?

Anshul Rai:

It was back in 2014, late 2013,. Actually early 2014. Yeah, and we said, okay, why don't we start acquiring merchants? So we were two of us and we used to have 60 interns, six zero interns, right like my developer, my app was being developed by an intern. Our marketing was developed, was done by an intern, and those 60 interns would have like four leads to whom we will pay like a 5000 rupees per month, and rest of the 56 interns would get a certificate. I had no money to pay. We can't afford to hire anyone, right? So that's how we got the job done, and those 56 guys used to be in so much enthu. What they would do is they will actually make videos, act in the videos, transact with each other in the video and then try to make that video viral within their college group.

Anshul Rai:

So it became quite famous, you know, like a young population, college students, uh, early professionals, right like, uh, we scaled to some 200 000 users zero dollar spend on marketing, scaled to 200 000 users. Um, we realized, look, we are still not making any money. I'm actually we're still burning money because, you know, for any, any rupee that goes into the wallet, we are actually using two percent on it right? Um, so the next thing that we said okay, why don't we make it? The gurdag campus is cashless because we are now famous in colleges. We go college by college and make these colleges cashless and acquire the merchants in that college because it's a cashless and acquire the merchants in that college because it's a concentrated effort and the concentrated set of users.

Sanjay Swamy:

We'll keep getting business plans to do this. By the way, today, 15 years later, flip them over.

Anshul Rai:

But everything is about timing.

Anshul Rai:

You know the CMRIT right here in Whitefield, right. So we went to CMRIT and we actually turned the entire campus into cashless. We ran that for a, you know, I think for a couple of weeks we ran that experiment and all of that was working fine. But we realized that the only way to make money in this business is to sort of pump in um billions of look, billions the business to create the behavior change, or I would say, build the entire base first and then monetize that base later with a different set of products Wallets.

Anshul Rai:

At that point in time the core usb for the wallet was the convenience and there was nothing else. The 2fa came in and the wallet the 2fa was not mandatory on the wallet, so the only use case for the wallet was, uh, that you sort of load in money and then it will automatically get deducted, right, like the whole paytm uber deal. That happened. Like paytm, uber was like an anchor customer for Paytm and was a game changer for them, and the only reason Uber got Paytm was that at the end of the ride, if you have a balance in Paytm it will automatically get deducted because there was no 2FA right. So that was the only core USP, but user experience wise.

Anshul Rai:

But look now all of that. Upis, of course, have taken away that also.

Sanjay Swamy:

So maybe we'll switch a little bit Shikant. So that phase you were back at Amex and then later joined Amazon, right the time Anshul was talking about. I have a funny story about my first meeting with Anshul which I'll talk about in a bit.

Sanjay Swamy:

But so what were you seeing from the, I guess, the Amex side? And of course the big thing that happened in that phase was sort of the emergence of ATM as well, right across the board merchants, whether it was online and so on. And of course then UPI came a little later, but be good to hear you know, from the perspective of the bigger companies, how did you see all of this emerging and the thinking both at an individual level as well as at a corporate level?

Srikanth Rajagopalan:

Correct, correct. So see, once you cross over to the entrepreneur side, it's a permanent virus for life, right? I mean, all of us know that. I mean it's almost like a for life. All of us know that.

Anshul Rai:

It's almost like a gene mutation that can never be unwound.

Srikanth Rajagopalan:

So that mindset stays with you. And when I joined back in Amex, part of it was because, after the startup went bust and then Nokia money also didn't scale too much because of different you know went bust and then nokia money also didn't scale to too much because of different, you know, larger issues um sanjay rishi. At that time I don't know whether you know him he was setting up a so-called digital unit in amex and I reached out to him and he said, hey, this is actually the best of both worlds. We have a guy who understands amex and who also has built something on the outside from ground up. Why don't you come and build it for us?

Srikanth Rajagopalan:

So the initial six to twelve months was fabulous because we were operating as a startup within a very large organization. We had all the tools and resources of, and the technology uh, you know capabilities of a large organization, but the freedom to operate very, very fast and in a very, very agile way. So we actually launched a couple of products, which was a one-click checkout which would work across any website, any e-commerce merchant, and then Amazon came calling Amazon at that time to put things in context, in 2013, when I joined, the website was five weeks old.

Srikanth Rajagopalan:

Oh, wow to put things in context in 2013, when I joined, the website was five weeks old oh wow, and we were very happily selling books and CDs and feeling you know, we're doing a fantastic job. You know it's just getting started. So at that time, I joined the payments team. That had become my core by that time, and the payments team was three or four people and the number one charter for us was not really make payments better, it was kill cash and delivery. Back in the day about I don't remember the exact numbers now over 65 or 70% of all e-commerce orders across the industry were cash and delivery. It turns out that it was a trust issue, not a payments issue. Right? People were still very new to ordering from some website with a promise that will show up in two days time. No matter how much you work hard to make that, you know, fulfill that promise of delivery.

Srikanth Rajagopalan:

Until you've opened that box and seen what is there inside, you're not going to part with your cash which sort of was the niche that easy to happen after also right with the payment on delivery payment assumption was people did have a credit or a debit card, but they wanted to pay after the delivery, not before the delivery exactly so the way we, uh, our mental model on the whole wallet business was something like this Listen, we've got the country's largest delivery fleet reaching you at a verified address at your point of convenience and the product catalog to match. And the product catalog to match. It is a very small delta for us to nudge you into opening a wallet, right. Small delta for us to nudge you into opening a wallet. To start with a low or no KYC wallet. I think there were categorizations over there up to 2000,. Up to 5000. There was a category of wallets which would allow you to transact without too much of KYC, and then you could move the person up the value chain. So a combination of these things, a combination of wallets, a combination of EasyTap I mean they were great partners for us back in my days at Amazon.

Srikanth Rajagopalan:

What we found is that, as you kept reinforcing trust, with the customer saying that your stuff will show up on time, it'll be genuine, now take that next step of faith and you know pay at checkout right, rather than pay on delivery. And then you had various ways of you know nudges and you know little offers saying that, okay, pay digitally. And here is a little delta back to you credited in your wallet and as your wallet balance builds, builds, builds and you say, okay, now I can actually use this balance for something meaningful. What changed the game for us in wallet adoption was really the digital goods. When we launched prime movies or videos and bite-sized 50 rupee or 20 rupee transactions, that spun the flag. That then started creating this habit of paying online and all this stuff. And, of course, then you had all these partnerships with you know, special offers on credit cards, co-brands and all this stuff. So today, I believe less than 15 percent you still pay on delivery.

Sanjay Swamy:

Listen, one, five, fifteen percent my numbers may be a little off yeah, yeah, and that also, that pay on delivery might also be. Digital might also be. Yeah, right and today.

Srikanth Rajagopalan:

I mean, why would you not pay digitally when you just have to flash a phone camera? So the big corporate view of the wallet and payments ecosystem was an opportunity to remove transaction costs. You remove transaction costs, you make the delivery experience so much more seamless. Then all of a sudden, you can do crazy stuff like schedule deliveries, scheduled deliveries you're not at home but your packet will show up, you get a notification, you can make the payment right. So all of a sudden you're being there and you're receiving a delivery could be delayed. Therefore, your order turnaround times, your, your delivery efficiency also went up by many fold.

Srikanth Rajagopalan:

So what started as an assumption, your point is it? Your point is it's a payment problem or it's an instrument availability problem? Actually, as you peel the onion became a trust and habit issue Once you solve for that. It wasn't easy. It wasn't quick, because a good part of two or three years to get it done. But then the flywheel started spinning and today Amazon Payments, I believe, own own business unit. It's its own licensed entity, has its own set of, you know, capabilities. It's a. It's a. It's a business on its own.

Sanjay Swamy:

Very cool, right uh, maybe I'm sure we'll come back to you on um, the, the journey with happy itself, right, because it's sort of a little back and forth back to like 2015 time frame and um. So the story actually is that Anshul met my partners when they were doing this consumer p2p play in Delhi at a hotel. They had one for, I think, the Thai event or something right and they said, oh, it's a payments product. You should talk to Sanjay, and I happened to be in Vegas.

Prime Venture Partners:

You know what happens in Vegas stays in Vegas, as they say, but I was actually at the Money 2020 conference and they said well, you should speak to each other.

Sanjay Swamy:

So we had a Skype audio call at the time and I think the call went very well, or at least that's what Anshul thought and at some point I kept hearing my name saying Sanjay, sanjay and I was like, oh, I'd fallen asleep. Of course my ego did not let me say that to him. So I said sounds very interesting, we should meet when we're back in back.

Srikanth Rajagopalan:

Good recovery, man.

Sanjay Swamy:

If I had been awake maybe I might not have found it interesting, who knows, right, but anyway. So they came to Bangalore and of course there's a lot of interesting journeys. But we decided to invest and I remember we presented him a term sheet at a local restaurant and five years later he told me his secret. I told Shripati and I presented the term sheet me, which is, I told, we ship with you. And I presented the term sheet and said, okay, we'll give you half an hour you think about it. And he later said we had already decided if we were wondering what do we do for 30 minutes waiting for you guys to come back. So we all had, but it was a. You know, we were co-located. They moved from Delhi, they sat in our office and for a good two and a half years till we kicked them out and then they went to the next building and of course, along the way, you know, we did the seed and then Sequoia came under the A and the B and, you know, the company evolved and morphed, actually quite dramatically.

Sanjay Swamy:

So, maybe you can tell a little bit about that journey and you know know why you all moved to the b2b side of it and things.

Anshul Rai:

Yeah, I think uh, you guys invested in b2c, right and uh, when we were scaling the b2c, when we realized that that two percent problem was not going away problem is not going away and then, uh, it will require a lot of investment and I think I realized that that's not look, it's the problem also has to match with the founder's dna, like if, if there's no match with the problem, also has to match with the founder's DNA, like, if there's no match with the problem statement, irrespective of the money you could have.

Anshul Rai:

We had the money in the bank account, but we said, look, I don't think there is a viable business that we can build as founders in this space and thanks to Sanjay and everyone, you guys all open up your network. We said, look, we think that there's probably an opportunity in the b2b space doing something very similar. And you guys introduce us to all the CFOs and CEOs in your network. Here we spend next three months meeting, only meeting them, trying to understand that. What are they getting from their partner bank? Which problem, what problem statement do they have? So two problems that came out very clearly. One was that there was no fine level control on the transactions that their employees are doing. So they're like, look, india is a control freak market, to be very frank, like low trust, control freak, right. Uh, where, uh, the, the cfo, the finance guy wants to control and manage, saying who is spending what where, how, right and uh. So second was that look how a lot of data is actually sitting in the bank systems that does not really flow very seamlessly to our internal systems and then we have different workflows to sort of manage that data, to push that data into the accounting systems and whatnot, like these are the two core problems that we identified and he said okay, I think we'll pivot from b2c to b2b.

Anshul Rai:

And the first segment that we focused was like we'll launch a corporate card with a very fine level control and a very real-time transaction visibility, targeting the sme segment. Right, that was the first product that we launched. Um, look, I think we are trying to scale the sme segment. We realize that uh, uh, it's a story of too many pivots, but we realize that it is almost impossible to make money in the sme segment also because the cost of acquisition to acquire uhE customer does not justify the revenue that you will make from that SME customer. And in India SMEs, they don't pay any SaaS fee to any software. They still don't pay it. I don't think. Look at the licensing cost of your accounting software, which is Tally, which is like the most used software in the country, right, it's 10,000 rupees annually, right? Like I mean you, I'm saying that's the maximum you can probably get right, and that also people are sort of using one of the Somebody else's paid version.

Anshul Rai:

Somebody else's paid version and whatnot, like cracked version of Tally People don't want to pay those 7,000 rupees also, even when the entire business is running on that software.

Sanjay Swamy:

It's changing, but if you rewind to six, eight years ago, it probably wasn't the case.

Anshul Rai:

So we realized I think in the SME segment also that it's probably very hard to make money. And then we kept moving up the ladder and fuel.

Sanjay Swamy:

I will say one thing, though, which is for entrepreneurs who are listening right Happened incredibly quick price discovery. So initially we said it was going to be 50 rupees a card. Right, I recall that conversation. We said people said it was kind of expensive. You know, do we get free ATM with this? It was kind of expensive. You know, do we get free ATM with this? He said no, because ATM is 15 rupees per withdrawal that we pass on the cost, we don't make money. And people said no, no, no, my bank gives me three free ATMs for my personal debit card.

Sanjay Swamy:

So we went back the next week and said okay, how about 100 rupees, three free ATM withdrawal? Sure, no problem Charging five rupees more, even if they did do the three free, right. But the perception was there right. Then he said you know what, let's double the price, let's see if the market will bear 200 rupees, right. So went back and said okay, 200 rupees includes three free atms, no problem. Then we tried 400 rupees. Market rejected out is okay, so the right number is 200. Then I remember the board meeting saying why don't we try a 10 card minimum? Customer said okay. So 50 rupees a month suddenly became 2000 rupees a month. It was still not meaningful enough because of the customer acquisition cost because, as they say in India, the SME wants to be treated like an enterprise.

Anshul Rai:

So even at 2000,.

Sanjay Swamy:

It probably didn't make sense, but it was funny. How you know and a lot of startups the reason I brought this up. A lot of startups say oh you know, first I'll prove my product, then I'll test the pricing and then no for the first customer, if they're not willing to pay, you don't have a product right, because somebody has to find this as a pain point, right, and that person will be willing to pay even now, right. So sometimes they're too shy and too scared to ask. But it's very important to ask and I think we would have probably lost three years if we've just been trying to say, okay, let's just get it to work and then see about the price. It will continue, sorry yeah, I think uh.

Anshul Rai:

Then we kept moving up the ladder, sanjay. We from sme to started targeting more mid-market and we realized that in mid-market you can ask for the oti to recover your cost of acquisition. You can charge one time uh fee, a setup fee, to them, and they don't mind, they are used to. Uh, there was a time when our sales team would basically hesitate to even ask for like a 25 000 bucks. Right uh, today we charge like a 15 lakhs oti, 20 lakhs oti to these large corporates, right uh.

Anshul Rai:

Now, um, I think we have learned a lot in this entire journey. Of course, uh, look, our, both our founders had no background in enterprise sales and closing some of these large deals and whatnot, but I think today's who's who of India uses AppEye today, from PwC, kpmg, bajaj, maruti, dhani Group, imami Group, pretty much Hero, itc All large corporates are our customers today. All large corporates are our customers today. Right, so that's uh. But I think when we moved away from the sme, uh focused on more bid market and large enterprises. I think that, uh, that's something that we then kept focusing on for a for a good long period till COVID hit.

Srikanth Rajagopalan:

And yeah, got it.

Sanjay Swamy:

So that's actually an interesting segue back to the whole enterprise side of things, right? Because now that you're at Perfuse and the business of is really selling infrastructure plays to banks, right? Or to financial services providers and institutions here, both at the parent company as well as in the account aggregator services. So there is this notion that Indian companies don't pay for software At least that is the perception that startups have got other than paying the big guys, the big global guys. So how has this evolved? Maybe you can start a little bit with the description of the business itself what are the products, who are the target customers, etc. And how does one build a sustainable business by selling to Indian banks and financial services providers?

Srikanth Rajagopalan:

Just by way of background, Perfure started out in 2009.

Sanjay Swamy:

And recently became a unicorn right. Well, I mean that's a label.

Srikanth Rajagopalan:

It's just a label.

Sanjay Swamy:

It's important, though, because I think a lot of hard work goes into it. Everybody thinks about these overnight sensations, and I've always said it takes 15 years to become an overnight success.

Srikanth Rajagopalan:

And that overnight success took us 15, 16 years.

Sanjay Swamy:

There you go.

Srikanth Rajagopalan:

I mean, people don't look at the 15 16 years, they look at that 15, 16 seconds of fame. Not denying the fact that the market has recognized what value we bring and investors have recognized it. But I think the backstory is important to understand. We actually started perfures as a bC personal financial management product the two co-founders, Govi and Dichak, as they are called they had exited their earlier venture and then they were, like you know, still dissatisfied and figuring out why is it so hard to get all my financial information into one place. Why do I have to look at six emails and five websites and that problem has still not been solved, by the way, in 2024 right so back in the day in 2009, they said, okay, they're techies, so let's hack away to get this information done.

Srikanth Rajagopalan:

So they set up a pfm app and at the back, at the back, the secret source was being able to extract data from, let's say, a net banking protocol or maybe your email PDF statements. Being able to extract data, categorize it and then analyze it and output in a way that made sense to the customer. Customer doesn't understand some of the verbiage and some of the transaction descriptions that happen. Customer ask is very simple how much cash flow do I have, what's my network, what are my expenses, what's my EMI servicing capability, so on and so forth. So the product was brilliant Even if I'm saying so, I mean vested interest and all that stuff. It was brilliant, uh, even if I'm saying so, I mean vested interest and all that stuff. But um it, it worked very well for a very, very small niche of customers. Uh, but it was so hard to get people to pay for a product I mean to to your point. I mean, especially in the b2c world where, uh, it was near impossible to get people to pay and forget price discovery and all that kind of stuff. So we tried a whole bunch of things. We went to CAs, we went to wealth managers and said is this a product you'd like to use on behalf of your customer? They said yeah, but can't pay.

Srikanth Rajagopalan:

So the first three years were really a struggle trying to figure out a monetization model, until we realized that, hey, a bank is trying to solve the exact same problem of understanding your 360, of your financial profile. What is your net worth, what are your liabilities, what's your cash flow? If I lend to Sanjay, does he have the cash flows to service the EMIs over a period of the next six months, nine months? It analysis problem. It's a. It's a data aggregation analysis problem. So once we got our first two or three paying customers the large banks I mean kotak has been there for us since inception, bajaj has been there since since forever.

Srikanth Rajagopalan:

Right, that's when the pivot happened, saying that stop wasting time in in building a, building a b2c product. In fact, we shut it down six months back. A lot of people are very unhappy about it, but okay, we have to prioritize. So once you made this pivot and then we said, okay, we are an analytics partner for lenders and, over a period of time, lenders, wealth insurers then the engine started moving. So to your point of are customers willing to pay? I think I would phrase the question slightly differently. Do you have something that is so unique and so central and core to your customers' workflows that you earn the right to be paid no disrespect to any other business models, that you earn the right to be paid, no disrespect to any other business models. But if you're simply a gateway, a payment gateway no disrespect to any of the payment gateways, it's okay, you can be disrespectful, it doesn't matter.

Srikanth Rajagopalan:

But if you can be replaced at the click of a button or some eventuality and there is no stickiness there and obviously your ability to charge a premium goes away. What we realized and we realized this about two or three years into our journey in a B2B sense is that we have to stop selling APIs. We have to start selling solutions. We have to talk to a banker like a banker, and that's when our hiring strategy changed. The current CEO, sabia, joined us in 2016,. I think Hardcore banker Very, very clued in into all the things that a bank really cares about in terms of risk management, analytics, recovery, npas and all that stuff, and that's when the business started really scaling. We were able to go and have a conversation with the chief risk officer about exactly the pain points that he's trying to solve, or you're able to go and talk to an head of retail banking to say, okay, these are your pain points in distribution or cross sell, or upsell and all this stuff. Let me solve this for you, right? So that earns you the credibility to say that these guys actually understand my problem. They're building a solution to my problem, not to just their business. And it's not like we don't have competition. Competition comes. Every week, every month, there is competition. The first point they will attack you and is a price. I think our ability to defend pricing in a b2B world is a direct function of the depths of your domain understanding and the completeness of your solution stack.

Srikanth Rajagopalan:

We started life as an analytics product. Today we have a full stack solution right All the way from identity, identity verification, onboarding, decisioning, credit monitoring. The full stack is there. I mean you could literally, if you have a bank license and you want to set up operations, we could actually get you running in six weeks' time. That's the promise that we have. So a lot of this recently has been inorganic as well. Organic growth got us to a certain stage. The headline transaction that you would have seen was a company called Karza that we acquired about a couple of years back. Phenomenal bunch of people, great solution stack and it's just complemented the solution completely so long answer to a short question. The solution completely so long. Answer to a short question. But do Indian enterprises pay for software? Absolutely yes. Is it easy? Not at all. It takes a lot of patience and building the right solutions and having the right conversations to be able to build value and you know, or however you get your podcasts.

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