Revolutionising India’s Credit Cards Landscape: Insights from Ramanathan RV, Co-founder and CEO, Hyperface

Nikhil: Hey folks, welcome to the show. Today we are going to talk to a contextual banking solutions expert. We have with us Ramanathan RV. (Ram), Co-founder of Hyperface. Welcome to the show.

Ram: Absolutely. It’s a pleasure to be here and talk about all things FinTech. I think we’ll see a lot more action in the coming months, looking forward to that.

Nikhil: Pleasure is all ours. So Ram, would love to start with a bit about your personal journey, your own background. What were you doing before Hyperface and what led you to what you’re doing as of now, as well as your partnership with Aishwarya on the business just to set the scene here.

Ram: Absolutely. Look, I come from an engineering background. I started my career as an engineer in one of the ML divisions at Amazon. So I’m still an engineer by heart and still love to do code reviews and design reviews as much as possible whenever I can find time.

Now, before starting Hyperface, I was running Justpay, which is a payments company. We wrote the UPI BHIM. They did a lot of things with regards to making payments really seamless, friction-free. Now, we started Hyperface because we looked at the landscape of overall banking,and, in fact, the broader BFSI itself. As digital proliferation is happening, into the digital workflows, placing financial products in the context of that, that’s actually becoming far more meaningful for the customers. It’s not that this concept did not exist. Bajaj Finance has been running on top of this concept for a long time. You go to a 2 wheeler showroom, and then at the end of the purchase, there’s a person who’s sitting there selling loans and EMIs, right? And that pattern repeats across the commerce ecosystem today. Any large electronic showroom or any large automobile showroom… housing…So across all of these places, you’ve had those embedded journeys being the pivotal one. Right, and now it’s starting to make sense in the digital world as well. But integrating this in the digital world is a lot more complex because of the flexibility that digital offers. It also comes with a lot of complexities so it needs to be controlled, unlike the physical implementation. And that’s where Hyperface is bringing about a change,or rather we are counting that evolution takes place. We are, in fact… one of the category-creating companies. Embedded banking in India doesn’t exist in a big way as a category. We are creating that category with a small start, which is focused on credit cards. 

Of course, we will venture into other banking products in the near course of time, but credit cards are a starting point for us. And Aishwarya has been a great support for us, right? It’s a banking product.

Yeah, and half technology product, right? What we deal with on a daily basis is a lot of risks and compliance and regulation. It’s infosec, right? And these are all things that Aishwarya has pretty much lived out, done throughout her career, having launched Kotak 811 inside of Kotak Bank, which is a digital bank. within the Kotak ecosystem. And that’s what we are now trying to do outside of the four walls of the banking ecosystem. How can we bring in a third party to embed any banking product and then do so in the most responsible way and scalable way? So that’s the challenge we’ve embarked upon, and obviously, she brings the banking flavour and I bring the technology flavour to the table.

Nikhil: Right. I mean, the thing is that a good way to understand a business is in terms of who your customers are, right? I mean, and you mentioned that you’re providing embedded offerings which are end-to-end. Program management of sorts, starting with credit cards, and naturally there are other things also which are part of the suite.

So when it comes to an embedded offering, typically you’ll be dealing with banks, you’ll be dealing with fintechs, you’ll be dealing with non-financial institutions like brands. Who’s your customer? Where do you make the money?

Ram: The success of these implementations matters a lot more to the banks, even more than brands. If you look at the core business functionality versus peripheral business functionality, for the banks, it is bread and butter, and anything that actually changes here…, if the characteristics of the product changes significantly, then they have a lot to lose. But for brands, it’s an addition, right? It’s a +1 product feature or +1 product offering on top of, let’s say, a bunch of offerings. And particularly I’m talking about e-commerce brands, right? Say you look at BigBasket versus Zepto.

Zepto functions without a co-branded credit card. BigBasket, as part of the Tata ecosystem, has a co-branded credit card. But both are able to run their business. But a credit card as part of the product portfolio across the banking ecosystem, if you see, is a very core offering for all the reasonably-sized banks in the country. And that’s why we anchor this a lot more on the bank side rather than on the brand side. Not to say that brands don’t have problems. Let me give you an example. We recently launched a very large omni-channel co-brand. And they have an umbrella of brands under them. And one of the biggest problems that they want to solve is attribution. How many credit cards am I able to issue via brand A versus brand B. That attribution is a big problem for them. And we solve that. And the way we look at this is while we are talking about embedded banking and our primary clients tend to be issuing banks themselves, but where there is a large problem to be solved, which unlocks a lot of value and is anchored on the brand side. We actually go ahead and solve that problem. And in that case, the brand becomes the client for us.

The attribution problem, is first and foremost, in fact, only the problem of the brand. The bank has nothing to do with it. But the overall program’s success hinges on solving these problems together.

Right, It’s not like one thing versus another. Hope I was able to answer the question. We index so much on the banking side because it’s a very regulatory-driven product. Within the compliance guardrails, within the infosec guardrails, we need to solve a lot of problems.

So that’s why we tend to work, let’s say, 80% of our time goes to working closely with the bank.

Nikhil: When it comes to things like APIs, SDKs, tailoring them for different use cases for banking institutions. There are a number of companies in the ecosystem now.

In fact, we have spoken a couple of times with M2P. And interestingly, M2P raised a bunch of capital like a week or two after the show. But, let’s not take credit for that. But at the end of the day, they’re also, kind of setting up payment use cases, lending use cases, credit card use cases. Right. And they’re also working closely with NBFCs and banks so that they can navigate and track such kinds of transactions with other non-financial players or other fintechs. So how do you, I mean, it’s a very cliche question, you know, what’s the differentiation here? What’s the player? What’s the secret sauce?

How are things different? I would love to get a sense around that. Is it just a question of you are way more focused on a particular segment? So you’re going deeper and deeper into that? Or is there something else?

Ram: M2P’s product suite, if you see, a lot of their focus is on the core infra services.. They talk about core banking systems, clearing systems, processing systems. Card management, the plastic management system, debit card management system. So these are all very core infra-related software, banking softwares that they offer LOS, LMS. We’ve decided that we are not going to offer the core banking software products. Our competition is not Infosys, it’s not First Data, it’s not M2P. It is about the context. The context in which the particular product is being offered to the customer.

And to that end, that’s why you can see our software powers probably a percentage of the overall credit card product of the bank or debit card product or prepaid card product. So we actually go after the use cases of embedded banking. Because there’s a lot more problems to solve there. 

I will give you one example there. Let’s say one of the e-commerce companies wants to create two different onboarding journeys – Journey A and Journey B for their different customer segments. Now, these two journeys have different behaviours. Let’s say the conversion rates tend to be different. Now, for the bank, it doesn’t matter too much. For the LOS system, it doesn’t matter much because that handles 100% of the applications that are being submitted to the bank. But in the embedded journey, for a brand I’m saying, when one journey is able to give 10% better conversion than another journey, that becomes a very important decision point for them.

And this area is not helped by the core systems, but by a company like ours. We build tools that are tailored and really focused towards improving their embedded use cases. In case of credit cards, it happens to be co-branded credit cards. But tomorrow it can be about loan journeys. It can be about insurance embedding, right? It can be about the banking product that we want to focus on for the next few years, we’re going to focus only on credit cards. But what I’m talking about is that that surface area requires a lot more focus as well. And like you said, we are focusing there, building tools there, and building a lot of depth there, and trying to improve the conversions and the KPIs for that program as a whole. We’re not worrying about the rest of the programs. In fact, most of the time, if you see, the core credit card companies do not worry too much about the success of the programs for the bank.

Their worry is more about, am I computing interest correctly? Am I posting to ledger correctly? Are my end-of-day balances tallying? Reconciliation with Card Networks? The problem statements are extremely different compared to a company that is in the embedded space like ours.

Sharath: So interesting, right? I mean, let’s take that e-commerce example as well, right? I mean, an e-comm company is trying to create a unique onboarding journey for a set of clients. The ultimate aim for that e-commerce company is to increase sales, right? I mean, let’s talk from a high level. They want to churn out as many, move as much products and increase sales, and that’s how they get monetized. Do you think where we are right now, a credit card is one such tool which can help doing that? And when you look at a credit card, obviously there’s a whole loyalty element to it which sort of gives rewards, but there is also lending, like a free credit period as well, right? And you’re obviously focused on credit cards right now. How important is that tool and where do you see it going? We understand credit card penetration in India is very low, sub-6 %- 7%. So people talk about a huge growth runway. Then there is this whole UPI element, UPI credit cards. Then there is the whole discussion about merchant discount rate. And, you know, there are so many moving pieces. How do you see credit cards being an important tool going forward with the ultimate objective for the retailer to churn out more money or churn out more sales? 

Ram: Right. This is very, very important. In fact, this is a question that was asked almost like a VC question to us, right? The market that we have chosen – if you look at the metrics around the world, the US has more than 650 million credit cards for a population of less than 300 million people.

Whereas India has a little over 100 million credit cards for a population of 1.4 billion. So the headroom for expansion from those macro numbers looks to be very high, but it all hinges on how we are able to grow as a country, right? Our per capita GDP needs to grow higher.

Then the household debt to GDP ratio will allow room for a product like credit card, at least at the household level, if not at an individual level. And there is a, it’s a lot more dependent on factors such as formalisation growth of the economy and and then the expansion of the credit cards will happen right?  First the expansion of credit will happen and then the expansion of credit cards will happen. But we’re very confident that these things are playing out in India. Information is becoming more structured, the economy is getting formalized a lot more, and our digital channels are getting more penetrated into Tier 2, Tier 3, Tier 4 centers as well.

I don’t think India’s POS  growth will happen that fast. But thanks to Rupay and UPI coming in together, I think that will grow. And of course, the online services are growing as well. Amazon, Flipkart, Meesho, these companies are able to reach a lot more pin codes. So that gives us the avenues to spend.

Now, the ability to repay must be there. The intent to repay must be there. Provided these things come together, we’re very confident that India will see the emergence of, say, even a billion credit cards.  Headline numbers aside, even with the current 24% growth rate, we’re looking at doubling of credit cards every three years.

That in itself will take us to 400 million if we’re able to maintain this growth rate from where we are today in the next six years, by 2030. And our bet is that it will happen a lot faster because the disposable income increases at a certain threshold at the household level.

And that is when a lot of magic happens. That is when credit cards become much more meaningful for the customers. And it is not a growth function, like a linear growth function. It’s more of a step function. Anybody who crosses that threshold becomes eligible for credit.

And that step function is what is happening today in India with formalisation of the workforce and more opportunities coming from across the world by way of employment. But we have, like a billion, two billion credit cards? I think it’s very hard to know if we can get there. It’s very hard to predict.

But we know that this is a product that has been blessed by the regulator, has been understood by the customers, understood by the banks, understood by the merchants. And hence that is a perfect opportunity to actually scale in a really large way.

Any other new credit product for it to scale, all of these entities have to understand, right? Customers, regulators, banks, merchants, they all will have to understand the rules of the game, which will take a phenomenally long amount of time. It’s not that we are opposed to it, In fact, we would welcome that because as a startup, any new initiatives, we gain the upper hand rather than the incumbents because we can move fast. So we would welcome that. But in the absence of that, the current product, the ability for that to scale and happen through digital channels, which is the partnership between the banks and the entities.

I’ll give you one example and we’ll move on to the next question. In 2008, I was part of Bank Bazaar. At that time, fintech as a word was not even around. And at that time, we used to wonder, why is it that the SME lending in the country is very, very poor? Because…because the sales process to close an SME loan product, right? That’s extremely cumbersome, due to a variety of factors. Today, there is one thing that we can reduce, right? You look at a business like Khatabook.

Now, Khatabook is able to reach almost every bakery in the country. I’m taking Khatabook as an example. There could be a combination of 4-5  companies which are able to reach these kinds of businesses. And so tomorrow, let’s say, we want to sell a financial product to all the bakeries in the country, it is very much possible. It was not possible 20 years ago. It’s possible today. What is that product we have to sell? What is that financial product we should be selling? It can be theft insurance, for example. Today, you put a banner across 4-5 apps, and then every merchant, every bakery is going to be able to see that.They may want to purchase, they may not want to purchase, that’s all up to them. But the ability for us to reach is there today. And that’s a big change. I think that’s a huge change.

Nikhil: I was just wondering, when you were talking about the credit card market at large, now, the U.S. has been a very interesting leading indicator. But the U.S. is where you still have standalone private networks. Economics are fairly robust from the payment ecosystem standpoint. In India, the government has made payments into a utility.

They have done a lot of heavy lifting there. There’s a fair amount of price capping and restrictions on how much money can come out of merchants or issuers, etc. And to add to that, now there’s also chat about making the networks also interoperable in the sense that consumers will have the option of choosing whether they want to take a Visa or a MasterCard. So there’s a lot of churn which is happening there. In your view, obviously, India is a very credit-hungry country. So the segment as a whole is expected to grow. I think that’s a no-brainer, right?

And the data would front that. But do you think that growth is coming from the commerce end of the spectrum or from commerce/consumption end of the spectrum that it actually leads to higher sales and higher demand? And that’s why it’s something which is interesting enough for banks to pursue. Or you think…if you look at credit cards as a standalone business, which in my view personally is something quite challenging as we speak. So just want your two cents on that.

Ram: You’re touching upon a plethora of topics, Nikhil. I think there’s a debate about whether zero MDR is a good policy or not. I think we still don’t have a proper view on that, right? But from what it’s worth, look, some of these measures have pushed the entities to be able to be more creative in how they are creating these business cases. But on the flip side, the absence of a proper revenue pool means that we don’t invest a lot in technology, particularly technology that needs a lot of evolution. Because that’s where it becomes capital-intensive. You need, let’s say, you need to spend 500 crores, 1,000 crores in creating better and better machines or better and better algorithms. So we are not able to do that because of the absence of the menu port. But at the same time, the innovation by way of, let’s say, QR codes and in enabling the merchant to be able to collect money through QR codes, I think that has actually created acceptance points throughout the country. Instead of deploying very many POS machines, where that tends to be extremely expensive, particularly in a country like India. Just yesterday, I was talking about the economics of credit cards. As you see today, printing a credit card takes about Rs. 120 plus GST.

So that makes it around Rs. 140 or so. And then the delivery of a credit card takes another Rs. 100.  This is just to put that payment instrument in the hands of the customer.  And then what was the amount that was spent to acquire the customer, verify the customer and underwrite and approve the customer. You put all of these together, it tends to be about Rs. 3,500. Now for the product to break even after giving this instrument to the customer takes about eight months or nine months for the bank which is very high. Now, if you actually do the entire math in dollar terms, because these things don’t change dramatically between a developed country and a developing country, the cost of printing tends to be $1.5 and the dispatch cost tends to be about $3. Now, with just $4, we are able to put the instrument in the hands of the customer.

The CAC and the other economics tend to be almost at the same level as well. So their breakeven point is much closer than what is there in India. And now, how do you  break this conundrum, is it by increasing the revenue pool or is it by innovating on the distribution channel side? I think distribution channel innovation is a lot more creative process rather than trying to tweak the pricing. 

Nikhil: So the Bajaj Finance playbook?

Ram: Yeah, the Bajaj Finance playbook, where you’re being innovative about that model. In fact, I think… the rest of the world probably woke up to that model much later than India. The subvention model. I think we were very creative about that. And hence, they were able to grow that business significantly.

So, in a way, tech is always about constraints. You put constraints and then tech figures out a way. Sometimes you get barriers. For instance, we are not able to deploy POS machines for money. But a lot of times, the solution emerges. So to that end, I’m not swinging this way or that way.

I’m just a curious bystander who is looking for opportunities to create solutions within the constraints that’s being given to us. And if you see the pricing gaps, it’s not just in India. If you look at debit card-credit card pricing gaps, these are being instituted across the world, particularly in the European economies. It’s becoming more and more commonplace. Germany has a restriction on credit cards, while the UK and Australia have instituted tax on debit cards. So payments are becoming more and more utility. To that end, the U.S. is perhaps an exceptional market rather than the default to be a reference point.

Nikhil: Obviously, you look at things more from a business standpoint. And, you’re at the end of the day, a technology player. So these use cases are something that you work around and you create value in that. But, say for someone like me and Sharad, we are looking at this more as like third-party commentators. And it’s an easier job. But what we often ponder about is that if you look at things like BNPL, if you look at things like zero interest EMIs, does it effectively lead to bad underwriting or bad behaviour? People who don’t really have the servicing capacity to end up buying things which they don’t need or you know effectively the credit cycle expands and that leads to other structural problems, maybe like three or four or five years from now even today if you’re looking at like generally unsecured credit or unsecured PL in the country, the regulators are already looking at it very, very closely. Credit cards are slightly different because it’s shorter term so if there is some delinquent behaviour it comes out pretty quickly and so maybe they sit in a different bucket. From a 30,000 feet perspective, what’s your take on that?

Ram: See, indebtedness is a big problem, right? We’ve always had a very savings-focused mindset. But now there’s a dramatic shift that is happening amongst the younger generation where there is prolific spending that’s coming in, right? And products like low-cost EMI actually tend to create that impulse behaviour. So I was listening to one of the TV shows and there a man was remarking that he had gone to a mobile shop along with his friend and his friend was purchasing a mobile phone, okay? And the salesperson in that mobile shop offered him something saying, look, this Bluetooth headphone is worth about Rs. 3000, but you can take it home for RS. 0 and you can just put an EMI on your bank account. and we can mandate the bank to give you an EMI. So the ability to take a product without having to pay anything at that point in time, it’s very enticing, and it’s very hard to say no to.

So these impulse behaviours can potentially lead customers down on a slippery path. But at the same time, credit becomes a compelling need in the moment of time when you actually need it. And if you’re not able to avail credit, it has insanely difficult consequences for that person. It could be a loss of a life also, say, if for a health care emergency, a person is not able to avail credit. So it’s a double-edged sword. I think a lot of fintech companies should take this on rather than having the mindset of maximising credit for everybody and then pushing credit where it is not needed as well, rather than that, taking a more responsible approach to advertise credit products. Again, instead of actually making this a legislation or a diktat or a very prescriptive instruction to every fintech, I think the marketplace will figure out the solution by itself. There will be very creative solutions that will emerge for assisting customers.

Whether a customer would have to make that decision at that point in time or not to purchase. I think the technology itself will bring out solutions. In the absence of that is when I think alarm bells should go around in the banking ecosystem that we are creating a country of a lot of indebted people. That is not what we want to create.

Sharath: And some of these zero-cost EMIs or BNPL, the cost of debt has also gone down for a consumer, right? The merchant is sort of subsidising that in a way. That’s also sort of increased. 

I want to ask you a little bit about your business? 

You use the word embedded finance as well, and the way we think of it is, that it’s sort of API-forward, and it’s where a lot of services are bundled together within the same, let’s call it website or same platform, be it loans, credit cards, maybe insurance, maybe even investments, right?

So from the way you’re helping your clients, what are those touch points that you’re hitting? And credit cards are one which is essentially short-term credit for your ultimate user. What are the other things that can be tackled given the infrastructure of rails, if you will, that you are building with your clients?

For example, that e-commerce example.

Ram: A lot of these are about digitization. The journeys and the workflows have to be digitised and have to be offered as a premium offering without the sticker of having a premium offering, right? So the North Star example that we always give when we talk about credit cards to our prospective customers is – Look at the way Apple has implemented their Apple Credit Card. That experience, the unboxing experience, the app experience, How can we create a similar experience in India? And that is possible. With the kind of software products that we have today, that is possible. And this is not just about experience. Look at the onboarding journey. Apple prides in saying that they give a credit card to a customer with just five taps. One of the best workflows that they have is with just five taps, they’re able to render the credit card to the customer.

Now, that’s the level of experience we have to create for our customers also. And that’s our focus. Day in and day out, we just obsess over that, and work with the banks closely to create that kind of experience. Not just for onboarding, but post-onboarding as well to create better and better experiences. 

I can give you another example just right from our own process. If you look at mandate management, this is one behaviour where RBI came out and said that recurring payments cannot go through simply because the customer has put the card details on the file. It has to be driven through a consented architecture. 

And the regulator also went a step ahead and told the banks that you have to provide an interface for the customer to be able to go and say, I want this mandate, I don’t want that mandate. 

How many bank apps have that ability for, say, a customer to go there and change it? They have stopped a particular subscription, right? Saying that, look, I don’t want this from tomorrow. But that capability is not there. We want to bring that kind of capability on the front to the customer. Be it within a mobile banking app or the third-party app. Suppose you want to have this ability inside of your Flipkart Credit Card or Amazon Credit Card and within that app itself. Why are we not able to do that today? We will bring about those features. So taking a step back, we look at what are all the points where customer experience can be improved, where onboarding journeys can be made much, much better than what it is today, and can be offered in the context of what the customer wants more intelligently placed. And this overall will expand the space significantly. The way I even see this is it’s almost like a digital canvas. On this canvas, we are able to draw upon a lot of things. And we really take these things as flexible, being suspended in time. But on the time axis, if you see these features will keep evolving.

Sharath: We’re talking about credit card business, right? So one thing, we obviously, when you compare, I mean, we’ve had Western credit cards as well. And one thing clearly that jumps out to me is the rewards program or the points is significantly more lucrative in the West.

Even if you adjust it for currencies, you’re incentivized. You actually do the math and it’s significantly more powerful, be it air miles and what not, right? Is for your client, building a loyalty program also a key consideration to sort of do that?

Because anyways, India lags in terms of how much power those loyalty programs has. Is that important? And second is, you know, talking about loyalty programs and credit cards, we talked about being more customer friendly and sort of, can it become more granular or like how granular can we be? Can say, let’s say a net,

Gil and Sharath have similar income profiles. Can he get a dedicated credit card which caters to his spending patterns and I get a credit card which is tailored to my spending patterns? Can you go to that level of granularity in future? Is that possible?

Ram: Okay. Again, this goes back to the way customers perceive credit cards. And in fact, the way banks actually think about credit cards, there are no ideal customers of credit cards. Unfortunately, even within a particular program, be it a cashback credit card also, the way customers perceive and use these cards tend to be on a spectrum. And hence, that’s why with respect to credit cards,  it’s very difficult to find an ideal target group for a particular credit card. I don’t see a need to maximize the rewards, But to keep it at the point where let’s say the customer feels that this is good enough and I’m going to be using this card and will be using this card on this brand. Is 5% enough for Amazon customers or does 6% make it much more different? 

I think that when you do the plotting and then figure out that this yields the optimal outcome. So we don’t see a point in pushing that number higher and higher. A credit card means different things to different customers.

So to that end, I don’t see us creating significantly more rewards. and competing on rewards as a dimension. Rather, we would like to see a lot more stories being told about credit cards. The nice thing is that, for instance, there is this credit card by a neobank by the name Tomorrow.

Ram: What this company does is they actually plough back the rewards or the cashback into your favourite sustainability-focused programs for a better tomorrow. Then there is the Manchester United Credit Card which is built around the identity that I’m a Manchester United fan, so I’m using this product which has an affiliation to that.

Now, the story is being told around football. There’s not much about rewards, right? So it’s about the stories that we tell. For instance, there should be a health-focused card that should reward you if you have right behaviours around it. For example, if you purchase at organic stores. And those kinds of things will evolve.

To me, I see this almost as Maslow’s Hierarchy. Where the cashback is probably the lowest common denominator. But the storytelling takes it to another level of maturity. 

Sharath: Interesting.

Nikhil: In terms of your business, how does the revenue model work and how difficult is it to sell to banks?

Ram: It is extremely difficult to sell to banks. They are extremely difficult customers as well. Winning banks is one thing, but then being able to service banks is yet another huge challenge. I’ve been doing that for a good part of my life. And it is still a difficult thing.

Every day we come in and say, let’s gear up for a one year long sales cycle. It is indeed very difficult. 

Nikhil: Is it easy to retain them as customers?

Ram: It is very easy to retain them as customers because there’s a lot of hunger for technology. That leads to creation of a lot more technology. Once, let’s say, a particular module has been installed, then additional requirements keep coming from the banks. Now, that tends to create a lot of stickiness.

But good technology companies actually survive those additional requirements. They create those additional requirements and are able to continue to deliver value to the bank rather than emerge as a rent-seeking company. So that’s very important. We keep a very keen eye on that. We don’t want to be labeled as a rent-seeking company.

Nikhil: And on the revenue model?

Ram: So we price our technology through the SaaS business model. It’s a lot more palatable. I would say, in fact, it was a lot more palatable until a few years ago. 

But today, what’s happening is that there is a concerted push towards implementing the solutions within the data centre of the cloud accounts of the banks. So that puts the entire SaaS model in a very difficult place. Because the infra is now technically owned by the bank. So should we go back to the licensing model?

So I think the ecosystem will figure these things out over a period of time. But why this is happening, if you see, there is more and more push for owning the data and being responsible for the data that’s being accumulated within a bank. There is a push towards the bank controlling this entirely, not leaving it to technology companies, which was a lot more prevalent in the past 30 years of history.  If you see all the technology companies, it’s been that the bank owns only the very core systems and everything else tends to get outsourced. But that model itself has now been called to question primarily because of data security requirements and data privacy guidelines.

Nikhil: Right, right.

Understood.  So we talk about a product which is out there, say Amazon ICICI, right? Now they have a credit card. So an ICICI Bank would give a mandate to a platform or company like yours, and there will be some initial setup cost? 

And then you’ll have a recurring stream and that gives ICICI Bank the flexibility to set up a co-branding program with Amazon, with Flipkart, with Zomato, with anyone. Is that correct?

Ram: Absolutely, yeah, the GTM (go to market) becomes much faster for a bank….

Nikhil: So they have the architecture, they have the flexibility.

Now they have the framework to deal with multiple enterprise partners. And what you get as a business is not dependent on the transaction flow. So it’s not like a per-transaction type of structure?

Ram: Yeah, we don’t price it to the transaction flow at this point. We’re still pricing it as a technology company.

Nikhil: But is that the norm? Like in other countries? Is that even a model which exists? 

Ram: Not really. In fact, a lot of other companies, particularly in the West, price it as a percentage of the revenue.

Nikhil: Exactly. But you see that also happening here or not at the moment?

Ram: Definitely. We see that happening here as well. 

Nikhil: And just one thing, Ram, before we let you go, in terms of fundraising, you kind of raised a bunch of capital, right? Your seed round has been pretty lumpy as it is, and you have a fairly diverse number of marquee institutions on board. How was the experience in terms of raising capital?

Was there a lot lost in translation and you had to do a lot of heavy lifting to get the investors aligned on your vision or there was a fair level of investor awareness already and it was an easy sell?

Ram: Yeah, it was an easy sell because the team had played out in other countries of embedded banking and co-branded credit cards. For instance, the Marqeta story is very well known in the investor community. So our business model was a variation on top of that. So it was a fairly easy sell.

But, I think, everyone underestimated the effect of COVID and the downstream consequences of the regulatory actions that follow COVID, in terms of, let’s say, how to do things and data privacy guidelines that came in, which actually created a lot more uncertainties in the ecosystem. But now I think we are well past that.

And we can now focus on growth because the guardrails are put in place. The Regulator has actually made it very, very clear now. It’s almost in black and white. And hence, we can now look forward to roll-out and growth and further distribution.

Nikhil: We wish you all the best, Ram, for future and much bigger milestones. It was a pleasure catching up. And I would definitely watch out for Hyperface and cheer you from the side. And good luck for your journey ahead. And with that, it’s Nikhil. With me, Sharath Toopran signing off.