Story of Novopay

An Aadhaar-enabled Enterprise

India’s new service delivery model- Digital India infrastructure- layered-open- API based-scalable platform for delivering Government services and enabler for enterprises to build focussed and niche value propositions

1. Novopay is  India’s new age enterprise. It is is built on India’s new single service delivery platform that has all the functionalities a regular business requires: customer identification (through Aadhaar Number), know your customer (KYC) ( through e-KYC) and payment ( through UPI).
2. Khosla Labs had incubated Novopay Solutions earlier 2014  which offers Android-based mobile payment solutions to Kirana stores, the startup uses Aadhaar-based biometric scanners to allow consumers conduct banking transactions and money transfer among others.
3. Novopay  is a financial solutions startup was founded in 2014 by Srikanth Nadamuni, Gautam Bandyopadhyay and Sridhar Rao. It uses the mobile phone as a medium to help banking reach those among India’s non-banking population of 500-600 million.
4. Novopay was incorporated in February 2014 by Srikanth Nadamuni (Chairman), Sridhar Rao (Chief Executive Officer) and Gautam Bandyopadhyay (Chief Operations Officer).
5. Novopay provides banking, mobile recharge and electricity and other bill payments, at the convenience of a neighborhood kirana store through an android app and Aadhaar biometric scanner. The customers can use these facilities using the Novopay consumer app as well as send money to their friends and relatives.. The company have around 45,000 retail outlets in the Novopay retail network across 20 states .

Building of an enterprise on India’s New service delivery system

1. Idea Generation 

There were two ideas behind the creation of Novopay. One was Nandan Nilekani asking me “Can you create a payments and banking platform to service a billion people, run by 100 people”. This question implied a highly efficient and scalable system that would bring financial inclusion to all.

The other input came from Vinod Khosla who talked about his experience at Kirana stores when he was growing up in Delhi and how the shopkeeper gave credit to his customers – thereby acting as a small banker to the community.

My own work as technology head of Aadhaar brought me close to the financial inclusion and banking. These ideas and experiences were responsible for the creation of Novopay.

2. Special features

• Novopay focuses on the 900 million people who are unbanked or underbanked. Most other startups focus only on the middle class with smartphones.
•  We look at the problem of financial inclusion that is worth solving and we are getting good traction doing so.
• We have built the world’s best payments and banking platform that is solving a very real problem on the ground.

3. Challenges Faced

•  Setting up a physical network of retail outlets is non-trivial. It took a lot of planning and hard work to build a 45,000 strong retail network in 20 states.
• Banking is a very traditional industry, it take a lot of convincing to get Banks to adopt new technology and new ways of doing payments and banking.

4. Monetization and Traction Details

•  Novopay works on a system of commissions, ie. they charge the customer a very nominal amount for each transaction. The customer can be an end consumer or a business that is using Novopay services.
• Novopay has created a merchant network of 45,000 retailers. We have perhaps the largest deployed network of Aadhaar MicroATM devices in the country. As of now, Novopay has a user base of over 4,50,000 users.

5. Differentiation Factors

• Many startups seem to have not focused on unit economics and lost their way. Our current projections are we turn profitable in about 18 months. We do not discount or sell-below-cost, for if our customers come to our stores that’s because of our products and services not freebies.

6. Advice To The Emerging Startups

• Create products and services that add real value to the customer
• Startups are 5% idea, 95% execution, no make that 99%.
• Focus on your cash flows, don’t discount your products or sell-below-cost for you will attract the wrong customers. If your products have little value you better come to know of is early, so you can do something else!

7. Funding Details and Future Plans

• Except for our seed round from our parent company Khosla Ventures, we have only raised money from strategic investors from the banking sector. We will continue to take strategic investments for our financing needs.

8. Market Size & Opportunity

The market size for Novopay is quite large. As its services help provide payments and banking service to everyone, regardless of whether they have a bank account or not. Even users without a feature phone can use these services. This makes the addressable market size of Novopay very large. The prime focus is to get its services out to the unbanked population which is almost half the population.

The Making of Novopay

The Components of Novopay

The system involves three pillars: a mobile phone, a store and an Aadhar card, and the transactions are all paperless. It uses the mobile phone as a medium to help banking reach those among India’s non-banking population of 500-600 million. It takes banking to yet unreached by traditional brick-and-mortar bank branch. “The tail of non-bank users in the country is pretty long... half the country is still unbanked. With Internet penetration low, core banking has achieved little.

Taking advantage of India’s New Identity Infrastructure

“With one billion people holding Aadhaar cards and ordinary cell phones, we are converting the ordinary kirana store into a banking outlet. With its biometric system, the level of assurance in Aadhar is high,” he says.

Working of Novopay

People can open an account in a store, and deposit and withdraw money. Every transaction is authenticated by Aadhaar.

A customer gets a message on the mobile, and a receipt for money transactions. With a mobile, anyone can open an account in a kirana store to become part of Novopay.

Money is transferred to any bank account or store in the network. The payee can receive money by just showing an SMS. “We have installed fingerprint scanners and printers at each store at a cost of `15,000. The shop owner just needs a smartphone to start operations,” he says.

Novopay runs its 24/7 Network Operations Centre from its Sarjapur Road office in Bengaluru. Here, each and every operation at the 45,000 kirana stores can be verified and checked.

The retailer can even be alerted to charge his phone if the battery has drained out. Using a cloud network, the NOC manages to collect and manage huge amounts of data.

With the smartphone penetration in our country at 29.8 per cent, more than 70 per cent of the population don’t have access to the Internet.

Novopay has tied up with Ratnakar Bank, Axis Bank, IDFC and Bank of India to deliver its services through a consumer app.

In two years, since it started in April 2014, Novopay has carried out transactions worth Rs 600 crore. Today, it services three lakh bank account holders and e-wallets.

References

1. Startup puts a bank in your grocery store- http://www.newindianexpress.com/states/karnataka/Startup-puts-a-bank-in-your-grocery-store/2016/07/10/article3521844.ece 

2. Novopay Marekting Video- http://cyberspaceandtime.com/Novopay_Marketing_Video/gt6KnhZH0JY.video 

3. Novopay introduces KYC Wallet with cash – out facility  https://www.youtube.com/watch?v=Qtz_AJfvFRM

4. Novopay Will Redefine Efficiency & Reliability in Banking Services- http://bwdisrupt.businessworld.in/article/Novopay-Will-Redefine-Efficiency-Reliability-in-Banking-Services/30-06-2016-99872/

5. http://www.pics4news.com/daily_news_photo/93052/Novopay_Launches_Consumer_Payment_App.html