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STRATEGIST S TART - UP E COSYSTEM E DITION J u l y 2 0 1 7 | Vo l 2 | I s s u e 1
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We aim to provide participants consulting projects and challenges that will equip them to tackle future assignments confidently and competitively. We also aim to facilitate growth of collective knowledge of the entire student community interested in the Consulting and Strategy domain. This magazine says it all. In this issue of Strategist we have emphasized on the Start-up Ecosystem, which is disrupting various industries through technology and challenging the established players, with the present government banking on start-ups to prop up our nation’s economy in coming years. We hope you enjoy reading this issue of Strategist as much as we enjoy creating it. -Team ConQuest
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C O N T E N TS Start-up Ecosystem Edition
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F ROM
THE
E DITORS ’ D ESK 4
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D ISRUPTIVE S TART - UPS
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BFSI 6
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D ISRUPTIVE S TART - UPS
IN
H EALTHCARE 10
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C ASH K ARO . COM – S AVE M ONEY W HEN Y OU S PEND M ONEY 13
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M ATTERNET : A D ISRUPTIVE E FFORT
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L OGISTICS 17
6.
P AYTM
OFFERING
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I NTERVIEW H EAD
OF
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M R . A MBARISH D ASGUPTA ,
M ANAGEMENT C ONSULTING , KPMG I NDIA 25
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From the Editor’s Desk Team ConQuest In this edition of the magazine, we try to provide you a wholesome perspective on the startups across various domains and also try to witness a few success stories which inspire. But before we proceed further, it is important to have an overview of this growth driven world of start-ups. In the present scenario, Government of India is focussing upon building a strong eco-system for nurturing innovation in order to
accelerate our economic growth and simultaneously generating employment opportunities. In order to provide the initiative a strong push, the government has launched an Action Plan for Start-ups. It sets up 19 point actionable programme which enables easier filing for patents, provides tax exemptions, helps in setting up incubation centres and a develops a faster exit mechanism. It also establishes an INR 10000 crore corpus fund to facilitate the growth of start-ups in India In the Indian context, a startup is defined as “an entity incorporated or registered in In-
dia, with an annual turnover not exceeding Rs.25 crore in any preceding financial year, and working towards innovation, development of new products, or services driven by technology or intellectual property”. The present regulatory environment can be broadly classified upon the following contours under which various schemes provide respite for the startups:
General Initiatives • Compliances on selfcertification for labour and environmental laws in respect to 6 labour laws and 3 environmental laws. In addition to this, the start-ups are provided an
STRATEGIST 5 exemption from inspection for the first three years. While those start-ups which are classified under ‘White Category’ in Environmental laws are subject a few random checks after selfcertification. • A Startup India Hub to be established to provide a platform for all stakeholders like the central and state governments , local bodies and the start-ups to come together and resolve issues • The 10000 crore corpus will invest into the start-ups through SEBI registered Venture Funds through a 50% partnership model • The other initiatives are Credit Guarantee Schemes, setting up of Incubation centres and research parks (partly centrally funded), a special emphasis on start-ups in Bio-tech start ups through BIRAC, a national level
start up and innovation competition like NIDHI and annual Incubator Grand Challenge Regulatory Environment • Ease of registering the start up through a mobile app which also provides a platform to engage with venture capitalists • With the implementation of the Insolvency and Bankruptcy Code, it has facilitated the ease of quitting business thus ensuring a faster exit. A World Bank report suggests, it takes almost 4 years to close down a firm in India which disincentives the growth of start ups • Patent protection has been facilitated for the start-ups SIPP( Statutory Intellectual Property Protection) Financial Environment • The biggest relief for the start ups comes in the form of
exemptions in: 1. Income tax for a period three years and 2. Capital Gains Tax for Venture Capitalists This has incentivised the investment in start ups, thus providing the necessary impetus for the start-ups. With all the parameters set, and regulatory environment conducive, it is the right time to prop up the boots and venture into one’s own dream world of start -up. With the hope of a string of high flying start-ups, we present to you the present edition of Strategist…
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Disruptive Start-ups in BFSI
Best Article
Suraj Kamath & Vaibhav Shah, SIES College of Management Studies Introduction The Indian banking sector has witnessed a significant change in terms of innovative models like payments and small finance banks. Type of Banks Public Sector Private Sector Foreign Regional Rural Urban Co-operative Rural Co-operative
No. 26 25 43 56 1,589 93,550
There has been a robust asset growth over the years as shown in the graph. The total number of ATM’s in India increased to 207,402 and is expected to double in the next few years. Thus we observe that the banking industry is going to grow exponentially in the years to come. The digital frontier in India is rapidly emerging in the financial services sector. Cisco, the global networking giant in its report titled: ‘A roadmap to digital value in retail banking’ says that ‘Digital innovation in retail banking will drive $405 billion in digital value at stake
from 2015 to 2017. With the right technology investments, they can streamline operations and compliance, while offering customers the real-time financial advice and convenience they increasingly expect.’ Emergence Start-ups
of
Disruptive
There is a thin line between a conventional retail bank and technology companies. Development of agile methodologies with changing requirements in this fast paced scenario has opened up new opportunities for companies in the technology services sector. It is said that every financial services compa-
STRATEGIST 7 comparing products.
various
financial
Till now we have seen only big firms entering into the Mergers and Acquisitions environment, but this start-up is gaining popularity not only from Indian Investment Banks but also from Wall Street. ‘AG acquisitions’ is the Indian Wall Street dream. ny should think like a technology company because technology has become the back bone of any banking ecosystem.
• Crowdsourcing helps entrepreneurs with innovative and big ideas to get funding quickly.
Although these start-ups are different; they believe in simplicity, boldness and a customer centric approach.
What is a Fintech Start-up?
• Software-as-a-Services or SaaS is being leveraged by many banks.
All three firms have one thing in common. As mentioned, passion is what helps them compete with much bigger rivals and disrupt the Indian BFSI sector.
Fintech’s are financial institutions which use technology for their banking and services operations. A recent report from Accenture found that global investment in fin tech has skyrocketed from $930 million back in 2008 to over $12 billion by the beginning of 2015. Europe experienced the highest growth rate, with an increase of 215% to $1.48 billion in 2014. How has it changed the traditional banking paradigm? • Mobile payments are on rise. • Setting up businesses and expanding them is cheaper due to policies related to ease of doing business.
Indian start-ups have one thing in common. This common thing is the passion the founders have. Every Indian start up founder has a story behind their formation, which makes each of these special. One of them is ‘Secure Now’; an insurance broking start-up which is focused on delivering its clients what they require. Insurance sector is growing in India, and they are taking the advantage of the growing market. ‘Moneylvy’ is another start-up story which believes in simplifying personal finance and
The role of technology in the BFSI sector is increasing at a very high pace. To keep up with the changes in the sector, one needs additional help from smaller, but technologically more advanced firms. Indian start-ups are doing just the needful.
8 STRATEGIST Why are financial start-ups established? Most of the start-ups in the BFSI sector are formed for one of the below purposes: • Payments • Financial Planning
• Lending • Bitcoin Payments The most attractive purpose of a start-up nowadays is to make payments smoother and safer. According to "sumhr.com", there are approximately 20 digital payments wallets in India. Post demonetization, these ewallet companies have started leveraging technology in its true spirit. Financial planning Financial planning is a broad term consisting of personal finance and comparison of financial products. According to an article in "Live Mint", more than 70% of Indian's fared badly in financial literacy. To fill these gaps, start-ups have been formed. There clearly needs to be literacy drives and campaigns to spread awareness about a cashless society. Startups are promoting this and vo-
raciously chipping in. Lending Retail lending in India has not shown any growth figures since a long time. But according to an article by "The Indian Express", retail lending is an opportunity because India has a low debt to GDP ratio of 17% and a growing demand for housing, vehicles and personal loans augurs well for banks and housing finance companies. Bitcoins Crypto currency is the upcoming form and medium of digital exchange which is not regulated by any country’s central bank. Crypto currencies have a scarcity premium. They are created using a block chain technology. In today’s world
crypto currency can be used to buy various items, trade, invest and also make payments. Indian Finance minister has also shown interest by holding a meeting on 28/06/2017 with his state ministers. There are many crypto currency websites launched every day in India, which tells us about the growing popularity of this mode of exchange. Indian start-ups are setting up crypto currency exchanges and wallets to facilitate use of crypto currency. ‘Coinsecure’ and ‘zebpay’ are just couple of examples. Example: The State Bank of India has also shown interest in developing its own block chain and has set up research cells to develop one. It has taken a lead
STRATEGIST 9 to curb online fraud and cybercrimes. Artificial Intelligence and Cognitive Opportunities Artificial intelligence will speed up the process of transactions and help to curb the risk of frauds. Cognitive opportunities help to detect key patterns and relationships from billions of data sources to derive in depth analysis and insights. Chat bots is a new disruption to kill many jobs in the market. Customer centricity being the essence of this entire framework has led to evolving approaches to improve customer relationship management practices. Example: ‘Fonetic’, a provider in voice and text management solutions, partnered with Banco Bilbao Vizcaya Argentaria (BBVA) in rolling out the Fonetic linguistic analysis and trading compliance solution to proactively monitor and prevent trading malpractice at its London and New York headquarters. However, we should not forget that technology can be a bane as well. Example: The ‘Wannacry Ransomware’ has infested so many banking systems demanding money and
locking confidential customer data. Such instances are big threats for start-ups.
developments individually. This will give rise to more disruptive and assistive start-ups.
The trends in this disruptive innovation points towards:
The rise of big data analytics, block chain technology, chat bots and robust cloud computing systems leveraging software as a service is the façade of disruption in the BFSI start-up generation. Successful and sustainable anti- money laundering techniques coupled with probabilistic fraud detection models will empower start-ups to boom in this sector. The onus for the growth of the banking sector will also rest on the niche start up environment in the years to come.
The way ahead! India is a developing country and is seeing a lot of changes, be it indirect taxation or demonetization which will all contribute to a developing BFSI sector. This is because BFSI is the backbone of any economy. With a developing BFSI sector, existing companies will not be able to cope up with the technological and other
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Disruptive Start-ups in Healthcare Pothapragada Malini & Nishant Jain, XLRI Though healthcare in India is one of the fastest growing sectors with a Compounded Annual Growth Rate (CAGR) of 16% since 2011 with a 6% contribution to the GDP, affordable healthcare remains a distant dream for more than 70% of the population. The World Health Organization’s 2000 global healthcare profile ranked India’s healthcare system 112th out of 190 countries. India accounts for about 21% of the world’s disease burden but has an alarmingly low doctor to patient ratio of 1:1674. Out-ofp o cke t e x p e n d i tu r e o n healthcare is the highest in India with health insurance penetration less than 3.3 percent. The number of professionals along with medical infrastructure needed to satisfy the healthcare needs of a nation of 1.25 billion is without doubt significant. To put things in perspective, we would require about 600,000 – 700,000 additional beds over the next 5 years to take care of the increasing medical needs.
The above facts shows a grim picture of a broken healthcare industry which is plagued with inaccessibility and unaffordability. The widening gap between need and offering from traditional delivery model presents an enormous opportunity for start-ups to play a key role in the healthcare ecosystem through their technological innovations. They can not only help increase accessibility to better treatment but also reduce travel expenditure and waiting time in hospitals for appointments and post treatment follow-ups. Fortunately, start-ups have already started tapping this opportunity and approximately 300 start-ups emerged in 2015 itself and are working on diverse areas such as medicine delivery, telemedicine, diagnostic services, home based care services and paramedical services etc. Not just medical services but multiple start-ups have come up to facilitate improve networking of doctors and increase knowledge sharing..
Start-ups in India can be broadly classified into six different groups:
1) Doctor Networking & engagement a. DailyRounds - It is the largest academic network for doctors with more than 2.5 lakhs plus doctors. It was founded with the belief that an evidence based treatment supplemented by a problem solving approach can revolutionize medical education. It acts as a platform where doctors share actual cases with other doctors. With availability of other information doctors can enhances their knowledge. b. Docplexus - It is a platform to assist doctors to make better clinical decision, connect and network with other doctors and build online presence. It focuses on peer-to-peer exchange of patient cases, dialogue and interdisciplinary learning to improve medical outcomes. 2) Doctor Discovery
a. Practo - It acts as a one stop
STRATEGIST 11 solution for patients. It helps doctors to digitize their practices .It provides them a platform to build their presence and engage patients more deeply. For patients, it related other services on a single window. b. Lybrate - It is India’s first mobile healthcare communication & delivery platform. The application facilitates interaction between the doctor and the patient. It also creating awareness by providing health feeds by eminent doctors. 3) E-commerce & Online Pharmacy Pharmeasy- It is an online pharmacy which offers free doorstep delivery of medicine at a discounted rate. It acts as the mediator between the traditional pharmacy and customer. 4) Patient Education & Network Noora Health - It is a platform to impart high-impact health skills training to the patients and their caregivers after surgery.
5) Personalized Health & Lifestyle services GOQii - It is a US based startup with its office in Mumbai and Shenzhen. It provides an integrated solution of which includes a wearable device, an expert coach and a doctor. The device tracks the individuals’ activity and helps them to shift to a better lifestyle. 6) Health Record, Data & Claims Management Praxify - It is a start-up started in 2009, which enables Health IT seamless, intelligent & helpful. It was founded on the belief that physicians spend too much time working with technology thus missing out on the crucial time to interact with the patients. The app help in streamlining the process and make the information readily available to the doctors. Each of these start-ups is not only enabling the healthcare sector but is also leading to increase in job opportunities for the Indian youth. Portea Medical, a home healthcare company that has a current strength of 4,500 employees is looking to expand its staff by 30% by the end of 2017 to meet its need in both
medical and non-medical domain of work. Similarly, Bengaluru-based online pharma company Myra Medicines has so far employed more than 300 people and is expecting to bump up the number to 1,000 by the year-end. This is indicative of the immense employment opportunity present in this domain. Increasing advancements in Internet of Things (IoT) and virtual reality space have had a positive impact on the development and growth of these startups. IoT can bring treatment to one’s doorstep giving healthcare delivery a boost and with improved network connectivity in India, technology can enhance the ability of start-ups to venture into improving digital healthcare. Digital payment systems can also help the functioning of online healthcare services by enabling e-payments from patient to doctor or medical practitioners. Integration of such diverse advancements displays huge potential for startups to tap into. At the same time there are few challenges that are constantly impeding the growth of these start-ups: 1) Lack of medical special-
12 STRATEGIST ists and mentors: Lack of well -trained medical professional and guides for budding startups impacts their ability to attract investors and receive enough funding to establish a base. 2) Sluggish growth: Considering the nature of the industry where in one is dealing with human lives, every aspect needs medical and legal validity which can increase approval time and implementation of the solution. This combined with the lack of investment or seed funding acts as a major roadblock for budding start-ups 3) Lack of network infrastructure in rural areas: With poor internet connectivity and telecom infrastructure, 70% of India’s population which is present in the rural areas cannot avail the complete benefit of digital healthcare even though the potential and need in such regions is multi-fold in comparison to urban areas. This restricts the application of the medical solution to only certain parts of the country and does not allow companies to tap into markets with high potential but low network accessibility
4) Highly Regulated Industry: The unclear policies and
large number of rules and regulations contribute to an increased complexity, uncertainty and confusion in the healthcare industry which makes it difficult for entrepreneurs to innovate and grow rapidly. Affordable and quality healthcare is the need of the hour for an ever burgeoning population of India but the Government’s expenditure on healthcare is the lowest in the world. Taking into consideration low investor confidence in the healthcare sector, it becomes imperative that the Government also takes necessary steps to help the growth and development of start-ups in the healthcare sector. This would not only improve the medical reach and hence labour productivity, but also act as an employment generator, forex generator through medical tourism and driver for innovation through alternative healthcare models. Few of the initiatives taken by the Indian Government in this sphere currently include: 1) Government funding for students & early stage Researchers - The Indian govern-
ment are providing funds to young entrepreneurs. It has taken initiatives for new ventures by providing support in the form of incubator centres and other facilities technology commercialization, networking between academic, R & D institutions, industries and financial institutions (NSTEDB). 2) Government Venture Capital Funds - Funds like Canbank Venture Capital Fund Ltd. And SBI Capital markets etc. which are supporting healthcare by providing funds to promising start-ups.
Thus, the trend in healthcare is definitely changing for the better and with more support from Government and leading business houses healthcare startups can help improve the grim state of medical care in India.
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CashKaro – Save Money When You Spend Money Mannat Singla, IIM Shillong Rohan and Swati Bhargava, the husband-wife duo, alumni of London School of Economics, bid adieu to their rewarding jobs at Aladdin Capital and Goldman Sachs in the year 2011 and started off their entrepreneurial journey. Pouring Pounds, their first venture went on to become one of the UK’s leading Cashback and Voucher websites working with over 2500 popular brands like Tesco, Debenhams, M&S, Expedia, and Argos. Pouring Pounds provided them with an experience which helped to shape the initial stages of setting up CashKaro.com in India in the year 2013. The foundation of CashKaro.com was laid out quite strong by making strategic tie-ups with top retailers in Indian ecommerce industry which included the likes of Jabong, Myntra, Amazon India and more for offering Cashback on orders. Only within 6 months of the launch, it drove sales worth ₹ 25 crores to the partner retailers.
Business Model of CashKaro.com User shops at any of the partner retailers via CashKaro.com. A certain percentage of user’s order value is paid to CashKaro as commission by the retailer. CashKaro shares major chunk of that commission with the user as Cashback. It’s as simple as that. What sets CashKaro apart from other coupon websites is the fact that instead of keeping the commission with themselves (which most coupon websites do), they share it with the user. This creates a win-win situation for both the
users and the CashKaro wherein user gets the best deal possible and CashKaro gets a part of the commission as revenue. Also, time and again they introduce new product features keeping the innovation alive and enhancing the user experience, which in turn helps them to retain their leadership position. Value Proposition of CashKaro.com The company envisions “to be the easiest & smartest savings destination for shoppers, both online and offline.” CashKaro.com is the only externally funded Cashback website in India which has raised close to 5 crores from Londonbased angel investors. By the year 2014, it had already partnered with over 500 e-
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commerce websites in India. As believed by the co-founders as well, having a right team especially in a start-up is very crucial. People who understand the vision of the company and are motivated enough to work towards it make the right fit. Rohan and Swati Bhargava spent considerable time in recruitment and grew the team to 50 people within a year based across Gurgaon and Chennai. CashKaro’s mission to provide the cheapest way to shop online in India is what kept them going and in the year 2015, it partnered with Alibaba Wholesale to become the first India site to offer Cashback on orders placed on Alibaba. In the same year, they raised a funding of 25 crores as series A funding from Kalaari Capital. The year 2016 began as “Tata” way for CashKaro.com. They strengthened trust among the
users, even more, when Mr. Ratan Tata invested in the company. The co-founders and the employees of the company were overwhelmed. The year proved to be the best one till now for the company as they partnered with more than 1000 e-commerce websites in India and achieved the GMV target of Rs 1000 crores. And by the year 2017,
they had credited Rs 35 crores as Cashback to the users. What sets CashKaro.com apart in the crowd of Coupon Websites in India In addition to regular coupons and offers provided by other coupon websites, CashKaro has Price Comparison, Product Search, and Cashback as well. The Price Comparison feature
STRATEGIST 15 makes it easier for the users to compare prices across partner retailers like Amazon, Jabong, Snapdeal, Lenskart, Myntra, Firstcry & more. Product Discovery functionality enables users to search for any product that they desire to buy and get the best price possible. The website also lists down offers and price list of top brands category wise, for example, Nike, Adidas, Woodland and more for Fashion, Samsung, Micromax and more for Mobiles etc. The most exclusive offering of CashKaro is Cashback given on top of Coupons and deals to maximize savings. Users can choose from a huge collection of Online Shopping Coupons, Online Recharge Coupon Codes, Food Ordering Offers & Promo Codes and Travel Discount Coupons to get exclusive extra Cashback and Rewards from CashKaro.
Future of Cashback Industry and that of CashKaro.com in India With the growth of online shopping in India, deal sites offering Discount Coupons and Cashback have emerged, helping e-commerce retailers to acquire quality customers and gain market share. Affiliate
Marketing has got its foothold quite strong as retailers have found that it offers a high return on investment as it’s a performance-driven model meaning that retailers only need to pay a commission when affiliate drives a sale. Resulting in more and more ecommerce sites working with affiliate sites like CashKaro.com to get more sales and branding. The Indian e-commerce is expected to be a $100 Billion industry by the year 2020. Cashback websites like CashKaro.com, CouponDunia etc. directly benefit from this growth making it a very promising industry to be in. The Cashback business model is a great product/market fit for
India as people here have an innate attraction towards savings. In the near future, CashKaro primarily plans to be working on extensions and derivatives of its Mobile initiatives which include launching the CashKaro app. They plan to continue to work in parallel to grow the comparison ecosystem, their recently launched product while creating more partnerships with various other online businesses to build great synergies. They also expect to cross Rs 500 crores in GMV and credit more than Rs 25 crores as Cashback in the next 9 months.
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M at t e r n e t : A D i s ru p t i v e E f f o rt i n L o g i s t i c s Akshay Varekar & Ramesh Palwade, SIMSREE We are social species as human beings. And not just because how much we enjoy each others company but because in groups we reap the many benefits of diversity. Eating the variety of food other than what we can grow ourselves which makes us healthier. Relying on one another for different needs. Trading widely makes our economies stronger. Collaborating makes our ideas more creative. Modern transportation and communication technologies dramatically increased size of those sharing networks in 20th century allowing people to trade goods globally, work together remotely and benefit from skills of partners worldwide. And thanks to the internet and cellphone for the first time in human history no one is excluded. But that’s not quite accurate. For those of us who grew up surrounded by cars and freeways it can be hard to remem-
ber at this moment more than million people live in the regions completely cut-off from country’s road network for some or most of the year. We see children using cell phone in developing countries and farmers collaborating with university students online but we forget that all those great entrepreneurial ideas still depend on good old trucks, trains and ships to get things from place to place. A luxury or the human right that many people have no way to access. It took centuries to build up the modern roadways, port systems, railways and airports that comprise our corporate network. And think about that one seventh of our world population is literally centuries behind. Here what it looks like up close. You live in a village with a single road leading in and out. This single pathway floods for six months straight during rainy season giving it quick sand like consistency in some places and becoming a lake in
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others. There is no chance of getting the goods to the market in summer or fall and periodic rains in the dry season make predictable harvest planning impossible. 60% of your crops spoil yearly and 75% of the revenues from the crops that due make it, go to courier service that drives them into town. If you happen to get sick in rainy season there in no way to access medicines or doctors. The future is bleak! No one nation, group of nations or even a global cooperative effort has the money for the infrastructure project to serve a billion people. So what do we do? Can we give any
hope to the people who have been left out of the global sharing network for generations upon generations? A little help from technology, a little outside the box thinking, more than a little courage can make this distant dream possible. Picture this, Chichi a Nigerian woman has a baby with some medical issue. In the past she would have walked 20km to the hospital, but today she just gives them a call and someone would get the request immediately. That’s the part that works. The medication might not reach on time though, sometimes may take days due to bad roads. That’s
the part that’s broken. And it can be completed with an electric autonomous flying vehicle, the wonderful vision of ‘Matternet’, the leading developer of autonomous drone logistics systems. The UAV, unmanned aerial delivery vehicles, developed by Matternet, can carry about two kilograms, over a short distance about 10 kilometres in 15 minutes. It is a part of a wider network that may cover the entire country, maybe even the entire continent. It’s an ultraflexible, automated logistics network.
Matternet uses three key tech-
STRATEGIST 19 nologies. The first is electric autonomous flying vehicles. Automated ground stations are then used to fly them in and out, also to load and unload the payload. And the third is the operating system that manages the whole network. The company is planning to use all sorts of vehicles in future but for now they are using small quads. These fly autonomously which is the key to the technology. They use GPS and other sensors on board to navigate between ground stations. They are equipped with automated load handling and battery exchange facility. So they land, pick up or deliver the payload, exchange the battery if need be and they fly out. The locations of ground stations are known, the paths between them are verified which is important from safety and reliability perspective. The company thinks them as the commercial hubs where people can take out loads or put loads into the network. The operating system which manages the whole network, monitors weather data from all ground stations and optimizes the route of the vehicles through the system to avoid adverse weather conditions, avoid other risk factors and optimize the use of
the resources throughout the network. The cost to transport two kilograms over ten kilometres with this vehicle is just 24 cents out of which vehicle costs 3 cents, battery 9 cents, station 10 cents and energy costs whooping low at 2 cents. Company conducted an experiment to know the cost to setup a network in Lesotho for transportation of HIV/AIDS samples from clinics where they are collected to the hospitals where they are analysed. The area to be covered is 140 sq.km with 47 clinics, 6 labs. The cost to do that is 0.9 million dollars with 150 vehicles. Compare this with humongous cost of normal infrastructure development. The net-
work formed is like internet, decentralized, peer to peer which can be constructed with low infrastructure investment and will have very low ecological footprint. This is the one end of the spectrum. The other one is the use of the same in cities and megacities. Half of the earth’s population lives in cities today. Half a billion lives in megacities. These are the places that do have road infrastructure, but it’s very inefficient. Congestion is a huge problem. To overcome this, company is setting up a new network initially for small, lightweight and urgent items which will have very low ecological footprint and will operate 24/7.
20 STRATEGIST To realize this mission, the company entered in a strategic partnership with MercedesBenz Vans. Through the partnership, they are developing a solution for efficient last mile delivery system having fully automated cargo management and UAV. Company developed the technology that is integrated into the roof of the van, known as ‘Vision Van’ allowing for precision landing and automatic payload and battery exchange. The cloud technology of company integrated with vans software allows complete control of the supply chain. Keeping safety as the main objective, company’s drone and cloud technology has been designed carefully. It has obtained certifications from NASA and the Swiss Federal Office of Civil Aviation for safety ensured by its autonomous delivery network. Its system is designed to enable flight over urban, populated areas, not just rural and sub-urban. As one of the safety feature, the drone has a parachute which deploys in case of an accident, as a part of its redundant flight termination system. Another feature avoids diverging from pre-authorized path by more than 5 meters (16.4 feet) with the help of an
intelligent software installed in it. The company's cloud system uses terrain, airspace and population-density models to automatically generate the safest routes in approved airspace. The company has launched new M2 drone which is completely autonomous. It is capable of transporting up to 2 kilograms (4.4 pounds) and travel up to 20 kilometres (12 miles) with it, in single battery charge. It has automated loading facility and battery exchange mechanism and features a smart payload box that can transmit data about its contents and destination. Integrated with the Vision van, it has precision landing capacity and it can capture proof of delivery. Matternet is not the only company trying to achieve this. There are start-ups like Bizzby and Aria and also giants like Amazon and Google. But this company has proved itself by field testing in areas of Papua New Guinea and Bhutan where it has flown over swaths of jungle which does not have well regulated airspace. Also it has partnerships with some of the world’s most trusted or-
ganizations including Mercedes -Benz Vans, Swiss Post, Swiss World Cargo, UNICEF, World Health Organization and Doctors Without Borders. Due to the proven record, it has been granted with certification from The Swiss Federal Office for Civil Aviation (FOCA) allowing their delivery drones to fly autonomously over cities at any time of day or night. With this regulatory hurdle cleared, by next year Swiss Post partner of Matternet is planning to use the system for delivering blood samples for hospitals in Lugano, a small city with population of 56,000. With this it will become the only company to actually start delivering on commercial basis with drones. The company CEO and cofounder, Andreas Raptopoulos, hopes that one day he would have 2030 drones doing routine missions and nobody is paying attention, because it is just an establishment operating safely and in most efficient way possible.
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Pay t m o f f e r i n g L o a n s t o R e ta i l e r s Lalit Kumar Agarwal & Parshant, IIM Lucknow Introduction Paytm (Pay Through Mobile) was launched in 2010 by One97 Communication as a DTH and prepaid mobile recharge company. In 2014, it has made its way into e-commerce segment in and further it moved to providing bus booking services on its platform. Currently, Paytm serves to 150 million customers of India and it is one of the biggest service providers for the online transactions. It also enjoys the much greater degree of integration as compared to other service provider in the market. Recently, it has come up with revolutionized idea of providing small amount of loans ranging from 10,000 to 1,00,000 within short span of time to small merchants and retailers. For this, it has tied up with third party financial institutions like Capital Float, Aditya Birla Finance, and Capital First. Paytm will pass on the credit profile of customers to these institution and based on the transaction history of mer-
chants and retailers registered on its platform, these financial institution give loans to them.
Step at The Right Time The global digital payment landscape has seen unprecedented growth in the recent times and last one to two year has witnessed excessive focus because of the four major shift happening in the global landscape. Firstly, digital revolution, led by the smartphone and Internet penetration, has revolutionized digital payments. Second, the digital payment space is witnessing the entry of non-banking institution offering banking solution and services. Third customers are demanding instantaneous solution and finally, there are changes in the regulatory framework, which are helping these institutions to flourish. India is also going to see
significant disruption in this space and the future indicates six trends, which will play significant role in transforming the payment landscape in India in coming five years: 1. Smartphone penetration and Mobile-based payment solution will make it easier and economical to accept mobile/digital payments. Over the next fiveyear it will attract nearly 10 million merchants to accept these payments. 2. Payment through digital platform will give relevant data to the service providers. It will help them to make sound lending decision to merchants registered on its platforms. 3. Customer will prefer fewer and widely accepted solution so it will consolidate the market and first movers will get significant advantage. 4. UPI (United payment interface) is going to provide greater platform and it can drive largescale adoption of mobile/ digital payments.
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Fig. 1. Growth of Retail Growth (Company Data, Credit Suisse)
5. Banks are collecting Aadhar and KYC data, which can facilitate online authentication and boost digital payment system. 6. Currently, non-cash payment constituted around 22 percent of the payment and it is expected to overtake cash payments by 2023. Paytm positioned itself firmly in the digital transaction space by offering diversified payment solutions. In 2015, it received a payment bank license from RBI (Reserve Bank of India). As a payment bank, it will use its existing user base for offering services like giving saving accounts, debit cards and online banking and transfer solutions. However, under this agreement, it will not be possible for them to give this money as a loan. So, to further expand its digital
footprint and helps its merchants registered on its platform, it is partnering with established banks to provide access to small loans. This service can also be extended to give smaller loans to its customers registered on its platform. Currently, RBI has not given permission to these payment banks to provide loans but in future, they might permission to payment banks to offer small-scale loans. Then, Paytm can use its current experience to move in banking space and adopt loans, insurance, and wealth management as a part of their future growth strategy. Need for The Change Today India’s banking system lends approximately INR 50 lakh crores ($3 trillion), which
is about 75% of our GDP, and the sector, which is not covered by the banking system, is of the same order. As per the estimation by Credit Suisse, retail loans market will grow at 18% and will reach $1120 billion by 2020 (Fig. 1). This area is being served through variety of avenues. Microfinance institutions only constitute around INR 20,000 crores and the rest are fulfilled by unorganized sector (Fig. 2). Moreover, there is a large amount of population, which is not covered by any financial inclusion. Indian financial institution provides loans in different sectors like corporate, agriculture, small businesses and retail. In this, small business and retail collectively covered the 38% in year 2014 (Fig. 3) and recently, this sector grew manifold. Due to which companies imitated new ideas to cover the untapped market. Future Impact on SME (Small and Medium Enterprise) Small businesses are the core of India’s economic competitiveness and it plays a vital role in the Indian economy by contributing in 40% of the exports and 45% of the industrial out-
STRATEGIST 23 put. India is home to about 26 million small enterprise that nearly constitutes 20% of India’s GDP. Moreover, it employs 42 million workers and generated one million jobs every year. It produces more than 8000 quality products for International and Indian markets in various sectors like precision engineering, textile and garments, retail, food processing, pharmaceuticals and service sectors. Therefore, SME’s have greater opportunities for further expansion across sectors. However, they are multiple problems, which is stopping them to work at their full potential.
finance is crippling them the most. They need finances to purchase raw material, pay wages, support expansion plans and meet other working capital requirements. Despite multiple efforts by SIDBI, and ministry of SME, and RBI, there is still a huge gap in demand-supply mismatch of enterprise financing. One of the major reason for financial institution and banks being unable to fill this gap is the default and credit risk involved in financing these enterprises. Credit risk is due to the lack of proper accounting systems, lack of known buyers, and non-availability of bills.
Among the many problem these SME faces, absence of adequate and timely banking
To account for these credit risks, banks look for traditional equity or enhanced collat-
Fig. 3. Different Type of Loans in 2014 (RBI, Credit Suisse)
eral; both of them are difficult for brought in by entrepreneurs. In the face of reluctance to lend from banks, these enterprises compelled to move to non-continuous and high-cost financing from infor mal sources like moneylenders or continue to operation in subscale. However, substitutes for tradi-
Organized market of lending • Commercial Banks
• Co-op Banks/ Societies
65%
• Other formal Sources
Unorganized market of lending • Money Lenders • Relatives and Friends • Other informal Sources
Fig. 2. Organized and Unorganized Market of Loans (National Sample Survey Office (NSSO))
35%
24 STRATEGIST tional measurement of the credit risk score are emerging by the new source of information and vast amount of availability of data from mobile -phone usage patterns, utilitybill payment history, and others. They can be used creatively to create better risk models and to make responsible and profitable lending decision to individuals those who do not have a credit history.
other parameter as well. In the next section, we are proposing a sample model, which these services can use as an input to work on a larger scale.
This initiative from Paytm can work towards helping these enterprises and which in turn help India to unleash its potential. Starting from financing small merchants on its platform by proving affordable loans through banks, it can move towards helping small-scale enterprises, which do not have access to these types of technologies. For this Paytm need to develop a more comprehensive credit rating model which is not only dependent on transaction history but it should include
3. Data through Social Activities
Sample Model Factors identified to create an alternative model for credit scoring: 1. Prepaid Mobile, Utility bills 2. Psychometric Test
4. Digital Transactions Due to the significant mobile penetration among target segments, a vast amount of data can be collected through prepaid history and phone usage. It can be analysed, and decisions can be made on their willingness and ability to pay loans. For example, a research by Mckinsey & Co. shows that initiating calls and longer call duration have a positive correlation with credit worthiness. With the help of psychometric test, knowledge, abilities, personality traits and attitudes can be measured and used as an input in the model to generate personal credit risk score. For example, the question that measures relationship with
others will provide trustworthiness and likelihood of repayment and questions regarding logical thinking during adverse situation will provide his behavior when the financial position is going to deteriorate. Risk model can also incorporate inputs from social media usage and other online activities, which can be used for identity verification, employment status and income level estimation. Social data can be available from multiple sources, and it can be cross-matched for better assessment. It can be most useful in targeting middleclass consumers in growing markets. Because of heightened focus on digital transactions using UPI system which can be accessed through basic cell phones, payment data captured by wholesale suppliers will be useful in assessing the creditworthiness of small businesses.
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Interview with Mr. Ambarish Dasgupta, Head of Management Consulting, KPMG India Team ConQuest ConQuest: As a consultant, what do you think were the implications of demonetization on prime industries such as BFSI, Real Estate, Retail, Media and Entertainment?
Mr. Ambarish Dasgupta has over 25 years of experience in business and IT consulting, implementation and business transformation. He has managed large strategy, process, people and IT-enabled reengineering and business transformation projects in the private and public sectors. Before joining KPMG, Mr. Dasgupta was a partner at PwC. He was the Consulting Leader of PwC India and its eastern operations and a member of the firm’s India Leadership Team. Team ConQuest brings to you his exclusive interview regarding the impact of recent events on various sectors, opportunity for start-ups in North-East India and changing consulting landscape.
Mr. Dasgupta: Demonetization has not directly impacted KPMG, but it has affected some of our clients who majorly deal in cash. The effect is two-fold, affecting both legitimate and illegitimate transactions. The impact of sectors like retail is severe. Percentage of cash transactions, especially at shopping malls have fallen, and because traders feed retail, traders are affected. All entities connected to the retail supply chain are suffering as a whole. There has been a significant impact on real estate as well, due to the loss of illegitimate currency and money coming under the purview of official channels.
ConQuest: Being a partner in KPMG India for about four years now, how do you
think is the landscape of foreign investments in India changing? Mr. Dasgupta: Foreign inflow in retail has increased due to higher interest rates in India, but institutional investments in core industries like infrastructure and iron and steel are still lagging. This is due to the sluggishness of the Indian economy, perception of investors, complex regulatory issue and events like demonetization, GST creating uncertainties in the business environment. Also, the global economic conditions are not in favour of investing heavily in a single country like India despite higher interest rates.
ConQuest: Technology and digitalisation is changing various industries in India. Microsoft recently partnered with PwC for boosting the Digital India initiative. What activities is KPMG doing in this domain, especially for start-ups? Mr.
Dasgupta:
Globally,
26 STRATEGIST KPMG has multiple Centres of Excellence for Digital Analytics. KPMG has a separate horizontal for Digital Analytics and has partnered with some of the leading IT players in India. We provide digital consulting to several corporates, semigovernment, and public sector companies. We are also designing and training Digital Technology courses in various educational institutes. KPMG has alliance partners with more than 150 employees in this domain. We have an extensive global ecosystem of start-ups, whose solutions are deployed around the world by KPMG.
ConQuest: KPMG and FICCI recently published a report on ‘Emerging NorthEast India’. Which sector do you think has the most potential to develop in this region for start-ups? Mr. Dasgupta: In the report, we identified tourism as the key potential industry that is underdeveloped in North-East India. Floriculture, IT/ITeS, BPOs and handicraft also have potential. Large manufacturing industry find it difficult to come up in North East because of the terrain, climatic conditions, geographical complexities, and
transportation challenges. We recommend tourism and service sector as attractive sectors for start-ups to boost the local economy.
ConQuest: A recent article on ‘Disruption in Management Consulting’ stated that in the past 100 years, the business model of consulting had not changed a lot. However, recently, there has been a three-pronged attack on management consulting – fuelled by increasing availability of intellectual property rights, artificial intelligence and internal or individual consultancy. What do you think is the future of management consulting? Mr. Dasgupta: Recently developments including artificial intelligence, complex mathematical models, and predictive analytics are offer a bigger foresight and will definitely be very disruptive in the consulting domain. To sustain, the consulting structure must be agiler, aiming towards creating a consulting ecosystem through alliances. The future consulting model must be a balance of both, the aggregation and disaggregation. On
one hand, consulting firms will have to be very integrated, but on the other hand, they will have to be disaggregated to not have everything under one standard roof.
ConQuest: In strategic consulting, information flow is mostly downward, from strategy into systems integration but does not flow back from systems integration to strategic departments. Do you think this should change and if yes, how? Mr. Dasgupta: Strategy and systems integration must be purely horizontal for the longterm success. The top-down approach is primarily due to discrimination between the white-collar and the blue-collar, and is unsustaining. Companies need to come out of the concept from upward to downward information flow and need a consistent approach from left to right. We believe that consulting is the entire continuum of the value chain movement, from strategy to systems integration, as all contribute to the value chain.
STRATEGIST 27
Bibliography
India Brand Equity Foundation, “Banking Sector in India 2017”
YourStory.com, “Five promising Start-ups in the Finance Sector”
Deloitte Report, “Banking on the future: Vision 2020”
KPMG India Report, “Healthcare: The neglected GDP driver”, September 2015
Forbes, “Three Healthcare Start-ups Tapping Into India's IoT Market”
Matternet Company Website
Techcrunch, “Matternet cleared to fly blood samples in delivery drones”
Dronethusiast, “Meet the Startup that’s using Drones to Change the World”
Vans & Drones - Daimler, Mercedes Benz Website
IANS, “Paytm now has a current user base of 150 million”
Suthar, J., “The small loans would be in the range of Rs. 10,000 to Rs. 1 lakh”, Retrieved
Shah, A., “India’s banking system lends approximately INR 50 lakh crores”, BCG report on “Digital Payment 2020”
SME Chamber of India, “The role of SME sector in Nation Development”
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