India’s payment industry is evolving and has been one of the most rapidly emerging sectors with payment flows comparable to many developed Western countries. The payment industry in India ranks fifth amongst the Asian countries with revenues expected to grow at a compounded annual growth rate (CAGR) of 17 per cent. The traditional cash-based transactions, which used to be documented on paper, have witnessed a major shift towards electronic modes of payments.
According to a report, India Payment Services Industry Outlook to 2019, by Ken Research, the three major trends responsible for shaping the payment industry in India have been growth in electronic advancement, change in industry structure and business models and an increased regulatory overview by the government authorities. The Reserve Bank
of India (RBI), has also increased its regulatory overview and promoted the National Payments Council to contribute to the growth in the payment industry.
While cash remains the number one payment mode, rising preference for electronic payments, increasing mobile and Internet penetration, prepaid payments issuance and e-commerce growth, transactions through credit and, debit cards, and mobile payments is going to grow by leaps and bounds. From a ratio of 90:10 for cash to electronic payment it is expected to go upto 50:50 in the next three years
Equipped with an engineering degree from the Mumbai University, Ravi B. Goyal had previously worked with DCM Data Systems Limited and Byte Systems Private Limited. Prior to launched AGS TTL, he launched Advanced Graphic Systems,
a proprietary concern, to market computer-aided textile designing software. Now, AGS provides a wide spectrum of payment solutions and technology products for the banking, retail and petroleum sectors. “We provide customised products and solutions comprising ATMs and other automated payment products, related maintenance and managed services, cash management services and transaction switching services,” explains the 52-year-old Goyal, CMD, AGS Transact Technologies Ltd (AGS TTL), which began its banking operations in 2004 as an ATM supplier, since then it has grown to become a holistic player with solutions across the payments eco-system.
As of December 2014, AGS TTL had installed, maintained or managed a network of 41,569 ATMs, provided cash management services to over 10,000 ATMs to more than 70 banking customers, through its subsidiary, Secure Value India Limited (SVIL). AGS had posted a total revenue of ?951 crore for 2013-14 and made an operating profit of ?69 crore. Now, for the six months ended September 2014, its topline is ?579 crore. Going by this, by March 2015 (yet to announce the results), AGS could well cross the ?1,200 crore mark. It employees more than 4,800 people on a pan India basis.
Currently, AGS TTL derives revenues from a variety of products and services across business segments. In banking automation solutions segment, it has a combination of revenue from the supply of ATMs and other automated banking hardware products and service income. Besides the banking payment solutions segment, it gets revenue from operations such as ATM outsourcing services, ATM managed services (including both transaction based and fixed monthly fee), cash management services, electronic payment solutions and transaction switching services. It has also installed more than 25,000 point- of-sales (POS) terminals, automated more than 5,000 petroleum outlets and installed more than 34,000 colour dispensing machines across India. Revenue from banking automation solutions and payment solutions accounted for 36.i per cent and 51.1 per cent, respectively, of the total revenue from operations for the six months ended September 2014.
While a majority of the revenues is derived from the banking automation solutions and banking payment solutions segments, the other automation solutions segment constituted 12.8 per cent of the total revenue from operations. “Our diversified product portfolio and revenue streams enable us to mitigate the concentration risks that are associated with operations in a specific segment or geographic region,” says Amit Majumdar (42), CFO, AGS TTL. He has been associated with the company since January 2015. Prior to joining AGS, he worked with others, Ambit Corporate Finance and Rabo India Finance.
In 2004, when Goyal started AGS, its journey had begun with computer designs textile systems, catering to the industry by giving it designs that cut the time to production. This computer-based, colour-mixing technology, which AGS used for textile, was slowly expanded to other areas, such as paints and automobiles. “We extended this concept to the paints industry, where paint manufacturers at the retail level could use dispensing machines. So, they just manufactured white paint, while the colours were made at the retail level,” says Goyal. ags has partnered with all the top 10 major paint manufacturers and has about 40,000 of such dispensing machines that are running on a pan-India basis at retail level – for Asian Paints, Kansai Nerolac, Berger, Shalimar Paints and Nippon Paints.
As the banking sector was opening up in the mid 2000s, Goyal entered the banking automation solutions segment, which comprises supply and installation of ATMs and other automated banking products, such as the atm site development and the provision of services, including maintenance, software and hardware upgrades and spare parts. He tied up with global technology provider, Wincor Nixdorf AG, in 2004
and offered Wincor ATMs, cash deposit machines, retail cash billing machines and a diverse range of Wincor’s other banking and retail- related sector hardware, associated operating systems and software products in India,
“This tie-up has also allowed us to develop credibility, as we are able to cater to our customers in a quick and effective manner, Many of our competitors also have engaged us for the supply, management or maintenance of their payment services infrastructure,” adds Goyal, By 2009, he was leveraging the banking automation solutions expertise and had begun to offer ATM outsourcing and managed services. “As part of our strategy to offer an integrated payments platform and to improve our operational efficiencies, we commenced offering transaction switching services in 2011, cash management services in 2012 and electronic payment solutions in 2014,” says Goyal, talking about the evolution of the company, Currently, ags TTL has more than 30 customers in its banking payment solutions segment, including Axis Bank, icici Bank, hdfc Bank,
Ratnakar Bank, BTl Payments and Muthoot Finance, to name a few,
“Our partnership with AGS helps us with the latest in technology to provide best-in-line automated banking facility,” says Aspy Engineer, president, ATM, Yes Bank. “As far as the industry is concerned, there has been a gradual shift from a model of outright sale of an ATM plus cost per service to a brown label/out- source model,” he adds. According to industry estimates, in the next 4-5 years, about 50 per cent of the ATMs will outsource services such as site identification, deployment, installation, ownership and management to Independent vendors, Banks, which hold the ATM licence, will be only responsible for the cash and its clearing and settlement.
“In our ATM outsourcing and managed services businesses, we are responsible for the end-to-end management of ATMs, starting from site identification and development, followed by machine deployment, maintenance and management on behalf of our customers. While in our outsourcing services business, we own the ATMs, under our
managed services business, the ownership of these machines- remains with the customers themselves. As of December 2014, our portfolio consisted of 9,733 ATMs outsourced and 6,818 ATMs under managed services category,” adds Majumdar.
Outsourcing of ATMs by banks has multiple advantages and savings in cost. “There is a substantial reduction in capital requirement of the bank to acquire ATMs; savings in operating expenses to manage the ATMs; inability to take advantage of economies of scale compared to an outsourced agency; need to constantly upgrade technology is eliminated; outsourcing has helped banks to set up ATMs at offsite locations and finally huge challenge in managing third party vendors,” says Rajeev Ahuja, head, strategy, Ratnakar Bank, who has started working with AGS as a partner even since the bank started the transformation process in 2012.