But what you have is poor footfaH at WLATMs and high operating costs; the cap on free transactions has added to the woes. And the din for a higher inter-change fee is reflective ofall this. Net effect: ATM deployment has gone down contrary to forecasts ofa fillip with the entry ofWLATMs. To put it bluntly, WLATMs may soon turn out to be white elephants.

So when Patel says “the bulk ofour ATMs are in low-tier towns to drive financial inclusion”, it stumps rivals (seeA Tellers’ Tale) who struggle to put up runs on board; and worse, don’t want to go out and bat at all. “I see no reason to deploy so many WLATMs. It makes no sense,” says K.R. Bijumon, chief general manager ofMuthoot Finance, which has put up just 200 WLATMs. I ast May, he had told BIT) ‘We have been abit slow off the blocks, but the rollout will gather pace in the months ahead. At 100 ATMs a month, we will reach 1,000 by March 2015.” He’s offthe target by 80 per cent!

Echoing Bijumon’s thoughts, Loney Antony, managing director at Prizm Payment Services, says: “Ifl don’t earn money, what can I do?” Antonyis candid thatlosses continue to mount on account of WLATMs. So he has pulled out nearly200; it now stands at 1,200ATMs thereabouts. Financials are hard to get as these entities are privately held. Nowyou may quibble it’s a case of sour grapes for Bijumon and Antony—the truth is the tellers’ tale hangs in balance.


Indicash added more ATMs in FY15 than the top four banks put together

Indicash SBI Group ICICI Bank HDFCBank Axis Bank


Beyond Numbers, Betwixt Lines…

At theheartofthe mess is the inter-change fee -(down from Rs 18). It’s WLATMs only way to earn bread and butter; their bellies fill up only when more and more plastic is swiped on their networks. For issuers, it’s an expense they have to bear on behalf of customers. It’s a different matter that after three free transactions in a metro (it’s five in the non-metros), the plastic-issuer charges you anything between Rs 20 and Rs 30 and to that extent, covers up for the inter-change pay out


What’s important here is that it holds good onlyforyour bank that pockets this fee; not for WLTAMs that issue no plastic.

Not many swipe cards at WLATMs. If 100 people queue up at abank’s proprietary or brown-label ATM, only 40 go to WLATMs. “It’s very hard to get folks in the low-tier towns to go to WLATMs as they associate banks with ATMs,” says Suneel Aiyer, chief executive at Writer’s Safegaurd, a cash-management firm that loads currency in ATMs and is also into brown- label ATMs. And you have empirical evidence to prove this lack of traffic at WLATMs from the way brown-label ATM deployers bid for the rate per transaction (RPT)—the fee they get for every swipe —to be charged to banks for a tender of63,000ATMs floated by North Block in 2012.

AGS Transact Technologies’ RPT bid was Rs 12.10. We don’t knowhow Prizm, FIS, Mphasis, Electronic Payment Systems and TCPSL bid, but it’s been gathered that one brown-label

contender’s bid was as low as Rs 7 and that the bid-range by this lot was between Rs 7 and Rs 12.10. Nowifinter-change fee at Rs 15 is asore point for WLATMs, how come some in their brown-label avatars bid low on the RPT (technically it’s not inter-change, but that’s what you earn at the end ofthe day)?

Explains Bijumon at Muthoot (not abrown-label entity though): “That business model is different People come into brown-label ATMs as the signage is that ofbanks; they are deemed as banks’ outlets. Typically, 60 per cent of all swipes are at banks’ own ATMs; the rest is at ATMs ofother deployers. Again, you get to earn an RPT on 100 per cent of the transactions. You can’t extrapolate RPT bids into WLATMs and say we are now being unfair to clamour for a higher inter­change”. There’s another matter of detail: the inter-change for WLTAMs is not Rs 15 — it’s Rs 13 as Rs 2 goes to the sponsor bank. That’s because only banks can be part ofthe Mint Road settlement system.

Also note howthe lower traffic at WLATMs that Aiyer alludes to and the high number of swipes at banks’ proprietary or brown-label ATMs that Bijumon refers to mirror each other. You now have a ridiculous situation: banks now
monitor ATMs, other than their own, with higher traction andthenplonktheir own ATMs next to them to save on the inter-change payout This has led to a slug-fest between banks and WLTAMs, when ideally, they should have played complementary roles. Oh and by the way, North Block’s brown-label tender of 2012 for 63,000ATMs has seen only a 50 per cent strike rate despite an RPT on 100 per cent ofthe transactions; and some mandate winners, sources say, have opted to pay a penalty rather than deploy ATMs.

Antony feels what has clouded the view (for WLATMs) is “this business of three free ATM transactions in the metros and five in non-metros, which has added to the confusion.

It’s very hard to say if you are in a metro or a non-metro as some places are on the borderline.” Besides, free swipes now cover not just cash withdrawals but balance-enquiries and mini-statements too. Adds Bijumon: “Some banks have put a limit on free transactions on their own machines as well. It has confounded the problem. It is hard to remember where you swiped and what for.”

Brace For An Even Bigger Jam

It’s no surprise that ATM deployment numbers have fallen. The installed ATM base at1,93,000 is lower than London- based Retail Banking Research’s (RBR) projection of2,25,000 for 2014 up to 2017- RBR—a strategic research and consulting firm in retail banking, automation and payment systems — reports are the gold standard in this line of business.

“I have never seen RBR’s numbers like this. It’s unlikely that deployment forecasts at2,80,000 ATMs (2015), 3,40,000 (2016) and4,00,000 (2017) will be met,” notes Antony. The latest RBR (2014 up to 2019) forecast paints a gloomy picture: ATMs will be at2,90,000 in 2016,3,40,000 (in 2017), 3,90,000 (in 2018) and4,40,000 (in 2019) — that is, we may cross4,00,000two years later than what was forecast in 2013.

It’s not good enough to just open millions ofbank accounts underthe Pradhan Mantri Jan Dhan Yojana (PMJDY) or gloat that the numbers have made it to the Guinness Book ofWorld Records — it only makes for agood start. To be truly effective, growth in the card-acceptance infrastructure has to be in line with the spurt in accounts.

And here’s the irony: at the other end, you have 575million pieces of plastic (553 million debit cards and 21 million credit cards); it’s been a northward soj oum all through the years. Most ofthe bank accounts opened under PMJDY (all issued with a debit-card, which is nothing but a deposit-access facility)

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CALLING THE SHOTS “‘Our goal has always been to bring the experience of a neighbourhood shop in a large store, which is convenience and great service”

Shop: Wave Telecom Owner: PrashantN. Founded: 2012 Earnings: Rs 35,000 a month

Service: Sell mobile accessories and services Android Phones. Also, provides passport and PAN card services along with delivering Amazon products



Chairman, Future Croup

capture that information, which Amazon can. Kiranas are hubs for booking rail, air and bus tickets along with filling up passport/tax forms and mobile recharge vouchers to supplement their revenue. Over the years they have extended services to selling apparel, mobile repairs, and ironing clothes. Reports by CRISIL and Ernst & Young put the total number of kiranas in India at 12 million (approx.) outlets and they clearly continue to dominate the $550-billion retail market. The organised retail market accounts for less than 8 per cent of sales and, in the last 10 years, the share has only crept up by 3 per cent If you can’t beatthem, join them: is what the Amazon strategy dictates.

Flipkart and Snapdeal said that the ‘kirana strategy’ is not on their immediate agenda, but Biyani’s $3 billion Future Group is committed to leamingfrom and linking up with the Kiranas.

Kirana Now

“The data is agold mine. If e-commerce businesses get this data from kiranas, it is going to change the way they run promotions and campaigns,” says Devangshu Dutta, CEO of Third Eyesight, a consulting firm. “Can they provide customer

15 June 2015 I BW ! BUSINESSWORLO I 65

The company did manage to give BWa sneak peek into what it is doing for the food and grocery business andhowitplans to use the kirana network to deliver to customers. A similar model is followed Vjay Singh, the founder of, is aggregating 6,000 kiranas in 28 cities for food and grocery delivery, and is helpingthem find customers through his platform. However, this startup is yet to raise the kind offunding required to scale up the business. Meanwhile Amazon is goingto push all its cash resources to create technology that can make the customer connect with kiranas a simple matter.satisfaction? That is the crucial test which will decide ifkiranas can migrate to servingthe mobile customer,” adds Dutta. Sources say that today kiranas deliver close to 3 lakh packages a month for Amazon, which means just through the kirana network it makes more than 3 million deliveries ayear.

Fazal Mohammed and Abdul Basit, two brothers, run their 800-square-feet shop called Care Fresh, in Mathikere, in Bangalore, with a continuous watch on the expenses. Being new in the area, they were not getting any traction from their store. Their catchment had let them down and they had no marketing budgetto connect with customers. When they heard about Amazons “KiranaNow” pilot program, which is a platform for kiranas to sell grocery through a mobile platform, the brothers jumped in.

Amazon’s team took pictures of 15 to 20 items of the inventory of Care Fresh, and placed them on the mobile website and started an online store frontforthebrothers. Basit and Fazal have access to abrowser-based system that connected with the Amazon network and the boys know, in real time, whattheir customers order. All they have to do is pack the items and generate an invoice. The Amazon delivery boy will take the package from Care Fresh and deliver it to the customer in 90 minutes. Amazon is trying to reduce this to 3 0 minutes and eventually will train the kirana to handle deliveiy. The cash will be paid back to the kirana in four days and Amazon will take 1 per cent of the total value delivered to the customer.

“Kiranas know the customer better than anybody and hence, their services add more value to our customer service experience”



The ‘Kirana Now’ program is available only in afew urban centres of Bangalore, but in six months it would be scaled into other cities. That said, Amazon India has already cracked the kirana delivery model with its IHS program and is in a position to scale up this segment rapidly. Kirana stores in Delhi such as Manchanda Enterprises and Lakshrm Stationaries have scaled up their businesses with Amazon’s IHS. “I hardly made Rsl5,000 a month. But with people picking up Amazon items, on a daily basis, it has upped my shop’s I business too,” says Shankar Singh, owner of Lakshmi Stationaries at Janak Puri in Delhi. Today he makes close to Rs40,000 a month.

The company had started with less than 10,000 packages with the kirana network 18 months ago; today, it is doinga million packages a month. Clearly, one does not need a crystal ball to see that kiranas will survive and thrive. Retail in India will continue with its hyper local system with no one brand or group dominatingthe consumer’s wallet Wesay let the Kiranas drive the Indian story ahead. DEI

^ [email protected]; # @vishalskrishnc\ For more on retailing, visitwww.businessmM.i-


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LUCRATIVE LIAISONS Neighbourhood kirana stores know their customers like none. Giant retailers have leant that now and that partnering with them is their best bet By Vishal Krishna Photographs by Bivash Banerjee

ADAN MOHAN Reddy ofBangalore is hard atworkin his 500 sq.ftshop. Bhuvaneshwari Rice Shop is his livelihood. The 21-year-old puts in 17 hours a day to earn Rs 50,000 a month. He is savvy, ambitious and uses a strappingly large smartphone. He is a digital literate, knows about products such as the mobile wallet and is open to cash-on-deliveiy to win new customers.

He’s the kind of guy Amazon has been looking for. Eighteen months ago the $89-billion e-tailing giant began its ‘I Have Space’(IHS) programme using the street comer mom and pop kirana network to deliver products to their consumers. Reddy saw his future, made a phone call and registered as a delivery partner’. All he had to do was provide his PAN card details and he was good to go.

Amazon gave him a Samsung tablet and a palm-sized credit card payment device to connect the payments to Amazon’s seller app and the cloud server on the backend. Reddy hasn’t looked back since.

‘1 got in to this program because Amazon gave me extra reach and more


































customers,” he says. His sales increased byRs20,000a month and he made an additional Rs 15,000by delivering products ordered on Amazon at his store. “Customers would come to my store to pick up their orders and ended up buying soups or juices too. When I began delivering Amazon products to the door step ofmy loyal customers on my bike, some ofthem would ask me to deliver groceries too.”

Prashant N. from Bangalore has a similar story to tell about his store called Wave Telecom. The story of Reddy and Prashant has been replicated by around a1,000kirana stores that have joined Amazon India across 47 cities.

The Power Of Unorganised Retail

In 2006, when large conglomerates such as Reliance Industries, Future Group, the Aditya Birla Group and others, committed $10 billion (Rs 40,000 crore) to expand their retail
footprint, there was plenty of chatter about the death of the kiranas. Nine years later RIF | Businessworld finds that kiranas have not just survived, they have blossomed.

Historically, the Indian consumer has always been hyper local, preferring his neighborhood baniya. On the other hand, malls and independent stores found the capital cost of investing inlandandfillingthe godowns a losing proposition. High rentals, between 15 and 20 percent of sales and lowfootfaUs, have killed many a mall. Consumer behavior also revealed that most Indians do not have the appetite to spend on premium retail prices, and their mall spends are mainly at the food courts and the multiplexes.

Further, most retailing outlets do not buy intotheethosofa brand and in turn affect a brand’s value by not communicating the value proposition. “One of the reasons why kiranas thrive is because retailers, barring afew, have not made modem



Shop: Bhuvaneshwari Rice Owner: Madan Mohan Reddy Founded:2012 Earnings: Rs 85,000 a month Service: Sells food and grocery, loose and branded rice. Mobile and passport services. Also an Amazon delivery associate Education: Graduate retailing a career option,” said B .S. Nagesh, vice-chairman of Shoppers Stop, one ofthe largest retailers in the country, in an earlier interview with B W.

The big retailers underestimated the underlying strength of the kiranas and their importance in the unorganisedj ob market. In a country with high levels of unemployment, they provide sustenance to millions. According to Kronos, the global human resource technology firm, ofthe 450 million workers in this country, only 30 million are in the organised sector, while the rest continue in ‘informal’ employment.

A lot ofthe ‘informal’ work seekers therefore dabble with entrepreneurship and the kirana store offers the lowest-entry barrier. You can start with small finance from friends and family. It is the same ‘kirana’ spirit which Uber and Ola have hooked on to and made the taxi driver their partners. It is no coincidence that some ofthese drivers actually also own small shops and drive taxis for that extra income.

The growingfast moving consumer goods (FMCG) industry feeds the kirana network that has become an endless river. One shuts shop and another opens up with new services. “Indian cities, with their culture of shopping, includingthe psychology of consumers, are tuned to being hyper local. Our goal has always beentobringthat experience of a neighbourhood shop in alarge store, which is convenience and great service,” said


Kishore Biyani, chairman ofthe Future Group, in an earlier interview. He says people will still go to their kirana for their daily shopping and visit larger stores for their monthly needs.

If You Can’t Beat Them, Join Them

It is no wonder then Jeff Bezos, founder ofAmazon, wants to use the Kirana network, earlier seen as competition, to grow retail sales. His target istobringS,000 kiranas under Amazon umbrella within two years. The business model for the kirana owner is simple and profitable: he earns Rs 20 for every package delivered to the customer’s doorstep, and Rs 15 for every packet picked up by the customer from his store.

Similarly, Biyani wants to link10,000kiranas to Future Group’s food parks,which make squashes and short eats, located in Karnataka and Madhya Pradesh. “The food park in Tumkur can serve all the small stores in South India and our plan is to increase our private label (branded merchandise exclusive to the retailer) reach across the country,” says Praveen Dwivedi, president ofFuture Consumer Enterprise.

The rush to connect kiranas does not stop there. Technolog} companies such as SAP, Mahindra Comviva and Infosys are working on boxing “payment and assortment” software for kiranas. They will link data generated from kiranas to FMCG distribution centres on a real-time basis. HUL has connected

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