Rajesh Rai, 25, makes at least 20 rounds to neighbourhood households across the Dwarka sub-city in Delhi to deliver food from the restaurant he works in. And Rai used to have a unique problem.
Not every home that he visits has the necessary cash or can tender the right amount of change for the food items purchased. "This often led to considerable delays and ultimately led to loss of precious time.
Since my salary depends on the number of trips I make, the delays actually mean loss of money for me," Rai explains. But then, that was in the past.
The food courier now carries a mobile card reader attached to his smartphone and proudly charges his customers though their debit or credit cards, saving time and earning more commissions.
Mobile card readers are revolutionising the way business is done as they are dramatically increasing the reach of credit and debit cards as instruments of convenience that can be used by small shops and even mobile agents like Rai.
These mobile card readers cost anything between R 3,000 and R 4,500 and can be attached to the headphone jack of any phone with Internet connectivity and a GPRS capability to receive and send data packets on cellular networks. The phone then becomes a swipe-friendly device.
The last mile connectivity has opened up huge business opportunities for technology startups such as Ezetap, Paymate, Mosambee and Prizm Payments (now acquired by Hitachi). These firms offer mobile card readers and software apps integrated with banks to reach out to people like Rai.
"It is cost-effective but supports apps that process payment details and along with backend data generate newer business insights in real time. This can be crucial for small and medium business enterprises," said Abhijit Bose, co-founder and CEO of Ezetap. Bose’s firm has sold close to 15,000 mobile card readers and expects 10% growth over the next one year.
"These devices make it easier for innovative solutions to be deployed," said Jaideep Ghosh, partner at KPMG India.
Mosambee, a new mobile payments startup, has sold around 500 readers and aims to sell close to 5,000 such devices every month.
The ambitions seem to be on sound ground. India has close to 380 million banking customers and around 120 million smartphone subscribers — a number that is expected to double in a year.
This is expected to dramatically increase the market potential for card readers, which have already caught on in Western economies.
Consider this: US-based online payments service firm PayPal, controlled by online marketplace eBay, boasts of 143 million active accounts in 193 markets and 26 currencies around the world and processes more than 9 million payments every day. It has its own card reader, PayPayl Here.
Sweden-based iZettle’s card readers and apps support both chip cards and magnetic stripe cards that can either plug into the headset or connect wirelessly through Bluetooth to smartphones and tablets.
US-based Square allows individuals and merchants in the US, Canada and Japan to accept offline debit and credit cards on their iOS and Android smartphones.
Consultancy firm EY (formerly Ernst & Young) in its recent report "Mobile Money--the next wave of growth" has pointed out that the trend began in 2000 with the introduction in the Philippines of Smart Money — the world’s rst electronic cash card linked to a mobile phone — by telecom operator Smart and has since "gained traction in a number of emerging markets."
However, the proportion of mobile phone users actively using mobile card readers or apps remains very small in India. There is a long way to go.
EY points out that globally mobile payment users accounted for only 7% of mobile phone subscribers in 2013. "Nevertheless, mobile payment users are set to increase as a proportion of overall mobile users, totalling more than 450 million by 2017," it said.
Companies are also toying with options other than the mobile card reader to offer payment solutions.
India-based PayMate offers a wireless transaction platform and its mobile payment interface allows a user to link her mobile phone to a bank account, credit card or a prepaid accounts, thus turning it into a secure payment tool.
"Plastic is so old," said Ajay Adiseshann, founder and CEO of PayMate. The company has launched PayPOS, an app that enables businesses to accept and process electronic transactions (through cards) directly on their mobile phones at the points of sale (PoS). Adiseshann said his company has tied up with several banks including Dena Bank, Syndicate Bank and Indian Bank.
The companies claim that they use end-to-end encryption and an encrypted card reader that helps protect all cardholder information.
So, we may well be looking at a world where point-of-sale machines that expand the reach of cards may give way to one where a virtual card or an app does the job.