By Vedant Trivedi & Rupesh
T5E’s Made in Insti series continues with this article on Zup (previously known as Paymint), featuring an interview with Rajat Yadav (BTech/CE/2016), one of the founders and CEO of ‘Zup’. He along with his friend Shubham (co founder) launched their payments portal for vendors in IIT Madras campus in January 2016 before expanding to other colleges and IT parks and finally shifting to T-Hub, Hyderabad. We interview Rajat to know more about their product and future expansion plans while competing in a crowded Fin-Tech area. Rajat ends this interview with a very candid advise to all students dabbling with their startup idea.
What is Zup’s vision? How does it differentiate itself in such a crowded space?
We started with a vision to make society cashless. While we were still in college, we saw that there were problems pertaining change and cash, so we thought of starting a mobile payment system and implement it in colleges, closed communities and IT parks. Then as we grew, we realized that in order to capture margins, we must aim to expand to bigger societies. We are also looking to diversify by dabbling with the microfinance industry and retail industry by developing customized products for these niche partners.
Yes, the payment space is bustling in India. Mobile payment has been developing in India for a long time since PAYTM entered. Considering only mobile payments, there are more than 40 companies which are working in these areas. Mobile payments aren’t getting saturated, because India is a huge market and even with PAYTM and 40 other companies only 4% of the Indian retail is being covered right now.
Payment startups toying with microfinance.. What is the motivation?
Predominantly, India has a working class population in an unorganized sector who do not have access to bank loans. There are some microfinance companies which lend them small amounts on a low interest rate which they can easily pay on a monthly basis. Right now, all these transactions are being dealt with in cash. Physical agents are tasked to perform collections and hence face a constant fear of theft attacks. This sector is huge but largely unorganized. We are trying to remove this unorganized collection methodology by leveraging technology.
We are building payment platforms for businesses like FMCG & Microfinance Companies where they can collect payments from their stakeholders. We are the first company in India which provides customizable payment products depending on the individual business needs. Until now, such businesses had to go to big technology consultants like TCS, Infosys, etc, which would usually take about a year and huge costs to develop the product. We are revolutionizing this space by giving them a delivery cycle of just a few days, thus optimizing the industry cycle by more than 50x.
Our aim for the next year is to become the first profitable digital payment company in India and to bring our product delivery cycle to less than 24 hours.
Walk me through the creation and rise of Zup.
Shubham and I started working on this idea in July 2015 with an aim to solve cash collection problems in closed communities, as no one was even trying to cater to this market.
We worked on this idea for 2 to 3 months to check its feasibility. We conducted some surveys to fine tune our product features and started contacting people from the start-up space.
We got in touch with Kaushik, who was a school friend of Shubham’s, and he joined us as the Tech Lead of Zup. Product development took multiple iterations from October to January, but as soon as it was ready, we launched it in the campus and pushed the pedals on marketing.
First, our base of application was very less, students didn’t like it. Two OTPs used to come, you had to stand in a queue, it wasn’t solving the purpose of going cashless. It wasn’t fast and convenient. After a lot of iterations over 3 months, you can now see the final face of our application, Zup.
How many closed communities has it expanded to? How have you designed your team structure to achieve your goals?
Within a span of two months we were present in 12 colleges throughout India and in 2 IT parks and 2 residential colonies. In the next span of 3 months we are planning to launch in at least 30 more new colleges, 30 residential colonies and 5 more IT parks.
We have a team of 15 people right now, half of them belong to the business development, say sales marketing and so. You can make a very great app but unless people are buying it, it’s of no use. We put a very strong emphasis on sales and a major part of our monthly costs go towards our sales part.
What didn’t work for you? What set you back and what were the challenges that you faced?
We were actually in a great deadlock as we knew our idea is not profitable in the long run due to low margins on mobile payments.
We couldn’t compete with the bigger competition as they are doing transaction business in the frontend but their real cash cows were behind the screen. We didn’t know about this and naively thought that since it is a crowded space, we can also do the same. But after doing some research we realized that it cannot be profitable for at least another decade even with very optimistic expectations.
That’s when we started to think about how do we not revert but add something that complements our current product. As I said about microfinance, in the short span of time people might think that we are completely going into a new vertical, but we got into it only after a thorough deliberation.
We have a huge set of data from the students about their transaction patterns. In a couple of years, we plan to leverage our experience in lending and college transactions to enter the student credit market.
Say a student needs money during the middle of his semester for untoward emergency, then we can help him avail those loans through the microfinance industries.
What helped you realize that microfinance was the missing element in the puzzle?
We consulted a lot of people with years of experience in different industries – payments, retail, banking etc..And that worked out well for us. Startups usually get only a couple of investors in the first rounds, but we had around 10 investors from the start. All these 10 investors were from different fields and different sectors which helped us a lot.
What are some of the memorable moments and milestones your team has achieved ?
The first memorable moment for any app team is hitting the 10,000 user mark. I remember when we reached that within 1 and a half months of our launch. Another major thing that we boast of is that our total annual transactions are close to 1 Crore Rupees from the 12 colleges we have on board.
Another milestone we are chasing eagerly is managing transactions in the transportation industry. We are already in talks with the Telangana government and we are creating a seamless platform which can be used by students who use busses and metros. They will not even have to take their smartphones out, it automatically detects your boarding and dropping locations and bills you from the Zup application.
People still have inhibitions in using online platforms for payments.
For centuries, we have kept cash in our pockets and lockers. It’s naturally difficult for us to trust a system which has all our sweat and blood stored in a digital world with someone else (banks) having an access to it. We are more comfortable keeping it with ourselves rather than in a system which we fear getting hacked. I won’t say that all systems are secure but I would say the system of security is constantly being upgraded. Security breaches still come in, in fact, we have lost huge amounts due to security breaches. We cannot say that we won’t have any security issues at all. It’s just that we need to keep on improving. India is one of the best countries in regards to financial securities. Plus the Indian government is doing great things right now. They have taken lot of steps to curb the security threats of e-wallets. So government bringing UPI (Unified Payment Interface) is a great thing.
Will UPI compete with Zup?
No, UPI will be in competition to mobile wallets but will actually complement Zup.
The first thing is that we are not a mobile wallet company like PayTM. We do not have wallets of our own and we take the service of 3rd party wallet companies. Instead of loading money into your wallet you can directly debit it from your account in the same period of time.
The good thing was that we didn’t venture into mobile wallets, though it was the easier thing to do. Why it was good? Because UPI is displacing all these wallets. We are actually implementing UPI in our app and are among the first batch of companies to do so.
I will also give credit to the government for implementing Aadhar card system so nicely. They have done something which even most developed countries of the world are not capable of. Capturing biometric information of a billion people is no mean feat. Our fingerprints and retina scans can be used for transactions in the near future if the government is proactive towards making India a less-cash society. It may sound pretty farfetched , but it’s surprising to note that it’s already been started. Information Technology Secretary Aruna Sundararajan said that the department is providing an incentive of Rs 100 for every merchant enrolled through over 2 lakh common service centres across India. Just imagine going to shop without your mobile wallet. No passwords would be required and the amount will be deducted from your bank balance directly. We are actually bypassing plastic money.
You have been hiring recently. What is the team structure like? What is that you’re looking for in an ideal candidate?
We actually did our first hiring before we even got our funding. We hired an Android developer using our parent’s money. We have a team of 12 people consisting of Pavan the android developer, another iOS developer and the sales team. We are just looking for infectious zeal in any potential recruit. We are going out of our way to hire people who believe in idea in the long run and who believe that they are going to be benefactors of this association with Zup.
What was the impact of demonetization on the digital payments market and how did it affect your product?
Demonetization has created a huge positive impact on the entire digital payments market. First, it created a much needed push for all those people who were not on the system due to lack of faith. Second, it opened up a lot of previously unknown business avenues which were not expected to shift towards digital payments.
Talking about Zup, our transaction and user metrics have increased by more than 200% in just a month. It also helped us to redefine and refine our business model which now focuses more on the B2B sector.
What would you like to tell the readers about your journey?
Entrepreneurship is exciting, but risky at the same time. You must have your family’s support as they rise up to reduce the stress financially and morally a lot of times. Your seed fund always comes from the family.
I would also like to tell that you need to focus on just one thing, your product. You can’t simultaneously prepare for your placements and work on your start-up part time for a resume point. Nothing will work and you might end up screwing up both. Tens of people write start-up related activities on their resume and the companies see right through all that. None of my team-mates sat for placements. We actually had PPOs to decline.
It is going to be difficult when you have to put in your own money not knowing if it’ll ever come back. People think that everything is easy when they have funding, but with funding your hardships actually increase. Till the time you don’t have funds, you are working on your own, but as soon as you receive funds there’s a lot of stress that comes along with it. There’s a particular time frame and particular funds that you need to utilize efficiently. You can’t be in your own free world anymore so funding brings in more hardships.
Initially, I and Shubham both put 2 and a half lakhs each in our startup. I would say that even if you get an avenue of getting money from Nirmaan or Incubation cell, I would prefer you put in some money from your pockets. It’ll increase your focus because your money is on the line now. At the end these small amounts do not make a difference. I would say that being least dependent on others when you’re starting is a great strategy as that will slow you down, your success or failure, both. If you’re moving towards success, it’ll slow you down and if you’re moving towards failure, it’ll slow that down. Instead of failing in two days you’ll fail in two months. It’s better to fail in two days and keep moving forward.
