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Despite teething troubles, POS devices power through. What’s next?

Digital payment is trending up in India with the Centre promoting UPI-enabled BHIM (Bharat Interface for Money) app and tech giants such as Google, Amazon and WhatsApp buying in.

Jan 15, 2019 by Moulishree Srivastava
Despite teething troubles, POS devices power through. What’s next?

On 9 November, 2016 Byas Nambisan was lining up the putt at the golf course in Bangalore when he was interrupted by a flurry of phone calls. On the other end of the phone, at every instance, was a banker. Needless to say, Nambisan spent the day after the historic demonetisation on his phone.

“The industry was going crazy. Everybody wanted to know whether they can get a million point of sale (POS) devices over the next few months,” said Nambisan, CEO of Ezetap. He took over the mantle in November 2018 after the founder CEO Abhijit Bose left for WhatsApp to head its India division.

“I told them there was no way to do that,” Nambisan, who was Ezetap’s CFO then, recalled. “Nobody in India had that sort of capability.”

In the days followed, state-run Energy Efficiency Services Ltd. (EESL) alone issued a tender for a million POS machines while banks placed orders for the same in the range of 100,000-200,000.

Fast forward to 2019 and the digital payment is trending up in India with the Centre promoting UPI-enabled BHIM (Bharat Interface for Money) app and tech giants such as Google, Amazon and WhatsApp buying in. A 2018 Credit Suisse report projected digital payments to grow into USD 1 trillion market by 2023 on the back of mobile payments.

Many experts believe POS device terminals will go out-of-date sooner than later with the rise of mobile payments in the country. However, Indian offline payment services providers like Ezetap, Mswipe, and Pine Labs are in no mood to back out. Reliance Jio has also forayed into POS market and is currently piloting in six cities, Economic Times reported last week. The entry of Reliance speaks volumes about the high-octane potential of the POS device industry.

Feeding frenzy

Almost a month after the demonetisation, EESL called for bids to procure 1 million POS devices (which included 700,000 mobile POS and 300,000 fixed POS machines). The same week, the government asked banks to install an additional 1 million point of sale terminals by March 31, 2017.

“At that time, finance ministry required every company to provide supply update to them two to three times a week,” said Nambisan.

“Government had aggressive forecasts of a million units in three to six months. We partnered with PAX and bought around 50,000 mPOS devices from them—every existing device the company had available in India."

“We were the only company who bid for the ESSL’s million unit RFP ( Request for proposal),” he added.

Meanwhile, banks were pushing hard to drive down the prices of the devices. A mobile POS cost Rs 2,800-3,500, while fixed ones cost Rs 8,000-12,000 at the time.

“We did not drop our prices because we were not convinced the demand was real,” said Nambisan, adding some players dropped prices to 10-20% to win banks’ businesses.

Excess baggage

In the first quarter of 2017, 1.25 million Point of Sale (POS) terminals cropped up taking the total tally to 2.77 million at the end of March 2017.

“It compressed three or four quarters of sales or sign ups into a single quarter,” said Manish Patel, founder and CEO of Mswipe.

The ESSL was at cross purposes with the industry, as the latter kept pushing hard to dial up prices to recover the investments, while the state-run agency did the exact opposite. As a result, the ESSL’s million devices deal never came through. A media report said the demand for devices tapered soon after.

“During the bullishness of demonetisation, banks bought a lot of devices,” said Nambisan. “In 2017, there was a correction as the market was flooded with devices. At least one manufacturer had to buy back devices from banks.”

“We got hit because banks had bought cheaper devices from other players. When we would bring customers to the bank, they would try to convert that customer over to our competitors because they had excess inventory from our competitors,” he said.

To cut a long story short, the optimism in the first half of 2017 gave way to a pall of gloom in the second.

"It cost us a year," Nambisan said. “Our revenues at the start of the year and the end were roughly flat.”

Mswipe saw its growth plateau in the second quarter of 2017, post which, Patel claimed, the bottom line improved.

As excess devices with the banks got absorbed in the market, the demand for POS terminals went up. While Mswipe boasted a 50% year-on-year growth, Ezetap numbers doubled in 2018.

The beginnings

Patel was running a liquor business in 2008 when he tried to get a POS terminal for his retail shop.

“I had banked with Union Bank all along. I was shocked when I came to know the bank didn’t provide POS terminals,” Patel recalled.

“Four large banks accounted for 90% of the acquiring business in India. If you wanted a POS terminal, you needed to have an account with them. If not, you were on your own. Hence we set out to offer bank-agnostic acquiring service for merchants,” he said.

In 2011, Patel founded Mswipe. “When we launched our first POS device, there were no chip cards in the country. The mandate was the magnetic stripe and the signature.”

In the same year, Abhijit Bose, Bala Parthasarathy, Sanjay Swami and Bhaktha Keshavachar set up Ezetap. The company started its life as an offline omni-channel - device-agnostic payment solutions provider catering to enterprises in e-commerce, insurance and the government.

When RBI asked the banks to switch to EMV chip and pin cards in 2013, both Ezetap and Mswipe had to go back to the drawing board to make their POS terminals fit for purpose.

While Mswipe came out with mobile POS solution beginning with the Wisepad series, Ezetap rolled out its chip and pin device at USD 50 when everyone else was selling POS devices at USD 70 and more.

“We are one of the handful of companies in the world to build our own devices. And by doing that, we were able to price it very aggressively at less than USD 50 and disrupted the industry. When we started, even the Chinese mPOS devices were in USD 70-80 range,” said Nambisan.

“The Chinese makers were forced to drop price. Once we brought the market to the right price point, we began to buy devices from other manufacturers,” he added. “Because in reality, you cannot compete with Chinese manufacturers on scale. They build 5-8 million units a year compared to our 100,000-200,000 units.”

Lay of the land

Ezetap currently has 230,000 POS devices with more than 300 partner enterprises across the country, of which 50% are from third-party manufacturers. Mswipe, on the other hand, focuses on small retailers. The firm is working with 385,000 merchants and has deployed around 400,000 POS terminals till date.

The payment devices industry expects the demand for POS machines to grow over the next few years. At present, India has about 3.4 million POS terminals as opposed to about 20 million and 22 million in China and the US respectively. However, the industry has its task cut out.

“Payment devices will go extinct soon. People will call it NFC technology or wearable technology, or just pure UPI payments. Wallets are already using QR codes (to transact). It may end up as an inter-operable single QR code for all your payment needs,” said Ashish Taneja, Managing Director, GrowX Ventures. “BHIM layer has offered another dimension by taking everything out of equation.”

“When software can transact, why would you have a middleware? This device business, the physical card business will move out. And it is going to be in smartphones and wearable, which already come with integrated payment capabilities.”

Vicky Bindra, CEO, Pine Labs, a leading cloud-based POS solutions provider that works with global POS manufacturers including Ingenico and Verifone, thinks POS devices are here to stay but might shift shape.

“The trend toward going digital is clear. Cards can be digital too, they don't need to be physical. For smaller merchants, everything would be done through an app on the phone, probably in next 3 to 5 years,” said Bindra.

“Bigger merchants already have POS devices for billing. That's not going to go away. If you are a cashier, you have to be at the point of sale terminal to do the billing. It is much easier to integrate payment right at that point on that platform rather than not do it."

“Large merchants are not going to accept digital while billing is physical. They can't manage both,” he added.

Challenge accepted

The offline payment services companies including Pine Labs, Ezetap and Mswipe have seen this coming.

“They are, to some extent, at the forefront of innovation and making sure all the ways of doing a transaction are included in their offerings,” GrowX Ventures’ Taneja said. “The size and prices of devices are getting smaller. But the capabilities are increasing. They are more flexible, more secure, and can take all forms of payment."

“Some of these guys will move into new areas such as lending products," he added.

Bindra said the companies should invest heavily in R&D to give the devices a digital edge rather than focusing on selling them at lower prices. “I feel less focus and less effort is being put on that,” he added.

Pine Labs (works with 330,000 merchants at present and facilitates USD 16 billion worth of transactions annually) plans to up its merchant network to 400,000 and revenue by 35-50% this year. Ezetap, with USD 2 billion in gross transaction value a year, is bullish on its end-to-end offline payment platform and expects overseas operations to account for 30% of its total revenue by the end of the fiscal.

Mswipe, on its part, has rolled out Android-based smart POS devices a year and a half ago, with a view to change the way the small merchants conduct business.

“We have been working on this over last few years, and we are now starting to see results,” said Patel. “We expect our current retailer network and gross transaction value to grow by 40-50%.”

The company does transactions worth USD 198 million per month.

“The survival will depend on whether you can evolve yourself with BHIM, NPCI and all new forms of payments. Because cheaper devices will go up to a point and market will leapfrog to the mobile payment apps,” said Bindra.

Moulishree Srivastava

Moulishree Srivastava is a Bangalore-based tech journalist. She focuses on emerging Indian startups and unicorns. She can be reached at

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