India’s Prizm Payments On Track To Hit $50B In Transactions, Plans Square-Style Service For Feature Phones

One of the more innovative moves in mobile commerce has been the rise of services like Square, PayPal’s Here, iZettle, Payleven, and mPowa, which are based around using a dongle to turn a smartphone into a payment processor. Now Prizm Payments, an India-based payments company, is eyeing up how to bring that concept to its home market’s 670 million+ mobile subscribers, by offering a similar service that will work not just with smartphones, but with the feature phones as well.

A limited rollout of its service, covering about 200 merchants, is expected to begin this month, with a wider-scale deployment coming down the road. The move comes at the same time that Prizm, which counts Sequoia Capital India as one of its main investors (others include Axis Bank and Silicon Valley Bank), has hit other milestones that point to a rising use of non-cash payments in the country: Prizm is on track to process $50 billion in transactions this year, up from $35 billion last year; and it now has 30,000 point of sale processing devices and 10,000 ATMs in the country.

And Prizm is also gearing up for a new round of funding that sources say could raise between $100 million and $200 million to help fund new payment innovations like mobile payments, as well as a bigger drive into e-commerce and international expansion. The Indian telecoms giant Tata Communications is among those that have been reported to be interested in making a strategic investment, although TC understands these reports are unfounded.

As with Square, Prizm’s dongle-based payment service would be targeted at those merchants that either currently lack the facilities to accept card-based payments already, or want added functionality to accept them on the go, such as in the case of deliveries, says Loney Antony, one of Prizm’s co-founders and managing director of the company.

Prizm has not yet spelled out many details about the service, although it’s already listed as a partner for one dongle provider in the country, mswipe. Antony says the move to offer mobile payment services is part of a bigger strategy to target mobile with other with other financial services like money transfers and bill payments — effectively a move to transform people’s phones into additional ATM terminals.

The decision to focus on feature rather than smartphones is down to the bare facts of the mobile economy in India, Antony says. Indeed, although Google has made some headway with Android in the country, people are still mainly using feature phones in India. In the first quarter of this year, smartphones only made up just over five percent of handsets sold in the country. Samsung accounted for about 40 percent of those, with Nokia at about 26 percent, according to CyberMedia Research.

“We are focused on moving away from smartphones and more on something that the majority of people can use,” Antony says of the emphasis on payment services that work with feature devices. “Any mobile payment service [in India] would have to work on a feature phone if we want it to become popular.”

India is, after China, the second-biggest mobile market in the world, and it’s growing fast, with some 6.5 million subscribers joining the ranks of mobile users in India in the month of April alone, with around 80 percent of them on prepaid services.

But approaching something like mobile payments will come in gradual steps. One of the bigger issues is that the market is still largely dominated by cash, with card payments still relatively nascent. Antony estimates that right now there are about 280 million debit cards in circulation in the country, with an additional 18 million credit cards on top of that. But with a total population of over 1 billion, “We have a long way to go,” he says.

Signs are pointing in the right direction, though. Antony says that currently the number of cards in the market is growing at a rate of 26 percent, with 50 million cards getting added last year. The fact that people are using them more for purchases, bill payments and other services is also having a knock-on effect to people getting more used to making other non-cash transactions around e-commerce. E-commerce, Antony notes, is a market that is currently generating around $10 billion in revenue annually in India and is growing at a rate of about 35 percent annually.

Outside of India, Antony says the plan is to extend its payments platform into Southeast Asia and Africa, specifically markets that have yet to see a lot of development in card-based payments and therefore don’t have any established leaders in the field yet, he says.