Paving the way to a Cash-Lite JaipurImplementation Roadmap

7th April 2017

Agenda

Implementation Approach

Lab Projects & TimelinesData Utility

Other Work-streams

Program Scope

Catalyst strives to facilitate the adoption and sustained use of digital payment solutions by over 25 million small merchants and over 100 million lower income customers in India over the next three years.

Partnership with Government of Rajasthan - A Strategic Engagement

Setup of Urban Digital Payment Lab – “Jaipur City”

Scaling Digital Payments Across Rajasthan Cities

www.cashlesscatalyst.org

Set-up of Rural Digital Payment Lab - TBD

Implementation Approach

Jaipur Lab - Cluster Centric Approach to Learn before Scaling§ Experiment in a “Cluster” before Jaipur-wide scaling in 2018

§ Digitization of various payment use cases across consumers, merchants, suppliers§ Test interventions to drive behaviour shift through literacy, handholding, incentives§ Identify context appropriate solutions by testing pricing strategies, business models and

innovative solutions§ Test credit as a hook for adopting digital payments§ Develop models and platforms to scale

§ City-wide Initiatives§ Public transit fare digitisation§ Digitisation of federated networks (eMitra, Dairy)§ Research and Policy initiatives

Jaipur Lab Road-map

April 2017 July 2017 Oct 2017 Jan 2018 April 2018 July 2018 Oct 2018 Jan 2019

Mid-Income Cluster (Barkat Nagar)

City Level Engagement (Dairy/Emitra, Mass Activation, Transit, Policy, Research)

Low-Income Cluster (Shastri Nagar)

Jaipur City-wide scalingDevelop

National level template

Adoption & Usage monitoring

Rural lab Planning

Adoption & Usage monitoring

Target Metrics for Barkat Nagar Cluster

§ Population: 30,000 approx. (~6000 households)§ Shops: ~ 1500; Predominant shops/merchant categories: Books, Apparels, household goods§ Student dominated with ~ 20+ schools & coaching institutes§ e-Mitra centres: ~27

1 Merchant perform 60+ transactions in a month2 5+ merchant transactions in a month by consumer using an interoperable solution

Merc

hant Target July 2017 Target Oct 2017

Adoption 40% penetration of interoperable solutions 50% penetration of interoperable solutions

Active Usage1 30% of on-boarded merchants Active 50% of on-boarded merchants Active

Cons

umer Target Sept 2017 Target Mar 2018

Adoption 20% of consumers adopt UPI solution 30% of consumers adopt UPI solution

Active Usage2 § 15% of consumers are Active§ 25% payments at e-Mitra kiosks are digital

§ 25% of consumers are Active§ 40% payments at e-Mitra kiosks are digital

Partner Engagement & Ask What GoR & Catalyst shall jointly bring to the table:§ Plans to on-board 1Lakh+ merchants on digital payments in 2017-18§ Existing distribution networks (52,000+ E-mitras)§ 150+ strong partnership network of private, public sector and

knowledge partners§ Aggregation platform of “anchor partners” to operationalise the digital

payments labs§ Fund targeted towards bridging viability gaps, resolving market failures

and piloting new risky innovations

Value Proposition for Partners Partner Asks

§ Partnership with a flagship Governmentbranded initiative

§ Lower acquisition through shared platforms

§ Access to E-mitra distribution network § Leading insights from

experiments/research on-the-ground§ Access to scalable models from the Lab

that can be applied in other geos

§ Strategic involvement in Project Delivery & Engagement

§ “Most favored” incentives & innovativepricing

§ Transparency on end-user financial terms and customer protection safeguards

§ Transaction data sharing for research & monitoring

§ Collaboration on new shared valuepropositions (digital lending platform)

Lab Projects & Timelines

Objective Activities Partners Involved Value Proposition for Partners

§ Drive digital payment adoption and usage by small merchants across categories, their consumers and suppliers

§ Merchant Adoption through camp and leadgeneration

§ Literacy (benefits, solution comparison)§ Consumer & merchant handholding§ Merchant as digitization agent model§ Supply Chain digitization pilot

Anchor PartnersPayment solutions (B2B and B2C)Banks, Payment BanksDigital lendersPayment networks

StakeholdersMarket associationsLocal political repsLocal distributorsEmitraPolicy partners

ü Evaluate scalability of consolidated lead generation model

ü Co-develop and learn effective behaviour shift mechanisms acrossmerchants and their customers

ü Validate new solutions and business models

ü Understand of B2B payment solution needs of local distributors

ü Develop coupled digital payments plus credit model to drive small merchant digital payment acceptance

§ Conduct pilots to identify effective behaviour shift mechanisms and relevant solutions

§ Test Pricing models§ Test merchant incentives§ USSD based solution§ Self service IVRS for lead gen§ Low touch merchant on-boarding process

§ Validate credit as digital payment hook

§ Credit provision through BHIM App§ Digital lender marketplace with GoR

Partner Support required: 1. Payment acceptance solutions with low or zero entry cost for triability and appetite to test alternative monetization strategies2. Digital Lenders with products suitable to small merchant categories (e.g., starter credit, credit based on payments data, competitive interest rates)3. Sponsoring rewards program for merchants & consumers through network players & banks4. Participation and co-investment in pilots5. Customer protection safeguards including pricing/feature transparency & quick resolution of complaint escalations6. Easy on-boarding support by Banks (e.g., linking mobile numbers to bank accounts, debit card activation)

1. Small Merchant Eco-system Activation: April to Sep 2017 (for Cluster 1)Cluster

Market Cluster Camp: OverviewHighlights§ Camp’s co-branding with GoR added weightage to interest, trust and participation§ Solution feature & pricing comparison was instrumental in generating specific leads § Support from Local Market Association drove participation & responsiveness amongst merchants§ Shared lead generation activity resulted in lower cost of acquisition

Solution Partners’ Participation

NBFCs’

Camp Format Consolidated Lead Generation

(Catalyst)

3-day market campaign (Partner kiosks & Chai-chowkis)

Leads follow-up & conversions(Solution Partners)

Capture Insights & Learnings from the campaign (Catalyst)

Level 01

Level 02

Level 03

Level 04

Next round of activation activitiesLevel 05

Market Cluster Camp: Insights

BHIM Conversions :§ Generated a footfall of 87 (consumers & individuals)§ 28 (32%) registrations & activations complete § 20 (22%) failed / incomplete registrations, largely due to incorrect/incomplete linkage between mobile number & bank account

Willing to explore other payment solutions

Solution- specific leads

Credit-seekers basis digital payment

solution15% already digitally enabled on

interoperable solutions

Leads to Conversion Funnel

Generic leads

Target shops for Lead gen

422394

(93%)

156(39%)

238(61%)

2

32(10%)

72(18%)

Successful Conversions

Leads In progress

Credit was also being offered on standalone

basis

Conversion rates of 10-28% for a low-to-mid-income market vs. 10-

20% benchmarks for premium market

Cluster Camp: Learnings§ Zero upfront costs was a stark decision-making factor for merchant

adoption§ Merchants keenness towards UPI solution - attributed to easy on-

boarding, instant activation and no on-boarding/ transaction cost§ Longevity of engagement i.e. lead generation to on-boarding is >3

days§ Credit & Value-added services as a hook for digital payment proved

non-conclusive, the experiment was not set up to measure this effectively

§ Trust through local merchant association support & govt.-stamped brand plays a key role in solution adoption

Next Steps§ Test for sustained usage among adopters§ Follow-on activity for next wave adopters§ Enable consumers at merchant Point of Sale§ Test credit only contingent on payments§ Engage with Suppliers & Distributors

Objective Activities Partners Involved Value Proposition for Partners

§ Pilot digitization of C2B and B2B payments at booths to instil digital payment behavior in the consumer

§ Assess impact of credit availability to booth owner

§ Strong justification for diary to digitize payments across dairy network

§ Scope: Digitization of cluster booths as well as 5 dairy brand parloursoutside cluster

§ Enable digital payment acceptance at retail points (UPI/cards)

§ Merchant and consumer incentive design, handholding

§ Booth to distributor payment digitisation and distributorcollections solution roll out

§ Business case development for network level scaling with Dairy Board

Anchor PartnersBanksPayment solutionsPayment networksDigital lendersDigital order management solutions

StakeholdersDairy BoardDistributorsBooth entrepreneurs

ü Understand the impact of frequent payment use-case and incentives on consumer activation & behaviour shift

ü Business opportunity to Jaipur districtwide digitize dairy network

Partner Support required: 1. Digitize and co-invest in C2B and B2B digitization pilot in cluster for six months (initial, monthly and MDR)2. Design specific digital payment collection solutions for “master merchants” (linked to invoicing-payments-accounting-reconciliation flows)3. Design and investment into merchant and consumer incentives

2. Digitisation of Dairy Booths: April to Sep 2017

Paras Diary in Jaipur: § Transaction value: Rs 100+ cr per month§ 4000 outlets & 60 distributors

Cluster/ City

Objective Activities Partners Involved Value Proposition for Partners

§ Pilot digitization of consumer payments at centres in cluster to instildigital payment behaviour in the consumer

§ Digital payment adoption at all eMitracentre in Jaipur without MDR being charged to consumer

§ Cost of cash analysis (baseline)§ Enable digital payment

acceptance (MDR absorption for 6 months)

§ Integration of digital payment targets in GoR incentive structure

§ Consumer and merchant handholding

§ Business case articulation for City / State wide adoption

Anchor PartnersBanks Solution providersDigital lendersPayment networks

StakeholdersGoRLocal Service ProvidersE-mitra Entrepreneurs

ü Understand the impact of frequent payment use-case on consumer activation & behaviour shift

ü Opportunity to digitize eMitra centrepayments across Jaipur and Rajasthan wide network

ü Validation of new partnership model to lower acquisition cost

§ Pilot eMitra as touchpoint for broader ecosystem enablement

§ Assess possibility of leveraging centres for lead generation, eKYC, merchant onboarding or lending support

Partner Support required: 1. Engagement with EMitra to test on ground activities on a commission basis2. Incentives for Emitra channeled payments3. Test Emitra as a touchpoint / assisted interface for deploying low-cost digital solutions

3. Digitising e-Mitra Centres: April to Sep 2017e-Mitra kiosks in Jaipur: § Total 3000+ centres (52,000+ across Rajasthan)§ Total Footfall: ~9Lac per month, Transaction value: Rs 110+ cr per month (98% of txs in cash)

Cluster/City

Objective Activities Partners Involved Value Proposition for Partners

§ Consumer enablement & behaviourshift through citizen action program targeting youth ambassadors

§ Engaging banks to develop simplified process for activating card and linking mobile to bank account(core focus on UPI & debit card)

§ Validation of the scaling model for mass activation across the city

§ Initial scope: ~6000 households in the cluster, 20+ schools & coaching centers, City wide scaling in 2-3 months

§ “Each one, teach many” initiative focused on youth – messaging and communications program, local gamification with incentives, and channel partnerships (Banks, media, coaching centers, universities, schools, etc.)

§ Bank Driven Campaign

Anchor PartnersMajor BanksB2C solution providersPayment networks

Local StakeholdersUniversities, Colleges, Schools, Coaching InstitutesEducation BoardMin. of HRD (GoI)MFIs, NGOs

ü Validate impact of scalable “youthambassador” initiative on influencing consumer and micro merchant behavior

ü Co-branding of high visibility, innovative initiative

ü Mass deployment of card and UPI solutions across major city segment

ü Understand differential impact of hard & soft incentives, and peer to peer referral networks

Partner Support required: 1. Co-invest, co-brand and design incentives/rewards for “Each one, teach many” initiative2. Active participation from local banks to support and drive customer adoption, on-boarding & on-going trust

4. Mass Consumer Activation: June to Dec 2017

Cluster/City

Objective Activities Partners Involved Value Proposition for Partners

§ Pilot low wage earners income digitization for different segments

§ Target employers, contractors and employees with win-win-win value proposition

§ Scope: Focus on formal segments first. Includes export parks outside cluster for small enterprises, Government controlled artisanal value chains (e.g., Khadi)

§ Digitization of employees / contractors working in micro and small enterprises

§ Digitization of payments to artisans and home based businesses

§ Digitization of payments from households to vendors and individual service providers

Anchor PartnersMicroSave (knowledge partner)Banks, Payment BanksWage digitization solution providers

Local StakeholdersRIICODept. Labour and IndustryDept. of MSMETax authoritiesLocal NGOs

ü Develop understanding of solution needs and solution fit for low wage earners and their employers

ü Government facilitated businessopportunity for wage digitization

ü Scalable model to increase penetration

Partner Support required:1. Co-investment in baselining current MSME clusters and understanding needs2. Cost-effective solutions that address market needs of different stakeholder segments: MSME/houshold, middlemen/contractor, employee/labourer

5. Income Digitisation: Aug to Dec 2017

Cluster/ City

Objective Activities Partners Involved Value Proposition for Partners

§ Digitize transport payment with open-loop, interoperable solution

§ Stakeholder engagement and transport landscape analysis

§ Evaluation of solution options§ Pilot testing§ Development of RFP § City wide roll out

Anchor PartnersPayCraft (knowledge partner)BanksTransit payment solution providers

Local StakeholdersJaipur Smart City LtdJaipur Municipal CorpJCTSLJMRC

ü Participate in the pilot(s)ü Engage in RFP post alignment on

solution by stakeholders

Partner Support required: 1. Participate in solution evaluation and pilot testing phases

6. Digitising local Transport in Jaipur: Apr 2017 to May 2018

City

Data Utility

Objective § Activities Partners/ Resources Value Proposition

§ Improve financial inclusion especially provision of competitive credit to the underserved segments of the population

• Create a CIBIL for the masses• Channel credit offers and repayment

through PSPs and existing brick and mortar networks (Emitra)

• Ensure end-users have transparent access to their data

§ Catalyst to pilot a neutral 3rd party platform to aggregate and cross-pollinate data from different sources

§ Work with digital lenders, PSPs and GoR to leverage their data to drive competitive credit models for the masses

§ BHIM data, to be made available by NPCI to Catalyst, to be integrated with the above data and made available to the lenders

§ Partnership with eMitra to pilot the assisted model

§ Development of data utility and dashboard

Anchor PartnersGovernment of Rajasthan (DoIT)NPCIiSpirtDigital lendersPSPs

Local StakeholderseMitra Centres

ü Provide the end user with seamlessaccess to credit, along with transparency on their data through a secure, self-serve, cloud-based data platform

ü Leverage data vault to amplify impactof public plus private data and multiple delivery channels to expand reach of proposition

ü Scalable model based on sound business model for lending partners and payment solution providers

Partner Support required: 1. PSP and network contribution of data for pilot 2. Deep collaboration on building logic for 3rd party data utility platform to drive right workflows and sustainable business model

Data Utility Concept

Catalyst partner PSP data

BHIM dataGovt. of Rajasthan data

Catalyst Primary data

Lenders eMitra app/ representative

Makes customer aware of loan offers

Processes as per credit policy

Draws meta data from Utility

Sends loan offers back to Utility

Assisted process flows (e.g., KYC) through eMitra

Public access to Data

Data Utility Preliminary Concept

Catalyst Data

Utility

Customer

Channel loan offers through customer touchpoints

Other Workstreams

Overarching Research EngagementUpcoming Priorities

§ Catalyst Lean Tests (ongoing)§ Needs assessment of street, mobile vendors,

individual service providers & home-based businesses: June to Sept 2017

§ Small Merchant study to gain deep experiential insights on small merchant financial and operational context, and digital transformation journeys: May to Oct 2017

§ City Baseline for Impact Assessment: May to July 2017

§ City End-line for Impact Assessment: Jul to Dec 2018

Policy Engagements

New Payment Regulatory Frameworks Enabling policies for adoption & use Advocate linkages between merchant digital payments & Tax policies

Identify key gaps in current payments regulatory structure

Consumer Protection – efficacy of current provision w.r.t. benchmarks

Mechanisms to make regulator responsive to innovation

Key Partners:NIPFPRBIIFMR Finance Foundation

Create digital literacy including transparency on solution terms for merchant adoption

Test & optimize incentive designs that induce digital payment behaviour

Promote low cost and easy to use payment solutions for the poor like UPI, AadhaarPay

Roundup of policy recommendations from local ecosystem enablement activities and pilots

Key Partners:Niti AayogMeITY

Impact of digital payments on business formalization and taxes

Linking digital payments to GST preparedness

Key Partners:Ministry of FinanceNiti AayogGSTN