May 10

COVID19 – Could this be the inflection point for Digital Payments?

We were preparing for our first board meeting with our new shareholders on May 1.  A couple of days before that, on April 22 the World Bank released its scathing report – World Bank Predicts Sharpest Decline of Remittances in Recent History. And being the conscientious, responsible management that we were, we didn’t want to blow the first year with the shareholders. Surely, if the World Bank thought remittances were going to drop 20%, the IFC would believe the same. We decided to reforecast the budget. We dropped our expected revenues, after careful analysis of corridors and partners, and arrived at a magic number of 26.3%. And being the conscientious, responsible management that we were, we decided to relook at opex and adjusted that to reflect an optimised cost structure.

What didn’t help was that one of our largest partners, Xpress Money, had its parent company Finablr recently go through its woes and had stopped services. We have a mix of online based partners and offline partners. Offline partners were suffering but online partners seem to be doing well.

Man Texting while Walking on Sidewalk

Man Texting while Walking on Sidewalk. Photo by Kate Trifo from Pexels

We get our daily MIS at 0130 hrs GMT, which thankfully, isn’t an ungodly hour for me, since it’s 0700 hrs for me in India.  Thanks to Prabakaran, our new Director of Revenue Assurance, we’re now getting more detailed reports and analysis.  So, the first thing I do on my bright Covid mornings is now wake up to look at his reports.  Revenues were looking good. Transfers were increasing. A few of my partners were not doing too well, but some of them seemed to be making up for the losses of the others. The trends were obvious. GCC in general and the UAE in particular were down. Europe and North America as senders were doing quite well. I tried to dismiss it. March was a bad month for us,  so the increase was expected. But around the 22nd, right after the World Bank report, I started seeing the increase.  We were in fact beating the numbers from January and February. Looked like we were going to have the best month yet.

May 1. We woke up early to update the presentation with the April numbers.  Huh? The month was extremely good, the best yet.  But the World Bank said ….

Anyway, I thought we were well prepared for the Board meeting. So, with extreme confidence I stepped up to the plate for the board meeting. We went through the regular procedures and Q1 update. Then updated them on April performance. I paused, they applauded, and I was convinced I was now going to hit my home run. The next section was about the reforecast.  I had prepped them well to believe in us as being conscientious, responsible management. 

“Board members,  this Covid situation is going to get worse. Migrants are being sent home, and we don’t know when they will return. Construction, travel & services industries have shut down. Most migrant workers serve this market, and most of them have gone home or been asked to stay home. Remittances will go down, we need to reforecast the numbers, and would like to present to you a new budget, with the reforecasted numbers. Revenues will be down, and being the conscientious, responsible management that we are, we don’t want to mislead you. I know you just invested a month ago, but this is a Force Majeure condition. And being the conscientious, responsible management that we are, we have also looked at reducing costs. In fact the World Bank….”

I was cut short by our IFC Director.  And that’s what I wanted. Of course being from IFC, he couldn’t possibly not believe the World Bank data. “Ambar, I know you are a conscientious and responsible management team, but you’ve just had your best month yet. We’ve invested in a few other companies, and they’re all reporting their best numbers to date. How can you reduce your projections, when even you’ve done better than ever before?”

I gasped. It wasn’t a home run. I was down for the count. That’s when it struck me – here I am forecasting a reduction in revenues, when in fact we’ve done better than before. If we go on at this rate, I’m going to make that year end bonus and kicker.

Took us a day to recover from that hit. And being a conscientious and responsible management team, we accepted it, and decided to go on with it. I sulked over the weekend, and did my reviews. Woke up early on my Covid Sunday morning to review the MIS. It hit me again. It’s the digital guys. Digital is taking over, definitively. My digital partners are seeing huge growth. And their growth is far more than the loss from the others, including my friends at Xpress Money. 

Backtrack a few days.  I am in a press release review and one of my partners says that they are seeing increased digital usage. They’ve invested in a bill processing unit, and they’re seeing new customers. Baby boomers are now ordering on Amazon, and 18 year olds are now subscribing to Netflix.

It now dawned on me. This is the inflection point for digital. All partners always talked about ‘moving digital’. But this will now hasten their conversion. Crises drive behaviour change.

This is the same as demonetisation in India, which gave rise to the prominence of digital wallets in India and the arrival of our Chinese investor friends to our playground. I also discussed with my wife and noted, “we haven’t been to the ATM in 6 weeks.”  We’ve finally gone digital.

This is it.  The world will never be the same. The new normal is now digital.  Just like we ‘Work from Home,’ we will start to ‘Pay from Home.’ Adoption will increase, and a few will fall off, and there will doubtless be some form of consolidation. But we’ve arrived with a business model validated by this unprecedented crisis, and being the conscientious, responsible management that we are, we now need to re-reforecast for the New Normal.