HDFC Bank and SAP Concur’s expense management solution will be targeted at 5,000 of the bank’s largest corporate clients in the next three years, says Parag Rao, country head – payments business & marketing, HDFC Bank. The government’s zero-MDR (merchant discount rate) notification will have only a short-term adverse impact on players in the payments acceptance business, says Rao. Excerpts:
What is this new product all about?
Because of the nature of travel, there is a lot of back-end administrative hassle both for the employee when they get back and fill up expense forms, and for the company which has to keep track of so many employees. So, the benefits are both to the employer and the employee. For the employee when they spend all the expenses get logged in at the back end, put into the SAP Concur software, which tags and collates it. When you get back, you just attach your bills and your expense statement is done. It’s simple and can be done from the convenience of your mobile phone. The employer gets one view across thousands of employees. There is a significant element of tax and regulatory compliance which most employers spend a lot of time on. There are important decisions which employers can take when they look across the kind of spends that are happening. They can negotiate better rates. This solution gives one view to the corporate. It’s probably for the first time that we have this kind of an end-to-end seamless offering for corporates.
How are you going to market with this?
SAP India has approximately 7,000-plus corporates. We intend to take this solution to those corporates. At the same time, HDFC Bank also deals with close to 30,000-35,000-odd corporates. We intend to take this solution to them also. We will do it in a phased manner. It will be a top-bottom approach, starting with larger corporates. Typically, travel expense management is about 8-10% of the opex (operating expenditure) of most companies. If I want to hazard a number, let me say that over the next three years, we’d like to target 5,000 corporates.
Does the government notification to do away with MDR on RuPay affect the payments space?
I see it affecting positively, in the sense that it will increase acceptance of these payment instruments. Over the last two-three years, there has been significant expansion in the physical acceptance space. It does put some strain on some of the issuers because an income line is gone, but globally the payments business is about scale. The unit margins on debit (cards) have already gone down globally.
Do you see banks running down orders for RuPay cards?
I don’t know about other banks, but definitely we are not (doing that).
RBI is setting up an acceptance development fund. Have you heard anything on that?
Yes, there have been discussions going on. They are still work in progress right now. The acceptance development fund is more about funding geographical expansion of the acceptance footprint at an institutionalised level. It’s not really about MDR. We are at 3.5-4 million now; so how do you get to 10 million or 20 million? It’s about that.
How do you see margins getting affected by the zero-MDR regime?
It’s a medium- to short-term drop, but once volumes take over, that will be made good.
Payments is anyway a business that bleeds, right?
It depends on the way you look at it. We look at it holistically. We see payments as an entry point to the liability relationship which comes with our acceptance business and leading to an asset relationship.
Also, it’s a very important strategic business for our retail bank and now also our corporate relationships.
You have increased provisioning against unsecured assets.
We have always been conservative. If you are a large player, there will be some buffers. We have always followed a conservative provisioning strategy to take care of existing or potential downsides in some segment or the other. That policy has helped us.