Mobile Payments in India

Venture Intelligence Blog has a post by Deepak Srinath:

There is no big m-payment success story anywhere in the world today, barring maybe Japan. Having said that, India probably has the best chance of producing an m-payment success story. Market factors for an alternative payment mechanism to cash are clearly evident high mobile penetration even in tier-2 and 3 cities, relatively low credit card penetration (98% of transactions in India are cash and cheque), a relatively low internet user base and rising middle class consumption and disposable income.

The biggest challenge will remain consumer adoption. The market is large enough to support 3-4 m-payment solution providers with different solutions that cater to different consumer segments. Moreover, competition is essential to create consumer and merchant adoption on a mass scale. Several m-payment solutions are likely to emerge in the next few years in India, as the market evolves and lessons are learnt. From a VC investment perspective, a solution that effectively addresses the hygiene factor of m-payment and then goes that extra mile, and a management team that has strong networks with the banking community are certainly worth taking a closer look at.

I am an investor in mchek, one of the three mobile payments companies discussed.

The New IBM

Barron’s writes:

In its most recent quarter, software accounted for a fifth of IBM’s revenue and, surprisingly, for the bulk of its earnings — some 40%, up from 29% five years ago. Under Palmisano, IBM is reinventing itself again. It’s shed its disk-drive and personal-computer businesses to focus on less volatile operations with fatter margins, and has boosted productivity by slashing costs and spreading facilities around the globe.

Welcome to the New Big Blue, the world’s second-largest software company — quite a change from the hardware giant that invented the disk drive 50 years ago and lived high on the mainframe, or the service outfit it successfully morphed into under Gerstner — one whose revenues had stalled in recent years. “We have globally integrated the supply chain, software development, services delivery,” says Palmisano. “I would say we’re just two or three years into a multi-year journey, with ongoing productivity gains to be had. As a result of all this work, IBM today is much more focused than we were four years ago.”

Language Translation

Wired writes:

LANGUAGE TRANSLATION is a tricky problem, not only for a piece of software but also for the human mind. A single word in one language, for example, may map into three or more in another. Carbonell likes to cite bank, with its utterly divergent uses for the place you keep your money, the edge of a river, and what an airplane might do. Then there are the dramatic differences in grammar and structure across languages. Arabic, for example, uses very little punctuation compared with English; Chinese contains no conjugations or plurals. For human translators, these problems are most often resolved through context or personal experience. There’s no rule that says “between a rock and a hard place” isn’t literal. We just know.

Machine translation is even trickier, and Carbonell’s “interesting errors” line is a good encapsulation of its history. Perhaps no technological endeavor has been more defined by its failures than the attempts over the last 60 years to use computers to convert one language into another. “It’s one of the earliest computer science problems to be attacked, and it has proven to be the one that’s most difficult,” says Nizar Habash, a research scientist at the Center for Computational Learning Systems at Columbia University.

Content Businesses

Scott Karp writes:

Can anyone think of a content business meaning a company that produces original content that has scaled dramatically in recent years? I cant. Look at the businesses that have scaled Google, MySpace, YouTube all platforms for content, but not producers of content. Compare those to original content businesses like Weblogs, Inc., Gawker, TechCrunch, Paid Content they are successful at their scale, but that scale is still tiny compared to the scale of the aggregation businesses. Even portals like AOL and Yahoo are much more aggregators of content than original producers of content.

The result of unbundling, disaggregation, the loss of pipe control (to use Andy Kesslers construct) i.e. the inability to force people to consume content they dont want is that content businesses dont scale anymore.

TECH TALK: Ventures and Capital: Start.Exchange

One of the ideas that I have mulling over to resolve the impasse between the early-stage capital needs for a business and the difficulty that there is in raising that capital is to create some sort of stock exchange where entrepreneurs can list their companies right at the start. They can publish an outline of the business plan and provide details of their capital needs. Then, individuals seeking to invest can make their own decision. (I have not looked at the regulatory implications of doing this in India but am sure there is a way to make such a thing possible.)

I think one of the most important untapped opportunities amongst the potential investor community are the million or so Indians who are working in software or other technology companies. Many have done well financially on account of a combination of salary growth and stock options. After taking care of basic needs in life (house, car, children’s education and the like), they still have surplus capital available. They can be a good source of capital for the new entrepreneurs. For one, they understand the technology space and can thus also provide valuable insights. Second, even if they do not want to leave to start a venture themselves, this sort of an investment gives them the opportunity to get a flavour of the world of startups and live a ‘second life.’

The challenge lies in matching the two groups, and at the same time providing liquidity to the investment made. This is where a stock exchange comes in. Market caps of the companies listed here will be in tens of lakhs to a few crore rupees. What is needed is the equivalent of a market maker who can match buyers and sellers. BSE and NSE listings will always be limited to large companies with profits. We need something on a much smaller scale where investors are clear of the risks. In fact, an investor should only put money into companies if he is okay with losing that capital. That is the worst case scenario and one must be prepared for it.

For an entrepreneur, this stock exchange helps to raise capital quickly and on-demand from investors who genuinely believe in the business (and the team). It will create for a deeper relationship with a set of people on the outside who can also be champions and advocates for the company’s solutions. If this idea works, then this will lead to a surge in entrepreneurs willing to create new ventures which is exactly what will spark innovation and the creation of more locally-relevant solutions in India.

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