On June 17 the National Payments Corporation of India (NPCI), the nodal agency that handles payments in India, is set to introduce yet another digital payments product — contactless cards — that will help users make micro payments like bus fares, pay for a pen, pencil a water bottle and so on. This will add to NPCI’s growing portfolio of digital payment options that includes apps like UPI and BHIM. These are key to the government’s goal of at least 25 billion digital payments transactions this fiscal. At least half-a-dozen companies, including startups, are behind the contact less cards platform.
This is not the first time that NPCI has depended on startups for mission critical apps. Even the BHIM app, launched by Prime Minister Narendra Modi on 30 December 2016, was developed by Bangalore based startup JusPay and the security mandate was with another startup, Delhi based Lucideus. AP Hota, CEO of NPCI, says: “We are very happy with startups. Post BHIM we have decided as a policy to work with startups in developing new products and applications to enhance the payments ecosystem.”
Such a tilt towards young companies is because they score over their larger counterparts on multiple counts — faster turnaround times and openness to new ideas and challenges, to name just two of them. “The only downside is that startups don’t have a history,” adds Hota.
Startups work in high-tech areas and such engagements may not be surprising— as they are ahead of the technology curve and take risks trying out new things in artificial intelligence or machine learning.
Neel Ratan, leader, government & public sector, PricewaterhouseCoopers India says: “Startups are playing a significant role not just in creating jobs but spurring innovation and injecting competition.” What stands out is that startups are being relied upon to develop critical products for government departments.
Even in areas that might sound traditional, startups are taking a lead. Take, for instance, LPG cylinder distribution where Delhi-based SocialCops is among companies doing data mining to ensure that subsidised cylinders go to the right people. Or deciding where the next 10,000 LPG distribution centers should be opened. Such data from startups is being used by the ministry of petroleum to ensure subsidised cylinders go to right users and distribution centers are opened up at the right places — with easy access to targeted users.
Another startup GetMyParking is digitising parking spaces in a privatepublic partnership. And the two-yearold Gurgaon based Easygov.in offers information to citizens on all government schemes. It will soon kick off pilots in Rajasthan’s Dausa district, to help students look for relevant scholarships.
Startups like SocialCops and Lucideus have government departments among their clients and that’s what sets them apart. Padamaja Ruparel, president, Indian Angel Network says: “Such startups question the status quo, do more with less and do things differently and efficiently.”
Young companies at the bleeding edge of technology can help bureaucratic, paper-driven processes go smart. Adds Ruparel: “As population increases, stress points increase—be it traffic, water, waste management, education, healthcare. Consequently, gaps between service expectation and delivery increase even as new problems like terrorism, cybersecurity emerge. These call for out of the box thinking, where clearly startups have an edge.”
No wonder more startups are looking to work with the government, even as the government wants to engage more with new ventures to solve mundane problems in a better way — be it parking or gas delivery. Startup India guidelines encourage ministries to step up procurement from new companies.
This allows ventures like Easygov.in, Lucideus and Process9 (a language localisation technology startup) to compete with the likes of Infosys, IBM or Tatas for the same contract.
While on paper working with the government appears attractive for a startup and is a great validation of its technology and business model, it’s never easy to sell when the government is the potential customer. Prukalpa Sankar, the 23-year-old co-founder of SocialCops, says: “Government procurement policies are geared towards low cost and not high quality. We understand it is public money, but how do you account for quality?”
If a government department were to place an order for a mobile phone, a Rs 1,000 phone stands a better chance than a Rs 80,000 iPhone, as quality is not a consideration. “It’s an interesting problem to solve,” says Sankar. “If profit motive is the only thing you are looking at then government business is not for you.” Payments are small and delays are long. The upside: “If I have to impact, say, 50 million people government is the best place to work at,” says Sankar, who is eyeing more government business.
Agrees Saket Modi, cofounder & CEO of Lucideus: “We do anticipate a change in government procurement norms over the next five years, with emphasis on talent, quality and not just on the lowest bidder.” For startups time is critical and in government technical or financial evaluation could itself take six months. “All we get to know is a file has gone up, with no idea when its being cleared,” says another startup founder who wished not to be named.
Startup investors frown upon companies with government customers. Unpredictable payment schedules and low payments add to risks. Besides, says Amit Shukla, founder easygov.in, “when a VC puts money they want to minimise risk. They don’t care about your vision or the social impact the venture will have.”
The VCs may have different intentions, but if the startups succeed in reducing red-tape and making government procurement higher tech, they would have succeeded in disrupting timeworn sarkari systems.
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