Innovative Prepaid Instrument: Zaggle YES BANK Caselet

This is a landmark opportunity for us. With this partnership we will be able to offer all users a
seamless and ubiquitous experience across board. The corner stone of all our offerings is
maximizing value and choice for customers and this is a great development Avinash
Godkhindi, MD & CEO, Zaggle was visibly excited with the partnership with YES BANK, and
he did little to mask it at the interaction with YES BANKs digital banking team. YES BANKs
digital banking head nodded in agreement, Avinashs confidence echoed in the joint meeting.
Four months after YES BANK and Zaggle had come together for issuance of the banks prepaid
instruments on MasterCard platform for corporate consumers; they were well on track to meet
their initial targets. Both organizations had strong belief in creating a cashless economy in
India and, through this offering, aimed at reaching out to more than 1 crore customers and
more than 10,000 corporate business houses targeting Indias top 10 cities.
Not ones to rest on their laurels, YES BANK and Zaggle teams had been in deep discussions at
their quarterly analysis meeting at YES BANKs head quarters. The two teams were focused on
finalizing their future roadmap focusing on:
Creation of a Zaggle YES BANK Meal Card
Creation of a New card which could address all needs of a salaried individual to tap
the corporate employee database
Creation of an innovative prepaid cards for rural customers including vernacular
language integrations
I.

The Need to Bolster Indias Cashless Economy: The Facts Pushing the Case

With almost 95% cash transactions in the country, talks of an emerging cashless economy
seem premature but is imperative. Cash comes with overheads - the cost of paper money is too
high and that's not even counting counterfeiting or pilferage or parallel economies - there's also
insurance, and security. As per the annual report of the Reserve Bank of India (RBI) for 2013-14,
the amount of currency in circulation stood at Rs.12.83 trillion with a compounded annual
growth rate of 10% over the past two years. Of this, around 5% lies with banks, hence implicitly
implying that almost 95% is in daily circulation. It is then of little surprise that INR 32.1 billion
cost is incurred in just printing currency. To quote RBI again, it costs banks about INR 75 per
transaction when a customer uses the ATM of another bank, overall the cost of running ATMs
approximately places a burden of an additional INR 1520 crore on the banks. Even by liberal

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estimates, the direct cost of running a cash-based economy is close to 0.25% of Indias gross
domestic product (GDP). Some feel that a reduction of 1% in cash, could spur the GDP by 4%.
Of course, these numbers seem too macro; however there are huge benefits of a cashless
economy for individuals as well. Queues outside ATMs become redundant, cashless situation
in holidays becomes less of a reality. There is also less risk of carrying currency and cheque
deposit hassles. Reducing use of cash would also strangulate the grey economy, prevent money
laundering and even increase tax compliance, which will ultimately benefit the customers at
large. Usage of cashless mechanisms would also ensure that loopholes in public systems get
plugged, and the intended beneficiaries are able to avail the benefits due to them.
A few more direct benefits of going cashless are detailed in Exhibit 1, however there are also
several including increase in the pace of money circulation. Cash, being material, can be
prevented from circulation. For example, a traveller returning with unused currency will have
no use of that particular currency unless she/he makes another trip to that country/region. A
multicurrency travel card can easily alleviate this problem. A Moodys report pegged the
impact of electronic transactions to 0.8% increase in GDP for emerging markets and 0.3%
increase for developed markets. Moodys Analytics estimated that higher card usage
contributed an additional $296 billion to consumption between 2011 and 2015, or a 0.1%
cumulative increase in global GDP during the sample time period. That equals about a $74
billion contribution to GDP each year. Real consumption grew at an average of 2.3% in the
same period, of which 0.01 percentage points is attributable to increased card penetration. This
implies that card usage accounted for about 0.4% of growth in consumption, as well as an
average increase of 2.6 million jobs over 2011-2015.

Fig 1: Cash to GDP ratio of top countries: Source Central Bank of respective countries
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Fig 2: Cash to GDP Ratio India: Source: RBI

II.

The Evolution and Gradual Rise of Cashless Economy

Banks and other financial service providers have long woken up to the need to creating a
seamless non-cash experience. Beginning with credit cards to prepaid instruments to travel
cards, several instruments have been created to enhance consumer experience and reduce cash
usage. With the rapid proliferation of internet and increasing usage of mobiles, online
transactions have also grown at a brisk pace.
Online transactions today are no longer restricted to online travel with the increase of ecommerce, mobile and on-demand business customers have prioritized convenience across
product categories. India is witnessing a year on year growth of close to 40% in digital
transactions; at E-Billing Systems too we are observing a similar pace.
The meteoric rise of e-commerce websites and online shopping has also played a pivotal role in
altering buyer behaviour from scan online and shop offline to both scan and shop online.
Online shopping spends have increased by more than 50% year on year from 2014 2016. In
this financial year, mobile wallets have overtaken mobile banking in number of transactions.
From online payment to taxi aggregators like Uber and Ola to phone recharges the value of
mobile wallet transactions has almost tripled to 400 million from April November 2015.

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The Smartphone revolution has had a massive impact on the psyche of Indians as well. Number
of mobile banking transactions has almost doubled to 265 million in 2016 from 98 million in
2014-15. Such has been the pace of growth that mobile based transactions like mobile wallet and
m-banking are predicted to soon outstrip cheque payments (currently mobile based transaction
add up to 602 million which is only slightly behind the 723 million cheques cleared during April
Nov 2015).
A. Prepaid Instruments (PPIs): A vital cog in the cashless economy
They were also there but yet not there that in short has been the journey of Prepaid Payment
Instruments or PPIs in India. Beginning at the periphery of non cash transactions through
ticket bookings in railways, small mobile recharges, bill payments they have gradually grabbed
a more significant wallet share, through the sheer convenience and security they provide. The
ability to load smaller amounts and assist small transfers has probably been the key to their
gradual emergence.
Banking Correspondents (BCs) also deserve a lot of credit for popularizing PPIs. In a span of
less than 18 months, PPIs contributed to more than 40% of all IMPS transactions between
banks and non-banks connected to IMPS switch. The growth of PPIs is hardly an India-centric
phenomenon with the prepaid opportunity expected to grow to almost USD 822 billion. At the
core of this increasing popularity among customers is its innate practical ability to be a solution
for all payment needs especially for those outside the ambit of traditional banking systems and
also since it provides a transparent, cost-effective alternative to cash and checks for both
governments and businesses. Prepaid also serves the needs of banked consumers who find it
an ideal payment tool for segmenting spend such as travel and online shopping.
In January 2014, the Mor Committee Report on Comprehensive Financial Services for Small
Businesses and Low Income Households firmly supported the idea of payments banks and
other differentiated banks. Exhibit 3 highlights the future prospects of Prepaid Instruments.

Fig 3: PPI Transactions in India Volume and Value Source RBI

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III.

Zaggle

Zaggle, is one of India's fastest growing prepaid card companies with over 1000+ corporates
and 6 lakh cards(VISA/Master card/Proprietary platform) in circulation. Zaggle not just issues
prepaid gift cards with various card program constructs but brings along with it a disruptive
approach to creating a perfect solution to many interesting problems with an amazing range
and diversity of opportunities to further simplify the process of making payments. The focus
however has always been on providing its users maximum freedom of choice with greater
value.
Zaggle has always prided itself on being a fast moving execution centric organisation willing to
go the extra mile to ensure disruptive ideas are made a reality in the payments space. Zaggle
wants to look at expansion into new domains and create innovative solutions to existing
verticals and possibly new verticals with as yet unaddressed challenges. Zaggle's strengths
include product innovation and marketing.
Zaggle prides itself on creating a strong indelible brand, being open to innovative ideas and
smart solutions and always having a collaborative approach.
IV.

YES BANK

YES BANK was founded in 2004 on the ethos of Professional Entrepreneurship and a
differentiated approach of Knowledge Banking to provide comprehensive sector specific and
customized financial solutions to sunrise sectors of the economy. The 1st phase of YES BANKs
lifecycle from 2004-2010 was characterized by entrepreneurship and involved building strong
capabilities in the wholesale banking segment with a comprehensive product suite, which
leveraged the Knowledge Banking approach while building a strong human capital team on
the Owner-Manager-Partner philosophy. By 2010, YES BANK was recognized as one of Indias
fastest growing banks in the previous 5 years and emerged as the Largest Small Bank in our
country, India.
From 2010-2015, YES BANK lived the Version 2.0 phase during which the focus was on
expanding the Retail Banking capabilities by drawing upon the Wholesale Banking franchise
through a B2B2C approach for client acquisition and business generation . While the previous
version was about entrepreneurship, in Version 2.0, YES BANK focused on further
institutionalizing its systems, processes and controls gearing itself for orbit shifting expansion.
The Bank built a strong platform in terms of its Brand, Distribution via Branch and ATM
footprint, Technology, Human Capital as well as Risk Management. This well calibrated growth
strategy resulted in YES BANK establishing itself as the Largest Medium Sized Bank in the
country with a balance sheet size of over ` 100,000 Crore. FY 2015-16, marked the 1st year of the
next phase of YES BANKs growth cycle of 2015 to 2020. The vision for YES BANK is to

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establish itself as a meaningful LARGE HIGH QUALITY Bank by employing a focused 2pronged strategy of Deepening Mind Share and Growing Market Share.
A. Digital Banking At YES BANK
Digitized Banking YES BANK has adopted a unique Alliances, Relationships & Technology
(ART) approach to Digitized Banking to Deepen Mindshare and Grow Market share among its
consumer base. In todays dynamic and ever changing financial landscape, YES BANK realizes
that all Innovation cannot come from within the Bank. Therefore, YES BANK has taken the ART
approach and partnered with some of the best Fintech firms to deliver unique, innovative
Banking and financial solutions to our customers. YES BANK implemented Digitized Banking
solutions to address the needs of customers across the spectrum right from Corporate Banking
to Retail Customers including solutions addressing Financial Inclusion.
B. YES BANK Zaggle Partnership
Earlier this year YES BANK and Zaggle entered into an association to offer prepaid cards to YES
BANK customers. Zaggle has aligned itself with YES BANK as a total solution provider for its
prepaid instruments services across India.
This collaboration formally marked Zaggle's first engagement with YES BANK to issue prepaid
gift cards and subsequently follow it up with other prepaid cards and allied products with
respect to digital payments. This collaboration with YES BANK would enable Zaggle to further
cement its position as a leader in the digital payments space.
V.

Charting the Future Roadmap

The banking industry is possibly seeing the greatest transformation in every sphere with digital
payment initiatives taking the centre stage, a vast new set of challenges have opened up. This
has been set in motion by groundbreaking changes initiated by reforms brought out by the
Reserve Bank and the various initiatives of the central government. With these reforms in place,
the outreach and the possibilities are immense with the way in which banking and the
consumer's approach to banking as a medium changes radically. New domains and new
payment based initiatives have opened up and multiple means to for services, products etc to
be paid for. Seamless integration of technology into all these initiatives has been the single
biggest driver in this paradigm shift.
The current discussions between Zaggle and YES BANKs teams were focused on taking
advantage of these opportunities. After prolonged discussions, the two institutions decided to
create a joint crack team to focus on either of the following challenges:

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 Creation of a Pre-paid YES BANK Zaggle Prepaid Card: a seamless, effective, compliant
product to address the current deficits in meal vouchers and create a mode of payment
that is popular and in a familiar form factor that addresses all issues posed by the
current set of solutions
Creation of an innovative prepaid solution for salaried individuals. An individual's
salary is usually broken down into components. The team should look at creating a card
for every situation that demands a solution. The cards could be reloadable or one time
load cards for gifting and incentivisation. The card constructs could also include
associations from merchants relevant to the card program. The focus should be on
creating a solution that gives the employer a hassle free product construct and the
recipient a potent solution with a wide bouquet of options.
Creation of innovative prepaid card instrument for rural and semi-urban markets with a
wide range of associations and possible solutions are expected as well.
Creation of an evolved yet preferred payment mechanism for acceptance across
merchants by users of the Zaggle App. The focus should be on involvement of new ways
of paying merchants powered by Yes Pay Wallet using smart technology to ease the
pains of first time adopters of this platform for payments to merchants.

The team will also have to create a strategic marketing roadmap to popularize the solution
developed.
As a member of the crack team you have to share a comprehensive solution for any of the 3
challenge and a marketing plan for the solution roadmap with a clearly defined annual
marketing budget and vehicles
The provided solution should conform to the following guidelines set by Zaggle and
YES BANK
1.
2.
3.
4.
5.

The solution set should be an executable and practical model

Handling confidentiality concerns while driving greater acceptance
Highlight technological intervention which is scalable to drive the product construct
Speed to market for the initiatives to be rolled out
Aimed at Zaggle's target audience age group 16-35 years

The solution document has to be in word/pdf within 1000 words (excluding exhibits and excel
sheets) in Book Antiqua font 11.

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Exhibit 1: Evolution of Cashless Instruments: Source EY Report

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Exhibit 2: Non Cash Transactions Gaining Currency: Source RBI

Exhibit 3: Online Financial Transaction Trends

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Exhibit 4: Mapping the Prepaid Payment Ecosystem: Source Axis Capital NPCI Report

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Exhibit 5: Future of Prepaid Instruments

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