Ishtiaque Sarwar is a serial entrepreneur and Founder and Managing Director of Dhaka-based fin-tech company aamarPay.
In this wide-ranging interview, Mr. Sarwar talks about how aamarPay came into being, the evolution of AamarPay, how he has grown aamarPay from a small operation to one of the leading players in the payment gateway space and expanded its service, shares his thought on the company culture, growth, decision making, sales and marketing, jobs of a founder, the state of aamarPay today and its ambition going forward, and much, much more.
Future Startup: How did you come up with the idea of AamarPay? How did you put together the resources initially and launched AamarPay? An
Ishtiaque Sarwar: I first thought about aamarPay in 2012. I launched an ecommerce platform called E-biponon at the time. Quite early days of ecommerce. To solve the payment problem of ecommerce, I tried to launch aamarPay together with E-biponon. I didn’t have enough knowledge about the domain and was not connected with the right people. It did not happen. But I became quite fascinated with the idea. I could see that there was (and is) a huge opportunity to serve people in the payment space. I spent the next two years, from 2012 to 2014, gathering resources and developing an understanding of the payment market. Around 2014, I hired a web developer to work on the first version of aamarPay. We managed to build an initial version but it was not workable. I did not give up.
In 2015, I raised a small seed investment of tk. 2.5 lakh and started working on the platform once again. We eventually managed to launch the platform in 2015. This time we had a workable platform, but it was not good enough. It was not working as well as it should have. We did not have any traction in 2015.
In 2016, I hired a developer with experience in the payment domain since my team did not have any experience in building payment products. Around this time, I met M. Asif Rahman bhai. We raised another round of seed money towards the end of 2016 from him. We used that money to build the second version of the aamarPay platform and launch it.
Between the end of 2016 and mid-2017, we ran several trials and errors to test our system. From the middle of 2017, we started to push a bit in the market and get some traction. We managed some tk. one crore transaction in 2017. Since then we have grown quite consistently. We did not raise any further investment. We are now exploring funding opportunities as we see there are opportunities to build serious business in the space. We had some 50 merchants on our platform in the first year. By the end of the second year, it grew to 200 merchants. In 2018, we saw excellent growth. In 2019, our transaction grew three folds.
While we started 2020 strong, we went through a difficult few months at the beginning of the coronavirus pandemic. However, we managed to recover and get back to growth within a short time. Throughout 2020, we have worked hard to improve our overall system.
We are currently a team of 22 people, of which 8 people are in tech, about 8 people in sales and partnership, and the remaining of the teamwork in finance and management, and logistics.
We started out of a tiny office. We are in an office of 1500 sq ft and soon will be moving to an even bigger office.
We now have 892 merchants on our platform. We plan to grow the number to 1000+ merchants by March 2021. We currently manage between tk. 60 lakh to one crore transactions monthly. Around BDT 7-8 crores transaction annually. The number is growing every month.
Last year, I went to China on a fellowship from Alibaba. We were the only fintech company from Bangladesh. It was an excellent opportunity to see the Chinese fin-tech ecosystem firsthand. It has deepened my understanding of the vertical. I had the opportunity to pitch in several events there. I received some great suggestions. One common advice was getting into the B2C market besides our B2B.
Returning from China, we decided to launch a bill payment platform and a consumer-facing platform. Initially, we wanted to call it AamarApp. But we later decided to change it to the aamarPay app.
We started working on the aamarPay app towards the end of 2018 and the beginning of 2019. We eventually did a soft launch of the app in August 2020. You can now use the aamarPay app for mobile top-ups, pay bills for different services, booking bus tickets, making donations to select organizations, book hotels, shopping, etc. The app has engagement features such as games that you can use for free. aamarPay app is the first super-app from a payment gateway. We are taking advantage of our payment gateway technology and using that as a backend to power the app. The app is not a wallet. We don’t hold money or save your information. It does two things. It aggregates essential services, we want to increase this number of services, and it makes it easy for our users to purchase and make payments for all these services.
Amid the pandemic, we launched a QR payment system called AamarPay QR with an ambition to get into retail offline payment. You can use the aamarPay app and QR to make the payment offline. Simply download the aamarPay app, you can make offline payments by scanning QR codes through our app. It is simple: you scan the AamarPay QR code with the aamarPay app, it takes you to a link and you get an OTP in your mobile number, you enter the OTP, and payment is done.
We launched our super app on 19 August 2020. We are the first payment gateway to launch a super app despite our various limitations. Our app users can pay bills for various services such as cable TV operators, Dhaka WASA, Titash Gas, etc. And we are working to add more services. The app is the front end while the aamarPay payment gateway works as the backend. We are not a wallet. We don’t store money in the app. When you transact through the aamarPay app, AamarPay Payment Gateway facilitates these transactions.
aamarPay is working on three segments: B2B payment gateway, which empowers ecommerce merchants and retailers, AamarPay QR, where we work with offline merchants, and aamarPay super-app.
We have added grocery shopping in the app. aamarPay app users can shop groceries in nine districts of Bangladesh, a result of our partnership with Khaidai Today, a grocery delivery platform that is available on the aamarPay app.
Facebook merchants can get their payments through the aamarPay app. Payments can be made through both mobile banking services and ATM cards. We’ve added games to our app to improve user engagement. We have added on-demand repairing services to the app such as AC installation and servicing, you can book these services from our app. You can currently donate to the Save the People Foundation, Ahar, and Bidyanado Foundation through the aamarPay app.
AamarPay QR is for offline retail payments. You scan and pay. We introduced a scan Menu feature for restaurants amid the coronavirus pandemic where you could scan the menu using the aamarPay app and place orders without touching anything.
B2C and retail businesses require large investments. Since we are a bootstrapped company, it is difficult for us to achieve scale in these markets. But we are marching ahead.
The AamarPay app is our highest priority. We are in the process of raising investments. We are in conversation with several investors. We are also registering AamarPay in Singapore since it makes raising investment easier.
We are currently 100% focused on fintech. We continue to provide IT solutions from Soft Tech Innovation Limited. Since we have a tech team for our payment gateway, we continue to provide web development services. It sits well with our current operation and allows us to generate additional revenue. A recent valuation of aamarPay valued us at US$7.8 million.
We are the first payment gateway to launch an app. That doesn’t mean that we have shifted our focus from B2B to B2C. B2B remains our priority. Our consumer business is not separate from our payment gateway business. We want to explore the market and find opportunities to serve our customers better.
We are working on several new features that we plan to add in the coming months such as Buy Now, Pay Later. We are working to launch Microloan Facilities in collaboration with Financial Institutions. We will add loyalty programs, reward points, etc in the coming days so that our users can take advantage of these features.
We are in the process of getting a PSO license, which we hope we will get in the next few months if the Bangladesh Bank authority finds everything okay with our operation. We are also in the process of PCI DSS certification. Once we get the PCI-DSS certification, we will be able to store card data securely.
In B2B, we are focusing on the education sector, where we are looking to collaborate with schools and educational institutions, where they could use our system to collect fees from students and manage payment.
We are investing in our people to equip them to tackle the challenges of this market. We train our people regularly to upskill them. We are now hiring people with experience of working in the payment sector.
We plan to improve our QR code system. We plan to invest in growing our business in retail. We see there is a huge opportunity if we could enable our users to pay offline through our app while buying groceries from the local bazaar.
We’ve built an IOT based prototype with a GSM antenna called Rapid Bus for bus companies. Using the Rapid Bus device, bus companies can automate fare collection. Customers will pay using the aamarPay app. Customers will be able to buy credit on a weekly or monthly basis and use the credit to pay for the city bus tickets. We are looking to collaborate with the government on this.
We have largely bootstrapped aamarPay. We have invested some BDT 2-2.5 crore in the company over the past few years. We invested our revenue from aamarPay and our web and tech services business into growing AamarPay. But fin-tech remains a difficult market and you can only go so far bootstrapping.
Future Startup: These are some fascinating works. When you started your business in 2017, there were other payment gateways in the market. How did you get users in the early days?
Sarwar: We did not have any marketing budget, to begin with. The initial few clients came through my network. Then we predominantly grew through word of mouth. Although we started small and did not have many resources, as a team we have always ensured that we serve our customers well. When you serve your customers well and make them happy, they usually help you get more customers through word of mouth.
We made some tweaks as well at the time such as connecting Muthofun and AamarPay and allowing people to send free confirmation SMS if they used aamarPay. As a result, whenever a transaction takes place from a user's ID we send an SMS to the user and the merchant. Our merchants liked these small changes.
Customer obsession along with these small tweaks allowed us to achieve excellent growth. Between 2019 and 2020, we experienced 96% year-on-year growth.
Future Startup: What were the major challenges in those early days?
Sarwar: In the beginning, one of the major challenges was pricing. We were a small player with quite insignificant transactions. Banks used to charge us more than the other established payment gateways. As a result, the price we were offering to my users was higher than other established players in the market. It was a challenge in the early days.
As our transaction volume increased, banks lowered their charge gradually allowing us to bring our rate for users down as well.
Today, we offer competitive rates similar to every other established player in the market. We are now among the top three players in the payment gateway space.
Future Startup: That’s an excellent story of persistence.
Sarwar: Despite limitations, we’ve been offering a reasonable price. We made it easy for users to take our service.
From day one, we have made it a priority to offer excellent support to our customers. We ensured that basics are covered well. We lacked some additional features such as we did not have an EMI feature before, now we have. But we compensated for those limitations with excellent service.
We are now looking to find new growth opportunities. For example, we are working to partner with the garment factories where they could use aamarPay to pay salaries and handle transactions paying a small commission of 0.5%.
We have resorted to innovation to gain a strategic advantage in the market. Using innovative thinking, introducing useful features, and paying greater attention to customer support has helped us to grow.
Future Startup: How does the payment gateway work?
Sarwar: Suppose Future Startup is our client. You are buying something from Future Startup, you go to their website, see the price, descriptions, terms, and conditions. You choose the product/service you want to buy, you’ll see the terms and conditions before checking out. When you click on check out you’ll be directed to the payment page, that’s where we come in, you are now on our payment gateway page where you see several payment methods such as card payment, MFS, etc. You choose the method you want to use and complete the necessary steps to make the payment. Once you complete the transaction, we send an SMS to both the merchant and the customer that the payment has been completed. That’s the entire process.
We then process the payment to the merchants a couple of times every week. The payment directly goes to the merchant’s bank account. We charge a small fee per transaction and the bank takes a small fee per transaction.
We have an aamarPay merchant app for our merchants where they could see all the information related to their account such as transfer, settlement, etc in the app.
We are a PSO (Payment System Operator-applied). It is a separate license from the Bangladesh Bank for payment gateway companies. We have a NOC from the Bangladesh Bank to operate as a payment gateway. We have applied for a PSO license and we are hopeful that we’ll get the license in the next 3-5 months.
Our consumer app, aamarPay app, is not a wallet. It uses our payment gateway as its backend. We are capable of launching an e-wallet anytime by fulfilling regulatory requirements. We’ll need a PSP license for that. We have the ambition to get there eventually, but for now, we want to focus on our existing business.
Future Startup: Suppose I’m a merchant who is interested in taking your service. How do I take your service? Could I register online and set things up virtually?
Sarwar: Yes, you can register online. Simply go to the aamarPay website’s registration option, give your details, and fulfill the requirements, we will get back to you and get you onboarded.
We do offline onboarding as well, where people reach out to us, fill up our forms and our people set things up. Sometimes people send us an email asking about the registration process, we help them to register. If you want to integrate a payment gateway into your website, you need to have a trade license or have to be a legal entity that can accept payment in Bangladesh. We require these documents and then we go on to integrate payment gateway into your system.
The product you are selling has to be legal. You can’t sell anything illegal. Once a potential merchant sends us their NID, and legal documents, we verify them and make sure that everything is in place. Once you are verified, you choose one package from our packages and then we on-board you. Then the merchant runs the integration test and if the outcome is affirmative, then he can start transactions.
Future Startup: How much do you charge for your service?
Sarwar: We have several packages for different target groups such as educational institutions, enterprises, B2B, etc. Our one-time fee ranges from tk. 4000-15000. The transaction fee is higher for packages where one-time pay is less. If you pay, suppose tk. 4000, your transaction fee will be higher than if you pay a 15,000 one-time fee.
Merchants can complete the whole process of registration from our website including the payment. Then we onboard them after verifying their identification and other legal necessities.
Future Startup: What is your transaction fee?
Sarwar: We take a transaction fee of 2.3% to 3.25 per transaction, which is when the transaction is done using cards. For mobile financial services, it is between 1.6% to 2.1%.
Future Startup: Could you give us a synopsis of the current payment gateway market i.e. how big is the market, major players and how do you see the market evolving in the coming years?
Sarwar: The market is about tk. 20,000 crore annually, of which tk. 15,000 is ecommerce and the rest is other services. Then there is the utility payment, which is around tk. 6500 crore per year. The ecommerce market is likely to grow in the coming days as more people come online and get used to shopping online.
Though we have quite a bit of competition, it is good for both the companies and the market. Competition accelerates growth and innovation.
There are 4-5 top players in the market right now and new players are entering the market. Competitive pressure is likely to grow in the coming months and you have to offer something unique to survive.
Future Startup: Is there any security concern that the merchants and the customers should know while using the payment gateway system?
Sarwar: Our system is fully secured. We carry out fraud detection to prevent any fraudulent activity in our system. Since we don’t store any data, there are very limited security issues. It is all related to the banks.
Future Startup: Generally speaking, as a PSO you aggregate available payment options and enable merchants to accept payment from customers using any available payment methods. Now many MFS companies such as bKash are directly working with merchants, where merchants can directly accept bKash payment, and consumers, since bKash has an excellent market penetration, are also happy to pay using bKash. Do you see this as a competitive challenge for payment gateways? If a particular payment method becomes exceedingly powerful, will it reduce your relevance in the market?
Sarwar: This is a major challenge for us. As payment companies go directly to merchants, we will lose market share. I think there needs to be regulatory clarity in terms of the role of payment gateways as well as the role of individual payment services such as bKash, etc. Now everyone is working directly with the merchants as well as with us.
Future Startup: In the US and now in many other markets, you can pay directly using Stripe or other payment solutions.
Sarwar: That’s an interesting way to look into it. But having a payment gateway makes sense because you have all the options to make payment. Moreover, we are a completely different market compared to the States.
Being aggregators, I believe we have certain upsides in the market. We make it easier for both the merchants and the consumers. What we need in my opinion is innovation. We have to innovate and improve our service to be competitive. If we could do that we are a much superior solution than other available options.
Future Startup: Where do you see the payment gateway market is going in the coming years?
Sarwar: The market will grow super competitive. Innovation will be critical. Unless you innovate as a company, you will not survive. . Instead of confining yourself within the traditional payment gateway services, it would be useful to introduce new services and features such as vendor payment, mass payment, etc. Indian market could offer an interesting case study for us in terms of innovating in the payment gateway space.
Future Startup: Since you are a payment aggregator, you have some competitive advantage over many other payment service providers, which makes sense. How many users do you have in the aamarPay app and aamarPay QR code?
Sarwar: We just did the soft launch for the app. We currently have around 200-300 users in the app.
We have given our QR code payment system to 50-60 merchants. Our target is to grow the number to 200-300 merchants within the first quarter of this year. Growing our QR code payment and strengthening our retail presence is a priority.
We are working on the aamarPay app and we plan to launch a second version of the app in the second quarter of 2021.
Future Startup: Suppose I use aamarPay app and want to pay my electricity bill. The payment gateway is for merchants, not for consumers, how does this work?
Sarwar: You go to bill payment options, select the company you want to pay to, click on checkout, it shows you a couple of options, you choose the one you want to pay via, and it is done. You can pay via bKash, card, or other available payment options.
Although payment is done by a consumer, it is handled by our payment gateway on the backend. To that partners that are available on our app can accept payment using our payment gateway.
Since we have all the payment options for customers, say you can pay using bKash, or card, whatever a customer has and prefer to use to make a payment.
Future Startup: You are not an e-wallet.
Sarwar: Suppose you are an aamarpay app user and you want to do mobile recharge using the app. The process of doing that is quite simple. First, you select the mobile operator, select postpaid or prepaid, you choose the amount you want to top up, then you click on the “Pay Now” option which then takes you to the payment gateway where you’ll see multiple payment methods. You choose the option you want to pay using, and you are done. The entire transaction is recorded in the app. You also receive an order statement once the transaction is completed.
Our service brings together all the payment options you have in the market in a single place. Payment gateways are aggregators of payment services - you have all the payment options in one place. In aamarPay app, you have all the payment options in one place.
One limitation of the aamarPay app is that since we are not a wallet, we can’t store money or payment information. Every time a user has to enter their payment credentials anew, which can be a hassle. But that’s how our process works. Every time you are directed to the payment gateway and you make payment entering your credentials. If we have the wallet permission, it will be a lot easier to offer superior service to our customers.
Future Startup: Do you take commissions from your merchants who are on your app as well?
Sarwar: When you book a bus ticket from the aamarPay app, the service is provided by busbd.com on the backend. We have a collaboration with busbd.com and under that, they provide the service. Usually, what happens is that we charge busbd.com a small commission on the sales we generate. This is the same with every merchant in our app, for whom we generate orders.
Future Startup: Suppose an ecommerce site uses aamarPay as a payment gateway on their website. Now that you have aamarPay app, Ajkerdeal also sells through the aamarPay app, which is again service from aamarPay and uses the same payment gateway. In that case, how will you charge Ajkerdeal, will you charge both commission and payment gateway fee?
Sarwar: You mean whether we will charge them both our payment gateway fee, which is 2% per transaction as well as a commission for selling through the Aamarpay app.
Suppose the ecommerce site has integrated with me to use the payment gateway on the website. If they use our app then there will be two modalities: one for the website and another for the app.
For the sales they make through the aamarPay app, we will not charge them the payment gateway transaction fee. It’ll be on me. Instead, I will take a commission for generating sales. When I use my platform, I’ll give the best rate to maximize my revenue.
If the ecommerce site only uses the payment gateway but doesn't use the app, then they will have to pay us only the payment gateway transaction fees.
Future Startup: In a way, this could compete with other payment options such as bKash quite effectively even without a wallet. Do you have regulatory challenges there? What are the apparent challenges here in competing with players such as bKash?
Sarwar: We have discussed with the regulatory authority and they said there is no problem unless we are offering wallet service, which we are not.
Future Startup: Do you see any regulatory challenges in the long-run because MFS and other players will eventually complain?
Sarwar: They already have. I think there needs to be a balance in the payment market where there are currently not many options available to consumers. We think there need to be products that can offer quality alternatives to customers.
Future Startup: What are the priorities for 2021?
Sarwar: Our priority for 2021 is our B2B platform. We plan to grow it significantly this year. Then we want to grow our offline QR code business.
aamarPay app is the second priority for us, at least for now. We see we have a huge opportunity there and we have plans to build a separate team for the app, but it is not a top priority at this point.
Future Startup: How are you doing in terms of sustainability as a business?
Sarwar: We are breaking-even. We are a healthy business, that much I can say.
Future Startup: You mentioned you are in the middle of a fundraising drive?
Sarwar: We are in discussion with several investors.
Future Startup: That was the last question regarding aamarPay. You have built an excellent product and operation without making much noise. Do you want to add anything else?
Sarwar: Our goal is to become a leading player in the payment space. Once we get the PSO license our valuation will go up 10 times.
Future Startup: I now want to explore a bit about how you operate as a founder and leader. What is your management philosophy?
Sarwar: Our people enjoy a lot of freedom and we offer quite a bit of flexibility to allow our people to design their work and life. My approach is rather working together, mentoring, and guiding people instead of pushing people to do things.
I try to motivate people and help them navigate the challenges of work and be productive. I think when people are motivated, they will do anything. If they are not motivated, nothing will work. I also think incentives are critical for human motivation. We give rewards to the best performers, we hang out and celebrate events.
Structurally, we have ahead for each department, who are responsible for their team. Our overall organizational approach is inspiring and motivating people.
Our employee retention rate is quite stable. We provide free food, medical leave, and maternity leave. We have everything a decent corporate system can have.
Future Startup: How does your marketing and sales work?
Sarwar: Our commercial division is divided into two parts. One is sales and acquisition, whose job is to reach out to merchants, generating leads and close deals, etc. Second is the growth and partnership strategy team, whose job is building partnerships and developing and executing growth strategies.
Future Startup: What are some mistakes you made in your journey that you think other founders should try to avoid?
Sarwar: It is critical to have the right people in the right place. Then you have to provide incentives for people so that they are motivated to work hard.
I’ve made several mistakes, I have been quite defensive when it comes to growth and pushing our ventures. As a result, I didn’t give much effort.
Bad investment is one of the mistakes I made as well.
I came up with several other business ideas that didn’t work. MuthoFun and aamarPay became successful. Focus and persistence are critical if you want to do well in this trade.
Future Startup: What are some of the lessons you’ve learned from your journey so far?
Sarwar: I’ve become more of a people person. I spend time with people. Instead of making them work, I try to inspire and motivate them to work. It has changed our culture and improved our retention rate. When your people own their job, you don’t have to manage them anymore.