Vijay Mallya’s Domino Effect: The Real-World Consequences of Late Payments

vijay mallya

(Originally posted here)

Vijay Mallya, the Chairman of United Breweries, exited the country on March 2nd 2016 – defaulting on loans worth Rs.9000 crores to 17 banks. The media storm which subsequently rained down upon the Mallya name would befit the crime, if it wasn’t painting an incomplete picture.


Given the frenzy and the weight of the government apparatchiks brought down to bear on the Mallya brand, it wouldn’t be remiss for the layperson to assume that Vijay Mallya is the heftiest loan defaulter of all time. At roughly $1.5 billion worth of money owed, his figures would make Donald Trump proud.


Yet, as verified by papers released by the RBI, Kingfisher Airlines was Top 5 at best. Indeed, if Newslaundry’s independent verification is to be trusted, Mallya was at best Top 10 on the list of India’s largest defaulters.


So, Why Should I Care?

We can practically hear you screaming this question. You’re sick of hearing about Mallya, and how one big corporateur didn’t pay an ungodly sum of money to another bunch of fat banks.


But, as Hummingbill has been trying to educate you, the damage done by late payments never ends there.


Take the example of one Manmohan Singh, a crop farmer in Uttar Pradesh. In December 2015, when he arrived at the Nand branch of the Bank of Baroda to operate his two accounts (total balance: Rs.5200) and pay his monthly crop loan installment, his accounts had been frozen as per the directions of the Mumbai Head Office – because he was listed as a “guarantor” to a loan to one Vijay Mallya.


This farmer, whose wife was undergoing treatment for a brain tumor, had to sell his crops at a fraction of their value for cash, while the bank sorted out this “technical error”. He eventually had to pay 12% interest on late payment to the crop loan, also taking on board the mark against his credit history for no fault of his own.


Sounds like a freak isolated incident, doesn’t it? Well, it was freaky, but by no means was it the only one.


Enter Subhash R Gupta and Subhash Ramdulare Gupta, both of Mumbai – one a security guard living in a Slum Redevelopment Authority building in Vile Parle, the other a vegetable hawker near Khar station. Both these men were identified as “guarantors” to Vijay Mallya, and had their meager assets and FDs frozen until further notice by the Bank of Baroda.


Now, how could this happen? As it turns out, these three men were mis-identified as Manmohan Singh Kapur and Subhash R. Gupte, both Directors on the board of the defunct Kingfisher Airlines. And, as FirstPost’s investigation concluded, this wasn’t a simple “technical error affecting a single man” as the nation’s headlines had been screaming, but an abject lack of even the most basic fact checks.


But This Isn’t A Late Payment Fallout

And that’s where we disagree. It is by discounting financial, administrative and other real-world impacts of late payments such as these that we, as entrepreneurs, have escalated the late payment culture in India to its current catastrophic levels.


I mean, 98% of businesses in India trade on credit, and 97% of them were paid late by clients in 2015.


A report by IFC estimated that the debt gap in Indian businesses is roughly Rs.2.93 trillion. With 1 in every 2 B2B invoices paid late in India, do you really believe that there haven’t been a myriad of negative impacts on the economy and life of the country?


The case of these three men just happened to be the most visible fallout in the media from the Vijay Mallya case. Yet, the impact of financial mismanagement which led to KFA’s downfall hardly stops with them.


As the CEO of a mid-sized business, which frequently provides services to the aviation and hospitality industry, confided in us on the condition of anonymity – the folding of Kingfisher Airlines took with it several tens of lakhs worth of overdue Accounts Receivables.


KFA being one of his largest clients, with a staggering payment accrual for services already rendered, it took his business a long time to recover and return to a partially stable footing.


As Business Standard also notes, the end of Kingfisher Airlines left a string of “creditors, suppliers and employees with unpaid dues.”


Over 50% of Indian B2B SMBs state that they are paid late by clients because of liquidity issues, and over 50% of unrecoverable B2B receivables occur because of clients going bankrupt. So how many bankrupt and unpaid companies do you think an entity as large as Kingfisher Airlines left in its wake, and among the web of its own supply chain?


But one of the most heart-wrenching effects of Mallya’s personal little chain reaction on the Indian business industry was depicted in this letterpublished in the Economic Times by former KFA employees. It portrayed the pain of his former KFA workforce and suppliers watching Mallya party on yachts and receive business accolades from Indian and foreign institutions alike, all the while maintaining that he didn’t have money to pay them.


And now, they have to silently sit and watch as this man takes on the role of a maligned businessman, thanks to the gross inefficiencies of the system which attempted to bring him to heel.


But Nothing Can Be Done Against Big Clients Like Vijay Mallya

Exactly. And therein lies the fundamental imbalance in the Indian business environment. Despite our constant efforts to educate visitors and readers of best payment practices to protect your business from late payments, a large client who willfully defaults suffers no consequences.


As Doing Business found out, pushing for contractually owed payments would cost a supplier 3 years in court and over 40% of the claim value, which is ridiculously ineffective as a protection measure.


Moreover, the unspoken rules of business in the supply chain also prevents unpaid suppliers from publicly ratting out their non-paying clients, or else they fear losing future business with other prospective companies who like to play fast and loose with payment terms.


Which is why we at Hummingbill have launched a petition to address this state of affairs. Simply put, we need every suffering business on our side. Join the fight.


In the meanwhile, if your organization suffers from overdue accounts receivables, try Hummingbill. All core features free, and experience our premium features during the 14 day free trial. late payment petition hummingbill campaign accounts receivables overdue non payment clients court case finance minister prime minister india business b2b smb

Why We Started A Petition Fighting India’s Late Payment Culture


(Our petition against India’s late payment culture can be found here)

The Late Payment Problem

We’re going to keep this short. Now that 97% of Indian SMBs were reportedly paid late in 2015, the late payment culture in our business environment has gotten out of hand.

Today, India officially carries the longest average payment delays in the Asia Pacific for B2B SMB invoices, 51% of which are always paid late.

The system currently in place is flawed, and heavily skewed in favor of the largest buyers on the market. The judicial system is over-burdened. It consequently delivers justice far too late to save businesses whose money is trapped in clients’ accounts.

What’s more is that the entire idea of justice by law in business is a debunked protection. Smaller businesses almost never take non-paying clients to court because they fear losing out on future contracts. They would rather suffer through the impact of being paid 90 to 120 days late, while their salaries go unpaid or they miss out on larger opportunities to thrive.

This isn’t guesswork either. Not only has this been verified to us in our hundreds of interactions with Indian CFOs and CEOs, but a commission established to study the impact of the EU directive against late payment found that 60% of European small businesses never even consider a legal battle as an option because they don’t want to spoil working relationships.

And why would hard-working Indian businesses, which prefer compromising to build strong working relationships with clients, be any different?

Our Motivation

As supporters of the business reforms espoused by our esteemed Prime Minister, Shri Narendra Modi, we believe that unorthodox action begets change. And yet, the late payment protections for businesses in India have stagnated in the same state for the last twenty years.

The last committee set up in 2014-15 to study further updates required on the MSMED Act – which provides these legal protections to SMBs – did not even consider the necessity for better options. This was despite the comprehensive database of studies measuring the horrendous effects of late payments on the Indian business environment.

Instead, they directly skipped over the issue of late payment protections, and jumped to the question of “How can we provide more access to loans for these companies?” And all we ask is, why? While access to credit is vital for businesses in any growth economy, late payment is the root of significant troubles in the world. It causes bankruptcy and unemployment, and increases barriers to survival in the business world. It also has a significant impact on inflation since businesses up and down the supply chain mark up prices to survive late payments from their clients.

As a single factor, trade credit is indispensable because it allows companies to keep running operations even during temporary working capital shortfalls. But when it extends to the point where clients refuse to pay their suppliers intentionally, as was the case with 38% of Indian SMBs paid late last year, it needs to be addressed.

A late payment culture which forces sellers and suppliers to simply accept it as an unaddressable pain is the equivalent of a cancerous tumor. It creates chaos, and no one can entirely predict which sections of the body it will hit next if left unchecked.

And this tumor isn’t very difficult to target either. Rather that It’s grown this large from a lack of trying than a lack of successful solutions. While we sit and attempt to convince you of the horrific effects of this problem, the UK government has now passed legislation mandating all large companies to release the details of their payment practices twice a year.

This means that SMBs and startups dealing with larger companies will now be able to check beforehand what the average payment term for their prospective client actually is even before signing them on.

Singlehandedly, this increased visibility has become the best prospective protection against large businesses which exploit their financial influence on their supply chain. Now, with the reputation of their leadership on the line, larger companies have lesser incentive to hoard cash while not paying suppliers.

Even though this may not be immediately possible in India’s current business and political environment, our motivation is to bring about similar unorthodox solutions to protect the average Indian business.

What We Want

What we want is simple – for you to sign the petition, and support us by sharing it among your professional and personal circles. This is no longer a problem which affects business alone, but is also a big contributor to why life in India is getting significantly more expensive year on year.

Next, we want the government to approve another sitting committee which will accept input and feedback from the private sector for meaningful practical solutions rather than laws which look good on paper.

Instead of adding more courts alone, which will be overwhelmed just as soon by India’s burgeoning case burdens, we are pushing for the establishment of a first line of defense. We want for policy to allow for out-of-court protections which can be enforced in straightforward non-payment cases, thus clearing the line in courts for more complicated business disputes.

To this end, as some of the most prolific activists pushing for more awareness of the phenomenon of late payment in India, Hummingbill intends to release a policy white-paper for the Indian government as well in the coming month.

Keep an eye on this space for more updates on this exciting journey. Now that we can depend on your support, click here to read and sign the petition.

But, before you leave, what policy recommendations would you put forth from experience, which could help fight the late payment culture in India? Leave your answers in the comments section below.




Why Flipkart Taking Clients to Court For Non Payment Is A Big Deal


What’s The Scoop With Flipkart?


“The digital industry is suffering because there have been several cases where advertisers default on payment… We do not have a strong industry body in terms of payment collection yet.” –  Amar Deep Singh, CEO, Interactive Avenues


(article originally posted here)

Between April and May 2016, one of India’s e-commerce leaders – Flipkartfiled cases against 20 of its clients for payment, to collect unpaid advertising dues.


Unlike Snapdeal and Amazon, who charge their clients ahead of time,Flipkart provided advertising services to clients on credit.


Though this move made sense as an advantageous proposition to attract more clients away from competitors, they have now initiated legal procedures against non-paying patrons who respectively owe them anywhere from Rs. 90,000 ($1,350) to Rs.1 crore ($150,000).


Is This Non-Payment A Common Problem?

The Indian business culture is infamous for the chaotic state of its payment practices. In fact, India has the longest average payment delays in the Asia Pacific region (Atradius Payment Practice Barometer).


Furthermore, 97% of Indian SMBs were paid late by their clients last year.38% of these businesses claimed that the late payment was an intentional move by clients. It was a means of using trade credit to finance their own working capital needs.


What’s more is that most of these companies will never enforce their contractual terms on overdue Accounts Receivables. Even when 1 in 2 B2B SMB invoices are paid late. And 1 in 7 B2B invoices are still pending past 90 days.


This is because enforcing a contract in court for non-payment by a client can take up to 3 years and 40% of the claim value to resolve (Doing Business India). By the time suppliers manage to get their money from the over-burdened court system, they’re already sinking under.


Which means that larger clients and buyers run pretty roughshod all over smaller SMBs in their supply chain. They even threaten to withhold payment altogether if their suppliers don’t give them unreasonable discounts to get paid faster.


Large buyers are well aware that their smaller suppliers are:

  • Either not aware of their legal rights in such situations;
  • Won’t act upon their legal rights because they would choose preserving business relationships over getting paid faster;
  • Will be tied up in an expensive legal case for years if they try to take matters to court.


This has created an environment where only the most exclusive businesses can demand payments upfront. While others are usually forced to roll the dice on the kind of client they land up with. Or have to face being ignored altogether by prospective customers.


To put this in perspective, for all the talk of “Why don’t businesses just demand payments upfront”, 98% of Indian SMBs extended goods and services on credit to their clients in 2015.


And if you think the situation is bad for regular Indian SMBs, it’s even worse for businesses which deal in digital services or mass communication products.

where in the world is that payment

So Why Does This Story Matter?

Because the Internet and Mobile Association of India (IAMAI) has used the publicity provided by this issue to push for the development of a payment recovery mechanism for their industry.


Several of the largest digital communication platforms and services are members of the IAMAI. And the organization is wisely using this move by Flipkart to justify enforcing meaningful out-of-court payment protections for the digital communication service industry in India.


The issue of late payment has been a given in the Indian business culture for a long time, to the point where it’s barely mentioned in mainstream media. Even according to law firms interviewed on the Flipkart matter by YourStory staff, this case has gained significance in the media only because a large brand like Flipkart was involved.


This is why, by this point, we’re sure you’re asking – How does this affect me as a small business? Of course Flipkart, a well-known brand, would be able to afford taking its clients to court. Yet if we, as small businesses, did the same – we’d probably be bankrupt by the time a verdict came in.


First, most late or non-payment situations can be addressed by integrating global best payment practices into your business – which Hummingbill’s Gmail plugin automatically does for you for free.


SecondIndian companies are gradually getting less court-shy in getting back money they’re owed by non-paying clients.


Third, the actions of the IAMAI shine a light on the necessity of out-of-court payment mechanisms.


Yet, none of the mechanisms put in place by the IAMAI’s committee will protect other non-member small businesses like you or us. Even though we need these defenses just as sorely.


With that in mind, we at Hummingbill are scaling up our war to break India’s late payment culture in the immediate future. The Indian business culture needs a concentrated effort to create better non-litigious protections which can be enforced. SMBs and startups need shielding from larger buyers who wish to exploit their position on the supply chain.


And for that effort, we will need the support of every single one of you. Keep an eye on this space for more information over the next few days.


In the meanwhile, let us know in the comments section below. If you had the ability to enact out-of-court enforceable protections against late paying clients, what measures (except straightforward mediation) would you put in place?

– Adam Walker & Aniket Saksena

Buyer’s Fault or Seller’s Fault: Who Is Responsible For Invoice-Related Late Payments?


(originally published here)

1 in Every 3 Invoices Unpaid Is Due To Seller Errors. Seriously?!

“The formulation of a problem is often more essential than its solution.” Albert Einstein

That’s just a fancy way of saying unless you understand the problem, you can’t really reach a solution.

Pursuit of an Objective Answer

Whenever we talk about late payment among B2B SMBs or startups, the usual story which builds up is one which portrays the buyer as either evil, greedy, or inept (covered here & here).

As the tale usually goes, buyers are either so poorly organized that they can’t clear their supply chain debts in time because they can’t see the received invoices among the dozens of piles of the same. Or they don’t want to pay on time because they’re too busy cash hoarding and making more money off the interest.

But, is that an accurate summation of the state of late payment among B2B SMBs and startups as a whole?

When we last interviewed Mr. Sridhar Subramanian – finance veteran of two decades and former CFO of Capillary Technologies – for our “An Evening with a CFO” series (Part I, Part II, Part III), we saw an alternate picture emerge.This perspective was then backed by other CFOs of mid-sized Indian SMBswhom we spoke to in order to further strengthen the Accounts Receivable segment of our product.

Seemingly, mid-sized Indian SMBs were more concerned with paying their suppliers on time to maintain better relationships along the supply chainthan they were with cash hoarding, for three reasons:

  1. Unlike larger conglomerates or corporate organizations, SMBs have lesser capital in the bank on which to accrue interest. In a cost-benefit analysis, the advantages of keeping one’s suppliers happy outweigh the comparatively smaller interest pay-out in the long-term;
  2. In contrast to larger organizations, gaining a reputation of late payment in an Indian SMB is usually directly linked to the credibility and business practices of the entrepreneur-founder or the CFO. Fixing a reputation of non-payment is nigh on impossible in a business community once word spreads;
  3. As opposed to popular view, it’s not easy for mid-sized SMBs to simply up and change suppliers in their supply chain. In fact, for the period in which such change is happening, work invariably slows down and the buyer incurs significant dips in expected profitability to find a suitable replacement. Not to mention, people you’ve done business with steadily for longer are more likely to show loyalty and prioritize your needs should such leeway be required.

Now, these might not be the most morally squeaky-clean reasons for buyers to defend their perspective on the list of reasons behind B2B late payment among Indian SMBs and startups. But they are practical ones.

Yet, without objective proof, how could we decide who deserves the lion’s share of the burden in late payment – the buyers or sellers? After all, the bulk of the damage of this phenomenon is borne by the seller SMBs and startups themselves. And the comparatively unified perspective of CFOs in larger B2B SMBs can also be attributed to a form of victim-blaming in order to protect their reputation.

So, objectively speaking, how could we ascertain the reality of the situation?After all, it’s not like buyers and sellers would give us access to tens of thousands of invoices for us to analyze and catalog the reasons for late payment as seen in the evidence.

Well, it seems we won’t need to – someone else has done just that.

TermSync Invoice Analysis

In 2013, probably chasing the same answers that we are now, a firm in the US named TermSync surveyed 100 CFOs & other accounting executives. In addition to that, they also performed an analysis of 10,000 invoices which were more than 30 days past due, from companies with revenues between $30 million and $200 million.

The result? Only 40% of late or non-payment situations were because of the buyers. Among them 13% went unpaid or were paid late because of defective products, while 27% were due to the buyer’s monetary shortfall.

In the rest, a staggering 49% of overdue accounts receivables were unpaid because of erroneous or missing purchase information on the invoice. And finally, in 11% of the cases, the invoices were either generated far too late, sent to the wrong person in the organization, or not sent at all.

With a clear 60% of the burden of non-payment sitting squarely on the shoulders of the sellers, the verdict is in – sellers who make errors in billing their clients are slightly more at blame for late payment than buyers who don’t wish to pay their suppliers.

So What Does This Really Mean?

Well, if you simply look at it in percentages, 40% and 60% aren’t significantly far off from each other. It’s not particularly a surprise either that two parties in a business transaction are somewhat equally responsible for the delay or non-payment of compensation for work done.

On the other hand, 1 in every 2 B2B SMB invoices (53.5%) in India is paid late. Overall, 97% of Indian B2B SMBs experienced late payments last year.

This means that 1 in every 3 (32.1%) B2B SMB invoices generated in India is either paid late or left unpaid because of invoicing errors by the sellers themselves! Consider that number, and the colossal sum of money it represents.

In Closing: 1 in Every 3 Invoices Unpaid Due To Seller’s Errors? Seriously?

Well, it’s abundantly clear that buyers and sellers are somewhat equally responsible for late payment situations – though sellers are slightly more responsible for their own cash flow problems according to these numbers than their “evil, non-paying” clients.

However, to put a monetary cost to these errors – according to Factors Chain International, the total factoring (wherein SMBs sell their invoices to factors at a discount to avail some desperately needed cash flow) volume in India in 2014 was at least around $5.2 billion. This figure excludes unregistered informal monetary lenders, private invoice financiers, as well as bill financing undertaken by banks.

And at least 60%, or $3.12 billion worth, of these factoring transactions could have been avoided if the sellers had but ensured that the most common errors in invoicing had been avoided. Not to mention the monetary costs to these businesses of providing the discounted rates, or the economic burden of billions more of unpaid invoices which either string along for 90-120 days while the seller’s business struggles to keep their doors open, or which are simply written off as bad debts.

However, well-researched though it may be, our perspective on this matter represents but one voice.

So let us know what you think about this subject in the comments section below. How often have you caught errors created by your employees?

Would the semi-automation provided by features such as Hummingbill Collect’s new In-Gmail E-Invoicing tool help reduce such errors, in your opinion?

Have you ever seen trends in the kind of mistakes which are most prevalent? What has been your honest experience regarding this subject – Is it more often your employees’ fault or your clients’ when you’re paid late or an invoice gets rejected?

Every Product Needs A Good Teardown

(originally posted here)

Last Saturday in Chennai at the SaaSx3 I had the privilege of participating in my first “Product Teardown”

A Product Teardown, “or simply teardown, is the act of disassembling a product, such as a television set, to identify its component parts, chip & system functionality” – Wiki

In the context of the teardown of my company, Hummingbill, a Software as a Service (SaaS), it involved a deep dive into the company’s Idea, Discovery Process, Landing Page, Sign Up, and its “Wow” experience.


(image courtesy of Suresh Sambandam of Kissflow)

But before getting into the details of the teardown I want to make mention of the audience in front of whom I presented, and the panelists who judged me. This teardown event was among several sessions during this year’s SaaSx – a conference cum meet up of India’s best-in-class SaaS founders, among whom in the audience were Girish Mathrubootham, founder of FreshDesk, Avlesh Singh, founder of WebEngage, and Pallav Nadhani, founder of FusionCharts. And as impressive as the audience was, so too were the group of panelists critiquing my company. They were, Shekhar Kirani, partner at Accel Partners India, Suresh Sambandam, founder of Kissflow, and Bharat Balasubramanian, director of Design at Freshdesk. The entire experience was an honor, to say the least.

So! how did it all go down?

The panelists had me up on stage with a projector showing our website, and we started with Shekhar and Suresh who was requested a description of the Idea of Hummingbill, which included a snapshot of the problem, solution, and our characteristic customer and user.

Our Idea:

(bear with my plug!) Hummingbill is a Gmail plugin that automates accounts receivable management for organizations that track hundreds of unpaid invoices from hundreds of customers. Our characteristic clients are SaaS and advertising companies. Currently, these companies use QuickBooks Online, Tally and Zoho to manage their invoices, but the problem is that these softwares make invoices inaccessible to those who need them most – sales reps and account managers who are among many things also responsible for payment collection. Today, the only window accounts and sales staff have into Accounts Receivable is a manually generated, manually distributed weekly aging report sent from the finance team.

Second, we discussed the Discovery process of Hummingbill:

or how businesses find us on the web. Because Hummingbill is more of a direct sales organization at-the-moment, we were let off-the-hook on this one, but for any disciplined SaaS company, they must be extremely conscientious of the “keywords” they use on their website to make their website more likely to be found by their target customer on Google. This is called Search Engine Optimization. By identifying those keywords – e.g. “Invoice Management” and “Accounts Receivable” – and carefully placing those keywords into their website, businesses can improve their performance ranking on Google which allows them to be more easily found by their target customers.For an example of a highly search-engine-optimized website, have a look at HiverThey are one of my favorite examples of a company that carefully updates its website over and over again to improve its performance for specific keywords within its category.

Then, after discussing discovery, Bharat critiqued us on the Design of our website

A lot of learning happened here. Some of the key takeaways were:

  1. If you have big customers like we do, put them up at the top of your webpage. This helps build trust in your product.
  2. Use the most accurate language possible on your landing page for your target users. Don’t be generic. During the event, the title on our landing page was “Get Paid Faster” – Suresh pointed out that this title  would be an empty statement for our target users, CFOs and Heads of Finance. Instead we should use more accurate language like “Reduce Days Sales Outstanding”.
  3. Add a second Sign-up button at the bottom of your landing page. This makes it easier for people to sign-up for your product .. .which is just good for everyone.

After the Design step, Bharat walked us through the Sign-Up process

or onboarding experience of Hummingbill. This step is where new users enter in their contact information and preferences, and then are guided through the software product.  If you’re not familiar with SaaS, then you should know that this step is the first impression customers have of your product, so it can “make or break” a business. It’s the reason why, for example I didn’t use Ola cabs, a very popular taxi service in India, for a whole year – I found their sign-up process clunky and time consuming, so I immediately switched to their competitor taxi service. And similarly to how I fell-off of Ola, SaaS founders need to be conscientious of their target customers’ patience, less they lose them at the first step to using their product. Building a fluid and intuitive sign-up process takes significant discipline to decide which information to collect from users now vs. later, and which features of the product to show now vs. later.  For inspiration on great onboarding experience, check out to see examples of how some of the best tech companies in the world  sign-up their users.

And last but not least, the product teardown ended with the functional Wow of Hummingbill. The functional Wow is simply the moment when users experience the 1 or 2 features of your product that fulfill the value they were seeking and found on your website. This is where products can close the deal and why it’s important for companies to get to that functional Wow delivered as quickly as possible. For example, if a company has a CRM product, then the functional Wow would be something like guiding the new user to creating a “prospect” customer in their sales pipeline, enter in the prospect’s details, and then move the prospect to becoming a “lead” in the CRM. For Hummingbill, we like to Wow users during onboarding by getting them to: 

1. Generate an Invoice 

2. Track the invoice in Accounts Receivable

3. Receive an email aging report

This functional Wow helps confirm to the users why they signed-up for your product. Seeing is believing, so the best practice here is to show your users the functional Wow ASAP

All-in-all the Product Teardown was an excellent learning experience for my team and I

As a public forum, it forced me to look more carefully at Hummingbill through the eyes of my target customer. Because SaaS is very much a numbers game – about driving as much traffic to your website, then trying to convert as many visitors to becoming users of your product, then trying to convert those free users to becoming paid users – SaaS is all about constantly iterating your website and customer onboarding experience to improve those conversions. Do teardown your product yourself. Though it’s an exhausting process, do it with a potential-user who can be honest with you and give their feedback in real time as they visit your website, sign up, and try your product for the first time. Best of luck in this process and keep doing it because it’s the only way for early stage companies, apart from marketing, to ensure they will have a constant growth of new users.

– Adam

Digital India: What Is eSigning & How It Works

Digitising India is the only sure-shot way to reach the benefit of growth to India’s masses and that then will create the multiplier to ensure the target 8 to 10% sustained GDP growth… [Digital India is] certainly the most appropriate call for transforming India into a vibrant and strong global economy.

– Pramod Saxena, Chairman & MD, Oxigen Services.

And we agree. Digital India has the potential to become one of the most meaningful reforms for Indian businesses in recent history.

As we’ve mentioned in the past, India can fulfill the promise of reaching a double-digit growth for businesses in the near future. But, as the Doing Business reports keep not-so-subtly pointing out, our infrastructure moves like a burdened elephant, rather than a ferocious tiger.

If we want to compete with the swift eagle (U.S) & the nimble dragon (China),we need to adopt tech-savvy practices which help us speed up business in every way – like digital signature certificates to attest the soft copies of documents & invoices. Yet, for many business owners, such practices are either too time-consuming to implement, or have little accessible information about their benefits for them to be understood well.

This is where Digital India can help. Last time, we had a chat about the DigiLocker service, and its possible benefits to Indian SMBs.

This next service which we address today birthed from a realization that digitally signing documents is an important basic amenity in the 21st century. But, it can’t be scaled if the plan calls for a billion people to be provided their own USB pen drive – which is what was required with the Digital Security Certificate system.

This week, let’s talk about eSigning.

This article will answer the following questions:

  • How does eSigning work?
  • How does it differ from regular Digital Security Certificates (DSCs)?

We will continue our conversation on how this impacts businesses in India in the next article of this week.

What Is eSigning?

Before we get into the ‘how’, we need to clear the ‘what’. And no – eSigning is not the same as getting a digital signature from a government-approved authority.

An eSign is an electronic signature which requires no prior paperwork, as long as you’re a registered Aadhar user. It can be instantly applied for, and approved for, a single-use validity of half an hour.

This differs from an issued long-term Digital Signature Certificate,which has a validity of one to three years, and is usually carried around in a dedicated USB device.

If you’re a user of eSign, this is how the process will seem to you:

  • You sit at a regular computer terminal, or a specific one installed by the service provider if you want to provide biometric data.
  • You verify your biometrics through the hardware installed by the provider, or through a One-Time Password (OTP).
  • You instantly receive a single-use eSignature to affix to whichever document you wish, as long as you use it within the next half an hour.
  • That’s it. You’re done. No, we’re not kidding.

Unlike the usual use of the term ‘eSigning’, however, the eSignature services launched under the Digital India campaign do not refer to a traced, handwritten signature on a digital screen or pad.

Instead, these eSignatures are highly regulated, legally binding, valid identity proxies which are issued only after the confirmation of biometric data such as fingerprints or iris scans, or through OTPs sent to the mobile number registered to the user’s Aadhar card.

Of course, there’s a lot more which goes on behind the scenes.

How eSigning Works

The biggest advantage of eSigning as a technological tool is that it’s absurdly simple to use for the end-consumer. However, since it’s a highly regulated service, the behind-the-scenes machinations are significantly more complex.

In the beginning, the architecture of the system is heavily derived from the Application Service Provider (ASP) which is choosing to provide this service to its users. One example of such a service is eMudhra’s emLocker service, which is currently allowing its users to eSign their documents. Another is the Indian government’s DigiLocker.

When a user accesses the eSignature service, the ASP creates the application interface – which acts like an application form. This API is used to access a partner eSign Service Provider (ESP), which is a government-approved entity that is registered as an eKYC authentication user under the UIDAI.

When this connection is established, the user provides an authentication of their identity based on the information saved under their Aadhar profile – either through fingerprint or iris scans, or through an OTP verification code sent to the mobile registered to their Aadhar. As soon as this information matches the saved KYC information in the Indian government’s database, a Certifying Authority – another government-regulated and approved entity –issues a temporary Digital Signature Certificate (DSC). In cases of entities like eMudhra, the Certifying Authority may also be an ESP.

A key pair is generated for that DSC, and an audit trail containing the authentication response and timestamp are created. The ASP finally receives the eSignature from the ESP, which can then be attached to the document. Once received, the user can now fix the signature to the document, and the key is then automatically destroyed after a one-time use.

What Does This Mean For The Future? In Closing

What this means for the future, Ladies & Gentlemen, is rather simple. Imagine a future India where the small-time farmer can self-attest documents online to receive faster access to government services and programs, or where his buyers sign and return invoices online to speed up his receivables due.

Imagine a future where, instead of having to attest twenty copies in thirty different departments when setting up a business, small-time entrepreneurs can simply save their documents on DigiLocker and attest them using eSign services – thus saving them days’ worth of physically running around, eventually helping them set up faster.

Imagine a future where a mistyped document submitted for a business visa would no longer require another appointment and a day at the relevant authorities. Instead, you self-attest the correct document online and send them a link.

Or an India where eInvoicing becomes the norm, like so many developed and developing countries in the world. Psst, by the way, eInvoicing can help cut as many as five days from the invoicing process, and so get you paid much faster. But more on that later.

Getting back to the point, that India isn’t so far ahead in the future. In fact, with eSigning and Digital Locker integration within services such as emLocker and DigiLocker, that India is already at our doorstep.

But then, we are but one voice. How helpful do you believe eSigning to be in the larger picture? Let us know in the comments section below.

with Inputs from Aniket Saksena 

Digital India’s DigiLockers: Boon To Startups & SMBs

India’s Step Forward

India’s government is rewriting the rules on basic standards of living and business. It’s an ambitious goal, but there’s been a rise in foreign direct investments in those sectors that have been affected by the “Digital India” campaign. So, the world seems to agree with what they’re doing – let’s not forget the Rs. 4.5 trillion pledged to the initiative by some of the biggest corporate names in the nation.

We want to have one mission and target – Take the nation forward digitally and economically.” Prime Minister Narendra Modi

This increased approval from the world’s business community has also given India the push to jump forward 14 ranks to 55th place out of 140 economies in the Global Competitiveness Index of 2015-16 released by the World Economic Forum.

As we discussed in our previous article in this series, Indian smaller to medium-sized businesses (SMBs) that are digitally disconnected are slowly dying out with an 8% decrease in revenue year-on-year.

The appearance of “Digital India” as a market force now brings new hope for these SMBs.

In this post, we will address some ways in which the “Digital India” initiative cuts through bureaucratic sloth and speeds up business practices. In our next post, we will go through the technical elements of how the digilocker works.

In short, this post will discuss:

  • The purpose of the DigiLocker; and
  • Immediate benefits of digital lockers to business

India’s DigiLocker: The Corporate Clog-Cutter

The Sluggish Source of Redundant Red-Tape

Indian governance bodies are reasonably self-aware, and understand the immense burden of documentation that is placed on the average citizen or business – even if they seldom attempt to ease it.

An SMB is required to acquire, manage, and regularly update a dizzying host of documentation across several dozen government departments. What’s more, there are even more government-issued documents that are shared with banks, other private organizations, etc.

With a population of 1.26 billion, it’s understandable why we need verification of documentation.

However, the real damage happens in the time it takes for each agency to verify these documents on the request of every government-to-business (G2B) service.

The process is then made worse by the fact that Indian government departments have historically been notorious for their lack of cooperation with each other.

It’s just as Mr. Narendra Modi himself remarked on his initial experiences as Prime Minister – “Even in one government, there were different governments. It was as if each had their own jagirs (fiefdom),” to the point that different departments even wanted to take each other to court.

Is it surprising, then, that this hostile atmosphere would slow inter-department verification processes – that should only take a day or two at most – to the point of taking weeks? In the end, the real losers of this constant jurisdictional feud are the citizens and, by extension, their businesses.

Still not convinced about the depth of this problem? Maybe this comparison will shed more light on the situation.

29 Days Later

In India, document verification at every step is so redundant that reserving a company name with the Registrar of Companies, paying stamp duties, filing the incorporation requirements, and receiving a certificate of incorporation takes 7 to 12 days on average. Side note: for Hummingbill, this took us OVER 4 MONTHS before we received our certificate of incorporation!

In the United States, this entire process can be completed in less than one day. Not just that, businesses can expedite processing to 2 hours by paying an additional fee.

The entire process of starting a business takes 29 days in India as of 2016; the same process can be completed in US in a mere 5 and a half days, 4 days if done from New York.

The economic ramifications of these differences are mind-boggling.

It takes the same time to finish business registration processes in India as it does 5 to 8 businesses in the United States.

This makes a big difference in productivity. Although these metrics are definitely not immediately related, it’s important to note that the nominal GDP of the United States is roughly 8 times that of India.

Imagine the swiftness with which eGovernance services could be requested and delivered – or a new business could be set up – if documents were digitally shareable and pre-authenticated to reasonable extents.

As the late Dr. APJ Abdul Kalam said,

We can not stress this enough. The arrival of Digital Lockers as a commonplace tool for the India of tomorrow could speed up every aspect of life in the country, from professional to personal.”

Thanks for reading and stay tuned for the next post on how the DigiLockers work.

Guest Post by Adam Walker & Aniket Saksena, Hummingbill Inc.