Monthly Archives: March 2010

Adapting to how consumers think offline (in real world)

Driving is fun for me and a great stress-buster ever since I discovered it (discovered… stress). And throughout the day I at least check one automobile site besides being a huge follower of Team-BHP since last 2-3 years now; and amongst the portals, Carwale.

While talking with a friend who was trying to finalize a car to buy, I realized there such few instances of how differently people think and how conveniently we develop an online product.
And I checked multiple sites, screenshots below.


Most of car portals provide users only 2 options – Select Cars by Manufacturer or Select Price Range. With some noted differentiations by Carwale & Gaadi that have tools to recommendation a car.

Just one basic flaw in this which I realized post my conversation with a friend who said it straight – “I can spend up to Rs. 12000/- per month in the EMI.”

This was exactly that I thought while I purchased my car. Wouldn’t it hold true for most of the middle-class Indians who thrive on hatchbacks and mid-size sedans as well? Over 80% of new automobile purchases in this segment are done through Car Loans paid in EMIs.

  • Could the right product approach for Indian price conscious market be this as well?
    o    Allow users option to enter the amount they can spend on EMI per month
    o    Change EMI period and Down payment and show relevant options to users.

Something like this:


The reason I like this approach is that’s the way consumers think while buying, and it also allows consumers to see more options when they stretch their budget :-)

Everyone wants to have a have a piece of German Engineering, but what they buy is different alright!
PS: Ignore my design skills.

How Reserve Bank of India (RBI) can facilitate eCommerce and Online Transactions in India

Online Payments & Transactions – one of my favorite topics. Are the volumes of Internet or Mobile Transactions important – YES!

Internet Businesses will be sustainable in India only when the volumes of online transactions in India go up, which in turn happens only when Internet Banking, Debit Card usage and proliferation of Credit Cards happen.


Why it is must?

Not just direct eCommerce websites, but Internet Industry will grow along with that. Why I say this  because the cycle goes like:

  • Take two of the biggest spenders amongst Internet Industry – Online Travel & Matrimony Services
  • To be in business – they need Transactions (Online Bookings & Paid Accounts)
  • If consumers don’t transact online, they will not have any revenues
  • No revenues – No or lower advertising spends
  • They don’t spend – Online Advertising Networks suffer, hence publishers, and hence it affects the complete ecosystem.

In happy happy scenario – when volumes of Online Transactions are higher – you see more Online Travel Bookings, Movie Tickets, eCommerce websites sell products, Consumers opt for Paid accounts on Matrimony Services, Paid Classifieds… and everyone is smiling.

The volume of online transactions will determine how mature the Internet user base in country is. And the fate of Internet Industry lies in hands of Reserve Bank of India by ensuring facilitation of usage credit /debit cards & internet banking facilities by all scheduled banks in India.


Some Unrelated Linkage:

Major banking websites in India (HDFC, ICICI, Citibank, SBI, Axis Bank) attract over 16.25 Million Unique visitors each month (Source: Vizisense) . That probably will be a small percentage of total bank’s user base, but going by that number means:

  • If India has 35 Million Internet users in country- a whopping 46% of internet users frequent bank websites
  • It would be still 27% if Internet user base is considered to be 60 Million and yet it is a significant number.
  • Every 4th user of Internet is a someway related to bank. This is just considering the top banks in India.


The Scenario Today:

Unfortunately the credit card subscriber base in India is not so promising at less than 25 Million Cards issued in market and of which estimated 50% are active users.

Positives – Debit Cards growth seem to be promising for as many banks couple the same as Debit-cum-ATM card and have started distributing it to all new accounts. NetBanking user base quoted above could indicate user logins to netbanking (mostly to check balance) and not necessarily online transactions.


RBI’s Plan of Action should be:

So what is required to be done to create an environment to boost Online Transactions in India:

Curb the loss of opportunity –

  • Many banks in India issue Maestro Debit Cards – unfortunately they are not accepted on many payment gateways
  • All debit cards are ATM Cards; but all ATM Cards are not Debit Cards.
  • There are many Scheduled and Cooperative Banks in India offering Internet Banking facilities, however most of them only for purpose of checking account balance. They need to be enabled for Online Transactions as well.

Mandates to improve Credit / Debit Card Penetration –

  • Many Scheduled and Co-operative banks operate in India., not all of them issue Credit Cards or Debit Cards or ATM Cards.
  • There are at least 300+ Scheduled Banks in India, the government should enforce up all the banks to issue Credit Cards & Debit Cards cum ATM Cards within an stipulated time frame.
  • All Non-Scheduled banks in India with 300,000+ savings accounts operating at any level – City, Taluka, District or State need to compulsorily tie-up with a National Bank of its choice to offer Credit / Debit Cards to its customer base. (Similarly to Bancassurance Models)

ATM Network Connectivity –

  • Ever wondered how you can use any Bank’s ATM card on any other? It is due to their inter-connectivity on the BANCS ATM Network. Unfortunately not all Banks/ ATMs are hooked up on this network – So no question here to guess on the recommendation.
  • How is it linked to Online Transactions? – These consumers are most likely to use ATM cum Debit Cards and are more likely to mature and move to Online Transactions

Internet Banking –

  • Scheduled Banks in India need to compulsorily offer Internet Banking facilities to its users and also ensure training terminals for same in its branches. If implemented and executed well, this might be a first hand experience for many Indians to Internet, for that matter even to Computers.
  • There are many Scheduled and Cooperative Banks in India offering Internet Banking facilities, however most of them only for purpose of checking account balance. They need to be enabled for Online Transactions as well.

Payment Gateway Infrastructure –

  • The payment gateway infrastructure in country needs to be improved – by which it means even the payment gateways need to have mandates on accepting all credit cards, debit cards and internet banking facility of all banks currently offering them
  • There has to be also a mandate to integrate such services of any new bank within 180 days of it going live.

Connectivity –

No comments on the state of Internet & Broadband connectivity in India. But that is not the point here.  Imagine you doing a transaction in a small town like Mahabaleshwar on a Dial-Up Internet Service provided by a local ISP.

Now enjoy the view:

  • From the merchant site you are directed to your Payment Gateway.
  • You enter your details on Payment Gateway and click Submit.
  • Through Visa or Mastercard switches that are located internationally of course – the same is routed to issuing bank for authorization and back to the Payment Gateway.
  • Phew., that’s not enough – Credit Cards are now 3D secured, you need also authenticate yourself again by the issuing bank and later again routed through Visa / Mastercard to record the authentication.
  • Post this you are routed back to the payment gateway and again back to the Merchant website.

Wow! And this is a world tour of some sort in 30 seconds, since by this time your transactions was routed through multiple ISPs, multiple Datacenters and multiple countries as well and all this multiple times.  So now imagine with state of (poor) internet connectivity in India, how many chances you have for connection dropouts.

One last point to be added here – even after going through all this, note that authorization of a transaction is completely left to the issuing bank and not Payment Gateway, Visa or Mastercard.



Indian Electronic Payment Network (India Card) – Needs to be reality!

The last suggestion – RBI should possibly ensure facilitation and make roadmap for creation of an Indian Electronic Payment Network (owned and managed by Indian Government).

It is not confirmed if it will be named India Card, but RBI has plans to set up own payment processing system , as reported many times in news like this one last in Indian Express.  This is in line with China introducing its own payment network – Union Pay through its central bank – People’s Bank of China (PBC or PBOC).

There are benefits of having an Indian Electronic Payment and Processing Network only if one understands how costly it is for the banks to be a part of existing ones:

  • When a bank issues you a Credit Card or Debit Card that is endorsed by either VISA or Mastercard, the issuing bank pays some amount to either of them.
  • This issuing fees is irrespective of the fact if that card is ever used for any transaction or not. Issuing fees are higher for premium cards like Gold, Platinum, Titanium (or any undiscovered metal).
  • The issuing banks probably also pay an annual fee to VISA or Mastercard to use its payment processing network.
  • And of course, VISA and Mastercard do charge a small percentage (<1%) per transaction to the payment gateway.
  • Plus, remember some one also pays for the bandwidth consumed while completing and online transaction too

So what are the benefits India Card comes to reality:

  • The costs involved will definitely be on a lower side for issuing of cards, transactional percentage charged and annual fees for the issuing banks.
  • Government could possibly waive off all fixed costs to banks for issuing cards (that is being very positive) and earn more with transactional percentage and taxes.
  • The whole chain of connectivity issues while making an online transaction will be reduced since it can be safely assumed that all processing servers will be in India itself and would have adequate connectivity with banks and payment gateways.
  • Currently different payment gateways charge merchants between 1.5% to 4%; when this lowers it significantly, directly & positively impacts profitability of all online transaction based services.


Sounds kewl isn’t it? But to bring that to reality is different game all together.

India Card will need complex systems for fraud detections, authorizations, authentications, refunds and many others developed by VISA and Mastercard over years. Most importantly acceptance of India Card in all countries and on all payment gateways globally.., for which India Card would also require affiliation with VISA and Mastercard.

That’s all for now. Till then – Happy Transacting! :-)

Dissection of Online Travel Agent (OTA) Business: What is Market Size?

Once an VC-favorite business domain in India, Online Travel Agents (OTA) business model has been quite silent since last 2-3 years in this activity. Primarily cause Aviation industry suffered huge losses in this time and most of the plans to expand the aviation businesses in India fell flat post the recession on 2008-2009.

Of course the direct impact of this was on OTAs. Consolidation is expected to take place, naturally since the number of players in market today are probably equal to or more than the number of airlines operating in India. The big 3 of course are Cleartrip, MakeMyTrip & Yatra, however the question is are other players in market big enough or valuable to get acquired or carry any differentiators to be acquired.

Nevertheless, this post is about some number crunching and to answer the question – How big exactly is the OTA market for domestic flights? Taking a reverse approach on this… from Supply to Demand.

Domestic Airline Fleet in India:

As of Airline Fleet Flights
Dec-09 Jet Airways 89 400
Dec-09 Jet Lite 19 110
Dec-09 Jet Konnect 19 125
Dec-09 SpiceJet 19 125
Dec-09 Indigo 24 155
Dec-09 Kingfisher & Red 66 400
Dec-09 Paramount Airlines 5 28
Dec-09 Go Air 8 55
Total All Private Airlines 249 1398

*indicative data only, gathered from various sources available like company websites, news, etc. Consider all numbers as indicative figures
* Data excludes Air India / Indian Airlines domestic flight operations
* Actual flights per day may be an lower number since most carriers operate multi-destination flights, like Mum-Kolkata-Guwahati
*Jet Airways fleet size may be fleet in service for both domestic/international operations.


Maximum Tickets Available for Sale:

Airline Flights Seats Total
Jet Airways 400 200 80,000
Jet Lite 110 200 22,000
Jet Konnect 125 200 25,000
SpiceJet 125 200 25,000
Indigo 125 200 31,000
Kingfisher & Red 400 200 80,000
Paramount Airlines 28 60 1,680
Go Air 55 200 11,000
All Private Airlines 1398 275,680

Total Tickets available for sale each day = Total Seats available = 275,680

*indicative data only, gathered from various sources available. Consider all numbers as indicative figures
* Actual number of seats available may be lower than mentioned since flights operated may be lower, as mentioned in previous slide
* Most airlines in India operate Airbus/Boeing aircrafts with which seating configuration varying between 180 to 220
* Full service airlines like Jet Airways & Kingfisher operates flight with business class seats, and have ATR aircrafts in fleets as well
* Paramount  Airways flies smaller Embraer  aircrafts


PLF – Passenger Load Factor:

Total tickets available for sale, indicates maximum inventory available or max supply  From time to time, airlines in India have raised concerns on the occupancy levels of seats,  that’s passenger load factor.

Mostly the number has hovered between 68% to 72% for most full service airlines & between 75% to 82% for low cost carriers . Assuming 75% PLF for India, total sold out tickets in India per day would be: 2,06,760

Total Seats Offered:  275,680
Passenger Load Factor: 75%
Seats sold: 206,760


Sale Distribution through Different Channels:

Having said that 206,760 tickets are available for sale, lets not assume that all sale happen through online channels. Different channel includes – Offline Travel Agents & Tour Operators, Tickets sold as part of travel packages, Big Corporate Organizations booking tickets for its employees through offline travel partners, Ticket Counters at airports and yes – Online.

Assuming a healthy 40% of all airline ticket sales as online sales. However, consumers in India are price sensitive and do book directly from airline’s websites as well.

Doing the division
– Ticket Sales on airline websites = 15%
– Ticket Sales on OTA websites = 25%

Tickets sold by OTAs daily = 51690


So What are Daily Transactional Sales like?

Total Ticket Sold by all OTAs per day =  51690
Assuming average price of ticket sold online at =  Rs. 5000      (not all get a Rs.3000 ticket)
That’s daily sale of Rs. 258,450,000   ->   ie.  Rs. 25.84 crores
Monthly =  775.2 crores
Yearly= 9062.4 crores
Market size for Indian OTA Industry in Domestic Flights:  9000 crores  approximately

On a 5000 INR priced ticket, you pay 2000 INR tax  (that’s 40% ). Hence removing the tax factor, the number will be 5400 crores per year

Figures based on assumptions & numbers used in this post.


Interesting take aways from this dissection…

  • this could have been extended to predict profitability of an OTA but has been restricted to predicting the market size only. However it’s a volume game!
  • On an average, every aircraft in India does 5.6 flights per day
    If airlines could further manage route optimization and do 1 more flight per day, at 6.6 flights per day, OTA Industry Sales will be up by 15%
  • If an airline adds one more aircraft to its fleet, OTA business increases by 0.4%
    Note that the airlines listed here itself (excluding Air India, Indian Airlines (now part of Air India)) have over  250+ air crafts in orders with Airbus / Boeing and others. This is equivalent to number of aircrafts in operations now.  If market conditions remain positive and airlines accept deliveries of these aircrafts over next 5 years, the market size will be double of existing today!
  • Nevertheless, Online Booking of Tickets will only increase in coming years. This presentation assumes 40% of ticketing happening online, this percentage share will increase with increase in consumer’s likeness for online transactions. The share of online reservations between airlines & OTAs will be deciding factor.

PS: The flow has many assumptions, however if one has or knows the right numbers – logically the market size can be concluded. I feel the numbers I have taken here are little on higher side.

Thank you :-)

about pj

over 13 yrs of exp of being internet user., since days of text browsing, irc chats & 9.6kbps dial up modems that disconnected on an incoming call.

key interests include – consumer products & platforms on internet, payment systems, airline industry, behavioral & audience marketing, demand side platforms, advertising networks & yield optimization, convergence of offline-online models, search engine stuff, etc. I claim no expertise in these domains and continue to learn. Love to focus on enabling technology to solve consumer pain points, building product road maps and simplifying complex platforms.

good at number crunching (with help at excel & calculator), time management (with help of organizers), product management (i think so). analyze business models of consumer internet products and offerings (without being asked for it). free time – driving, friends, music.

like to interact with startups and entrepreneurs. feel free to drop me a line or get validations for your products.

being practical is an my attempt to blog about technology, trends and my predictions & analysis of ecology in connected world. this blog will be not so much active and can be safely labeled as ‘endangered species’.


<contact>  pj [at] beingpractical [dot] com  </contact>

hello world

int main()
       printf("hello, world");
       return 0;

hello, world.

testing complete. end program