Nagaraj Mylandla is the founder and managing director of Financial Software & Systems (FSS)—the Chennai-based payments technology leader. Mylandla, in fact, pioneered this business in the country. What the company does is power the retail payments initiatives of leading banks, financial institutions, processors, merchants, governments and regulatory bodies across the globe. The company’s end-to-end payments suite provides the back-end to retail delivery channels such as ATM, PoS, cards, mobile and internet.
Mylandla did his BSc chemistry in a government-aided college in Chennai in 1979. “I come from a middle-class family and I went to a government school and college,” Mylandla tells me as we walk into the Square, a restaurant in the Novotel which is conveniently close to FSS office in the Siruseri IT park in Chennai. We order cold tender coconut water on a particularly hot Chennai afternoon.
How did Mylandla get into payments business? After trying to work in the family electrical contracting business for about three years, he got a break, wrote the CAIIB exam to get a bank job and joined IOB, the public sector bank headquartered in Chennai. “There really was very little work in those days. I became an active member of the union. I took charge of the canteen, which was catering to 3,000 people. I made it profitable. I also started teaching at the staff college.”
It is time to order lunch. That we are both vegetarians makes it easy. We ask for bruschetta and roasted tomato and red pepper soup. From running the canteen in IOB headquarters, how did Mylandla make the leap to payment systems? “I was transferred to the forex department and started dealing with a lot of students who were seeking foreign exchange to pursue studies in the US. I felt I could also attempt to get admission in an American university.”
In 18 months, that dream became a reality. Equipped with some savings, he landed in the University of Omaha in the Midwest to do his MBA. This cold Midwestern town was to open up a new world for Mylandla. “I got to work with the Nebraska Small Business Development Centre, which helps the air force people to start small businesses. This gave me a great exposure to startups. I then briefly worked for First Data Corporation and ACI, which were both electronics payments pioneers, based in Omaha.” All this exposed him to the world of electronic switches and transfers and payment systems.
When Mylandla finished his MBA, the US was passing through one of its worst recessions (1987-88), after the infamous stock market crash (Black Monday). “I knew it was time to return.” As it happened, Mylandla met Gary Biggs in a bar who was nursing his sorrows as he had just been sent back to the US from India as he did not have a visa! Biggs, who ran ACI, wanted to enter the Indian market with his company’s credit card operations technology.
One thing led to another, and Mylandla landed the job of selling ACI’s specialised switching equipment for credit card providers.
It’s too hot to have a substantial meal. We order the Square’s Greek salad and decide to share. “When I came back to Chennai in 1988, there were no ATMs in the country.” Mylandla was able to convince the then Indian Bank chairman M Gopalakrishnan to install an ATM in one of its large branches. By 1991, some slow progress was being made.
Mylandla stopped working for ACI and became their agent. FSS was formed as a 50:50 partnership with Harish Murthy of Diebold HMA, which sold the machines. In 1997, Mylandla bought over Murthy’s share.
A big breakthrough came in 1996 when HDFC Bank selected FSS to set up their ATM network. “Citibank expanded in the US through its ATM network. Aditya Puri, managing director of the bank, gave us the mandate and ever since we have grown with the bank.” In 1997, UTI Bank, now Axis Bank, came into FSS fold. “The next year we lost out to a competitor when ICICI chose them to set up their ATM network. The competition could not pull it off. We got the business after a few months.”
What catapulted FSS into the major league was getting the State Bank of India business in 2000. There was global competition. “At that time, SBI had 200 ATMs and 2,000 cards. Today, there are 65,000 ATMs and 200 million cards. What the Americans did in 40-45 years, SBI achieved in 15.”
Mylandla says he has always gone by his gut feel. He realised that this business was going to grow very fast. By 1996, he started hiring more people. “I knew we had to get into servicing all the networks that we were connecting. We started off shoring within the country.” This paid off when the Indian Banks’ Association (IBA) launched the Swadhan network in Mumbai to connect 42 banks, with one switch.
During the same period, a meeting with Nandan Nilekani led to working with Infosys to launch their product Finacle, the universal banking solution. The solution helps banks renew their business by simplifying banking.
“Being identified with Infosys, when we did the back-end work for about 22 banks, gave us a lot of visibility.”
Then came the dot-com and ICICI’s KV Kamath and HP’s Balu Doraiswamy wanted an internet gateway. “We built it in three months. It was a non-ATM, non-switching project. We got more visibility.” By the noughties, FSS got to be known as a company which banks can work with. “They started trusting us that we can deliver any new product they wanted to develop. We also decided to build our own products. IBA was not interested in continuing Swadhan. We bought our own switch and 32 banks remained with us. We started competing with Visa and MasterCard.
By 2002, banks wanted to outsource their non-core business. “Slowly, over a period of time, ATM services have been out sourced to us. We were 12-18 months ahead of others in being ready for mobile gateways and internet gateways.
We took a lot of risks, but business came and we are number one today. We do the entire spectrum of payment systems including hosting them. Everything has come as a request from the banks.”
FSS delivers end-to-end payment products, services and solutions to more than 100 global customers. In India, FSS’s domestic client portfolio of 35-plus banks features majority of public and private sector banks. Today, FSS powers 6 million transactions per day, providing faster and smarter payment solutions to millions of people across 7,000 villages and cities in India.
Over the years, FSS has received four rounds of funding. Last year, Azim Premji Foundation invested in the company. “We are very conservative. We don’t borrow.” Right now, FSS’s turnover is nearly $ 102 million in FY 14 and is expected to reach $200 million by 2017. Mylandla is sure he will be running a billion-dollar company in a few years. What next? “I am looking at Africa. My gut feel says that Africa is the place the next phase of growth will come from. I was in Harare, last week,” he adds.