One of the things that powered PayPal’s growth, to becoming a company that was sold to eBay for $1.5 billion in 2002, was its paperless KYC mechanism. It could add any number of users to its platform and their corresponding bank account, without using a single physical document to match the two.
They have a mechanism called the ‘random deposits’, and it was the brainchild of Sanjay Bhargava, who heads SpaceX’s Starlink in India as its Country Director.
“Perhaps that is why Elon thinks so much of me,” says Bhargava, who started working with Elon Musk at PayPal, in an exclusive interview with Moneycontrol. He took charge of SpaceX’s ambitious foray into India on October 1.
He has been appointed as SpaceX plans to launch its high-speed internet service, beamed down from a constellation of thousands of low-earth orbit satellites, by 2022 in India. It has been accepting pre-bookings for $99 since March 2021 but regulatory approvals to start the service seem to be taking a while.
Bhargava’s ‘random deposits’ mechanism is simple– a user submits details of a bank account that is to be linked to his/her PayPal account; he/she will receive two random deposits of less than one euro into that bank account; and, to start transacting through that PayPal account, he/she has to enter the value of the deposits made into the bank account. If they match, it’s a green light.
By eliminating paper, the scope to scale up operations becomes infinite. In fact, at PayPal, they often spoke about the infinity equation, says Bhargava.
“The infinity equation is wanting to grow the customer numbers to infinity. That is, over time, we want to serve every single person. Over time, however expensive a server (initial cost) is, you divide it by the infinite number of customers and the cost (of servicing each customer) comes down to zero… then, even to service an infinite number of customers, it will cost the same amount of money,” says Bhargava.
But, for this to work, there should be no paper or plastic, or basically any physical asset that will add even marginally to cost per customer. “Paper or plastic will defeat the infinity equation. If it costs me five rupees to issue a bank statement (a paper record) then the cost would be infinity into five, or if it costs me two rupees to issue a plastic card, then the cost would go up to infinity into two,” he says.
“We (at PayPal) did not take a single piece of paper… no photograph, no sign across the photograph,” he says. This is particularly impressive for the amount of money the platform moves around.
“That is the idea we are bringing to broadband service,” he says.
Inclusion is the game
Starlink recently announced its intent to roll out its services to ten rural constituencies. “First we have to get approval for that,” he says, adding, “and it is complicated. We plan to ask rural constituencies to submit a proposal to us, telling us why they should be chosen among the ten.”
Bhargava, who has largely worked in the financial sector, starting with Citibank, then working at PayPal and Infosys, is passionate about financial inclusion. He has served in advisory roles with companies who have that vision and has even founded a company to stop misselling of financial instruments. Bhargava sounds like he is extending this vision to his telecom outing: “Over the past twenty years or so, India has grown but there is low equity participation in this country. The penetration of mutual funds is in the single digits, and I think this as a big problem. There are various reasons for this but, with (better) broadband services, things can change… a mutual fund distributor can reach more customers without stepping out, the cost to acquire customers can come down.”
When the call from SpaceX came, Bhargava says he was surprised. “I was semi-retired and really didn’t want to do any heavy lifting, when I got a call from SpaceX asking me to find someone for the role (the head of India operations)… then they asked if I would like to head India,” he says.
“Going by my past association with them, they placed a lot of trust in me. They realised that India is complex with a lot of moving parts, and they thought of me as an out-of-the-box thinker. I thought it was too great an opportunity to pass up,” he says.
Bhargava remembers Musk from his early days at PayPal as an exceptionally hard-working person. “He had just sold his company for $300 million (the searchable business directory Zip2) and most young people, he was in his twenties then, would say I am done or sit back and enjoy, but Musk put in some of his money, got some money from Sequoia, convinced people like me to join him and then worked tremendously hard.”
“We had a small office then and it had a couch. All of us would work 16 to 18 hours and go home, but he would stay back and sleep on that couch. He was driven and it was clearly not by money, but by a purpose,” says Bhargava.
For India, Musk’s plans also include retailing four models from its Tesla stable. But, the electric car company has been asking for a reduction in import duty, from the current 60% to 100% to 40%, and an elimination of 10% social-welfare surcharge on these environmentally-friendly cars. In return, of sorts, the company will help develop the infrastructure to support electric cars–such as servicing and setting up charging points. On its part, the Indian government has been pushing Tesla to start manufacturing in the country, something industry watchers have been expecting since the carmaker set up its India arm with Tesla India Motors and Energy.
With Starlink, Bhargava wants to rope in “collaborators”. “We are not looking to compete but to collaborate. So I need to get fellow CEOs of telcos to see that. People like to write about intense competition (among companies) and how all of us will kill each other or whatever but, with us, nothing could be further from the truth. So the first message I want to put out is that we are here to collaborate and not compete,” he says.
Starlink has made its intent–of connecting hard to reach corners–clear on many occasions. In September 2020, in a letter written to Telecom Regulatory Authority of India (TRAI), in response to a consultation paper put out by the regulator, SpaceX’s vice president of Satellite Government Affairs, Patricia Cooper had written, “Powerful next-generation satellite systems flying today that can reach all corners of the country with high-speed, affordable service are critical to bridging this gap [for rural and urban customers on the wrong side of the digital divide].” For terrestrial internet service providers, connecting such points is a costly proposition because the cost per kilometre is high and the user density (to recover the cost) is low. Money Control