FinTech startups usually use bank investments to enter the market, but Toman is different. It has entered the market without any bank investments. In the course of the past 7 months, Toman has obtained a considerable part of the online transactions of taxi fee payments.

The very presence of big banks in the FinTech market makes it a tough one to aim for. Usually, banks step into this market with huge investments. There are few startups which dare to try the FinTech market without any support from the banks. Toman is one of them.

It is true that banks own big capitals and connections, but what is priceless is a self-confident and agile startup. This is more dependent on its founder(s) and experience. Taking a look at Toman’s main core team can tell us the very source of this courage.

A team of Sharif University alumni, with an average age of 27 years old

The power of each startup relies on its main core team. Successful experiences and especially experiences of failures will help a startup to succeed. The initial founding team of Toman has six members. What is fascinating about them is their experience, talent and their low average age, which is around 27. They came together to make the main core team of this startup.

Taking a look at the founders’ CVs, we realize that most of them are the alumni of Sharif and Tehran University. They are of Iran’s smartest people.

Seyed Hadi Alavi, 31-year-old:

CEO of Toman has got his bachelor’s and master’s degree from Sharif University.

He was also the founder and the CEO of Elecom Amad Development Company with an annual turnover of 8 billion Toman. Moreover, Hadi had founded Pakhsh Avand Company, which valued as much as 2 billion Toman in its first 6 months.

Ahmad Ebrahimi, 27-year-old:

Product Manager of Toman is also a Sharif University alumni who got his bachelor’s and master’s degrees from this university. Despite his young age, he was the project manager of Bamilo and the product manager of Sharif Noavaran Saamad Company.

Ahamad Reza Armani, 26-year-old:

Marketing manager of Toman got his bachelor’s and master’s degrees from Sharif University. He is the Founder of FoodPeyk Startup and the campaign manager of Soroush Sima. Besides, he has been the business counselor of Aryana Company and the Campaign Manager of Tapsell.

Farnoud Masoudi, 24-year-old:

Technical Manager of Toman is a bachelor’s degree holder of Sharif University. He has won a gold and a bronze Olympiad medal in computer. He was also the Founder of Hebeh Startup, the Artificial Intelligence Manager, the senior backend programmer of Lian Company and the Education Manager of computer Olympiad team of Allameh Helli High School.

Reza Ranjkesh, 26-year-old:

Reza is Toman’s senior software developer. He has studied both in Sharif and Tehran University. He was the senior software developer of Lian Company and senior member of the technical team of the World Olympiad in computer.

Amin Sheykhi, 27-year-old:

Amin, Tehran University bachelor-degree holder, is the Design Manager of Toman. On his CV, we can see that he has designed digital advertisements and worked as a UI and UX designer for many companies.

A team with collaboration background in different projects

Most of Toman Co-founders have formerly worked with one another. They have collaborated in some projects with each other before Toman Startup.

Seyed Hadi Alavi, the CEO of the company, has had a key role in gathering and leading other Co-founders. Interviewing Farnoud Masoudi and Ahmadreza Armani, they both mentioned the important role of Seyed Hadi Alavi and his influential character.

They believe that Hadi is able to convince anyone to join him in  teamwork. Farnoud Masoudi said that he had talked to Reza Ranjkesh several times to join the team, but it did not happen until Hadi spoke with him. Farnoud told the story of the long session in which Hadi convinced Reza to join the team:

One day Reza came to our office to talk to Hadi. They started their session and it went on until Reza said: “Hadi, I cannot see you anymore. Could you please turn on the light?!” It was at the end of that session that Reza joined the team.

The research phase was initiated in March 2018

Toman Co-founders started the initial research in marketing, business development and the FinTech field in March 2018. In the end, they decided to enter the mobile payment market focusing on small ticket transactions.

Having studied the Bluetooth, NFC, and QRCode, they finally decided to implement QRCode in Toman’s wallet. As other solutions were unavailable in Iran, QRCode was the easiest and most accessible method.

Choosing taxi fee payment as the first step into the market and launching Toman application in August 2018

Based on Toman’s studies, taxi payments were the best place to start with. In June 2017, the technical development of Toman application was started. A month later, Toman published its first product for taxi payment and later included some parts of its value-added products (mobile charge, bill payment, mobile network internet packages, etc.).

Despite bank rivals in the field of Taxi fees and Value-added services, Toman worked so well that in less than three months, it hit 1000 daily payments.

The problem and solution of the market: Small ticket transactions

Carrying change and cash has always been a daily challenge for people. It is true that digital payment has already been employed in the country and cash is not widely used any longer. But still, there is a lack of money change in the market which a lot of the times make the transactions problematic.

On the other hand, the transaction fee for small amounts of money is high. It brings about a high overhead cost to the payment system of the country. Therefore, another payment system is needed for small ticket transactions. Besides, such a solution will contribute to the implementation of smart city requirements.

On the other hand, considering the high penetration rate of smartphone in the country and with 60 million users of high-speed mobile internet, implementing digital wallet is a logical solution.

Small ticket transaction and digital wallet were the two main foundation factors of Toman. One of the main issues that requires a new solution for small ticket payments was taxi fees. These are the reasons why Toman picked taxi fee payment as its first step into the FinTech market. Due to the lack of change in the country, there is always a problem between drivers and passengers over money change for the fee payment.

Prior to the digital wallets, some companies had tried to solve the problem by putting POS machines in taxis. It was not successful.

Before Toman, other players had entered the taxi payment market. However, over the years, they had not been able to meet the needs of the market either. One of the main obstacles which have led to taxi drivers’ complains was the settlement timing. The settlement and clearing the fees exchanged via those applications were done with long delays, an issue that made drivers reluctant to use those methods.

Moreover, in the beginning, the taxi fee payment was exclusively managed by one company, which startups did not dare to compete with.

Toman’s solution

FinTech is a tough market in Iran with all banks and PSP companies active in the country. Usually, these companies are dependent on banks for their transactions.

However, with all the money and power that banks and their dependent companies might have, they suffer from a big weakness, and it’s the lack of agility and speed of startups.

Toman used this gap, analyzed the market, identified the flaws of the former players in the field and entered the market with its agile manner.

Inspirations from the East market

On the other hand, the development team of Toman studied the experiences of other countries’ payment market in order to find out the best solutions for the Iranian market.

In India (before UPI) and Indonesia, there is a big population and little access to the payment tools and banking services. Therefore, the digital wallet tuned to be the solution for carrying money and a platform for transactions. Paytm, Dimo and Gopay are startups that work in this field.

Inspirations from the West market

In western countries, like America and Europe, banking services and payment tools enjoy a high penetration rate. Services are flexible and widely provided in the payment system. So, the digital wallet became a tool for transactions with bank cards. Google Pay, Apple Pay, and Zapper are such startups.

Iran market and the suggested solution

We have a high penetration rate in banking services, POS machines and electronic transactions (by cards). But, in the payment filed, especially small ticket transaction payment, we have access to only a few limited services. Due to the charge related to the small ticket transactions, it is foreseen that the commissioning method of the banking system (Banks paying the PSPs for each transaction) will alter and processing the change payments gets excluded from this system.

One solution is what China picked which is a fusion of the two major mobile payment strategies in the world. Considering China’s market and other methods’ restrictions, and witnessing the failure of POS machines in taxis in some cities or airports, QRCode was chosen as the most accessible solution in mobile payment.

Competing with tough bank rivals

There were many rivals for Toman when this startup began its work. Some of them had close connections with Tehran Taxi Organization, and some others enjoyed the support of the banks. But this persuaded Toman to fight tough in order to find its place in this market.

At the time, these rivals were Pardakhtam, Resid and PhonePay. With its close connections to Tehran Taxi Organization, PhonePay used to exclusively control Tehran market for a year. It is interesting to know that Pardakhtam and Resid had already been in the market before PhonePay. But these startups had to remove their ads from Taxis in Tehran after PhonePay.

You close the door, we will enter from the window

When Toman stepped into the market in August 2018, Tehran Taxi Organization was planning to establish an integrated payment system for taxis by using the same QR Code in each taxi for all apps. Therefore, this organization was preventing startups to have advertisements (in taxis) except of PhonePay and taxis’ POS devices. But it could not prevent Toman from entering the market. This team introduced its services to taxis by advertising at the gas stations around the city.

The market’s Achilles’ heel: Settlement with taxi drivers

The reason that the Taxi Company prevented other ads was the abundance of such in taxis. Taxi drivers were unhappy of the late settlements and it is why they embraced Toman: for its faster payment. It was Toman’s main strength comparing to its rivals. It would work faster than its rivals and it could make drivers happy.

Besides Tehran market, which was tough in the beginning, Toman entered the market in other cities: Mashhad, Tabriz, Rasht, Isfahan, Kerman. In Mashhad a bid was launched and Top (Parsian E-Commerce Company) which was backed by the Parsian bank, won the bid. In other cities, except of Shiraz and Kerman, an integrated QRCode system was to be used. It is noteworthy that the integrated QRCode system is yet to be implemented in either of these cities.

Breaching the exclusivity of Tehran taxi payments

Toman is mostly known as the startup which ended the exclusivity of the electronic payments in taxis. Despite many problems, in October 2018, Toman and five other applications finally signed an agreement with Tehran Taxi Organization to be able to officially work with taxis, and be present at the taxi terminals. This is also what is gradually happening in Mashhad and other cities, too.

Toman’s rivals such as Pardakhtam, left the market, and Resid also disbanded its taxi payment solution. Paygir, which is currently controlling Mashhad taxi payments, is about to be replaced by Top. PhonePay is another rival which is backed by Barkat VC.

Value creation: Instant settlement with Taxi drivers

One of the values that Toman created for taxis is its settlement system. For the first time in Iran, an instant settlement with drivers became possible. Taxi drivers were unhappy with startups that only informed them by SMS, but made the payments with a delay. Toman solved this problem. Besides resolving this issue, Toman established its instant settlement to satisfy drivers who use its services. Now, drivers can transfer their credit on their digital wallet to their bank account, anytime they want (there will be a transaction fee of 500 tomans.)

The instant payment is done via PSP transaction services, since they transfer the money to the startups’ accounts at the end of each day and the startups settle with drivers the next morning.

Toman has also included added-value services to its application. These services currently include purchasing mobile top-up and Internet packages. Bill payment will also be included in Toman’s services in the coming month.

Toman’s business model

Toman’s business model is based on the commission for the services it provides. It can be from either side, both from the user and from the providers, like PSPs. Small ticket transactions are very valuable for the PSPs, as they get a commission fee for every single transaction from the banks. It means that a high number of transactions will benefit them.

However, banks are not very satisfied with this method as it imposes overhead costs to the agent bank (the bank in which the user has an account). They have to pay the transaction fees to the PSPs.

The real challenge of Toman and other startups in this field is to transform the process of getting a commission for the users. In fact, the way out can be a combination of commissioning both the user and the PSP.

For now, Toman does not receive any commission from the transactions. However the estimation will be around 2 to 3 percent for each transaction.

What is the size of small ticket transaction market?

According to Toman’s estimation, a breakdown of the small ticket transaction market in different fields is as follows:

• The annual taxi change transaction market in Tehran and 7 other big cities of the country is about 6,000 billion tomans.
• The annual Uber-like startups’ market in Tehran and 7 other big cities is about 8,000 billion tomans. Around 70% of this amount is going through startups.
• The annual motorbike package delivery market is around 4,000 billion tomans.
• The annual shop small ticket transaction market, (with less than 25,000 toman) is more than 100,000 billion tomans.
• The annual online mobile top-up market is around 16,000 billion tomans, which a huge share of it goes through USSD.
• It is tough to estimate P2P payments. But, 2 to 3 million card-to-card transactions happen daily in the country. Assuming that the average transaction amount is 20,000 tomans, the annual size of this market is 15,000 billion tomans. There are no statistics on the average transaction amount in the card-to-card transactions.
• No maximum estimation can be considered for the internet payment market.

Only 2% of taxi fees are paid online.

Based on Toman’s data, the number of daily taxi rides happening in Tehran is between 2 to 3 million. Only 2% of taxi fee transactions are paid online which is around 50,000 rides. It is worth to mention that Mashhad has around one million daily rides.

Toman’s market development perspective

Toman’s market can be set into three sections: Small ticket transactions, shop transactions, and B2B services. Toman plans to implement them respectively.

Small ticket transactions

The first set of services has already been launched. Toman has focused on the electronic payment in transportation, since no proper solution has been presented for small ticket transactions yet.

Value-added services that were formerly mentioned are also of the small ticket transaction payment services. It is expected to redirect the market from USSD payment to the app payments and get more users.

Person to person (P2P) payment is also included in these services. Considering the fee for card-to-card transactions, it is a great time to launch the service for this market.

Shop open platform:

Toman’s solution for shops is an open platform. Considering the huge market of shop transactions, Toman provides an open platform in order to cooperate and develop the market. Several digital wallets can work in this platform. Toman’s targets for this service are supermarkets, bakeries, and other shops with a high number of transactions.

B2B business services 

Toman will launch its in-app payment gateway to serve other applications. Toman will serve online platforms in terms of settlement services. There is a lot to do and huge room for improvement in this niche market of Iran.

Moreover, Toman plans to establish a credit scoring system on the users’ end. It will be an advantage in competition, since establishing a validation system with a big pool of users is pretty difficult. Besides, due to the high number of small ticket transactions, this system can score users more easily.

Toman’s growth in the past 6 months: 30% of Tehran taxi drivers got registered on Toman

Toman has  20,000 daily transitions. In terms of taxi drivers, it has already gained 30% of the market. About 70,000 active drivers work in Tehran from whom 20,000 are Toman members. Toman foresees that 50% of drivers will become members of this platform by the end of the spring. This startup has about 150,000 users now.

In the following graph, you can see the month-to-month growth of Toman, based on the number of rides per transactions done via this Toman:

In the following graph, you can see the month-to-month growth of Toman (compared to the month of Mordad), based on the number of rides per transactions done via this Toman:

And This is Toman’s performance compared to other player in the market:

Like any other new market, startups that work in this field face many challenges. Taking a glimpse on a short list of these challenges we can refer to what follows:

• Challenges with regulations and government institutions
• Scaling up the teams
• The Public mindset which assumes all FinTech startups do the same job
• High costs of user acquisitions in FinTech startups due to the abundance of advertisement in this field in the recent years.