Last year, the Associated Chambers of Commerce of India (ASSOCHAM), in association with Deloitte, released a report on the current state of Indian ecommerce.
According to the report, the Indian ecommerce market was pegged at $13.6 billion in 2014, and by the time 2015 ends, it crossed the $16 billion mark. Ecommerce transactions grew by 53 percent in 2014.
Along with growth in ecommerce, the payment industry has been developing new products and services to capture a share in this growing space. This development provides consumers with more convenience and security when making online purchases.
Experts say the choice of payment options is a key consideration for online merchants in order to reduce shopping cart abandonment. Offering payment options that are confusing to consumers, whom they do not trust or who are simply not in accordance with their banking needs, can significantly impact the success of the sales channel.
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A year ago, Aurko Bhattacharya, an IIT-Roorkee graduate who holds a PGDM from IIM Calcutta, and his peers – Uday Somayajula, Akshat Saxena, Prasannaa Muralidharan and Shanmuhanathan T – started exploring ideas in payments and lending, and personally experienced the friction that exists today at the point of checkout on ecommerce portals.
They realised that there was a huge trust deficit among online shoppers that was leading to a high occurrence of COD. There are many online-first customers who prefer to transact very frequently with online merchants, but the experience of payments leaves much to be desired. They worked towards a solution that can decouple shopping from payments, and thereby extend a more simplified online experience to the customer. They had seen solutions in Europe and the US for point-of-sale lending and sensed the opportunity to do the same in India.
In March 2016, they launched ePayLater, a cash-free payment solution for ecommerce consumers.
“It is a pioneering concept that allows customers to ‘buy now and pay later’ on online portals with just a single click/tap. The customers get billed only after delivery of the product, and the solution acts as a great substitute for COD. Thereafter, the customers get 14 days to make the payment,” says Aurko, who is the co-founder, and has 11 years of banking experience dealing with structured investment solutions.
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He adds that since the checkout is single-click, and offers a near 100 percent transaction success rate unlike payment gateways, which witness significant drops. Put together, it extends ease of shopping to customers, and higher volumes and margins to the merchant.
ePayLater has launched the platform with a South India-focussed online organic grocer becoming the first company to provide the "buy now, pay later" solution in the Indian market. He has been in talks with other hyperlocal players, and is gradually increasing the reach of the product.
According to the platform, merchants are keen to add this feature to their digital/online stores. It says that, so far, it has been selective in reaching out to merchants but has been receiving very encouraging responses.
“Some of these are the largest players in their respective categories, and we are expected to go live with them in the next couple of months,” says Akshat Saxena, another cofounder.
Banking on banks
The short-term loan of 14 days is provided by financial institutions. For banks, it turns out to be a low-risk, high-return product.
The platform says that in terms of credit assessment, what differentiates it from a traditional credit product is the fact that it crunches in a lot of data across various sources and provide results in real time. Further, since it relies on alternate data, it is able to reach out to those deserving individuals who are otherwise left untouched by banks and other financial institutions due to non-availability of financial history.
“The financial institutions we are speaking to are quite excited at the prospect of participating in this business as well,” says Akshat.
Initially, the venture was bootstrapped with the co-founders chipping in with their savings. That money was spent on product development and taking extensive legal opinion.
Recently, it raised $2 million from a group of HNIs. Now, it is looking to use this funding for product development, marketing, and business development.
It operates on B2B2C model, and claims to have on-boarded some of the largest online merchants in the country.
The revenue model entails charging transaction fees to the merchant and a penal interest on overdue payments to the customer.
The challenge is to do a smart credit and fraud risk assessment while causing minimal customer friction.
Only eligible buyers get the option to pay via ePayLater. The platform claims to rely on a strong algorithm and due diligence on the users’ profile. Recent transactions on the merchant’s platform, social media, and other transactions’ behaviour reveal a lot about the consumers.
The core team claims to have a deep exposure and first-hand experience to sectors like banking, payments, fraud prevention, analytics, and big data, and are concentrating on getting this critical component right.
“We can work to mitigate the payment loss as much as possible, but it’s impossible to check it completely. We are ready to take that much risk,” says Uday Somayajula, co-founder, ePayLater.
It is currently focussing on the e-tailing space, and once it builds traction there, it will start diversifying to new market segments.
According to the platform, it has many plans for the future, which involves diversifying into the offline retail space, and reaching the vast population of India, which has no easy access to finances. It aims to help in enhancing government's efforts towards digitisation and financial inclusion. It also believes that this solution has application in other Asian countries and would be looking to expand in other geographies at a later stage.
The size of the total e-tailing space is predicted to be $35 billion by 2020. Out of this, COD is predicted to be about 40-50 percent and the rest is split between the different payment methods.
The venture says that its solution addresses both the advantages of COD and convenient online payments for customers. Even 10 percent of the market would be $3.5 billion worth of transactions by 2020, as predicted by a few leading analyst reports.
“We have our eyes set on the offline piece as well,” adds Aurko.
ePayLater is not alone in the segment. Mumbai-based Citrus Pay has developed Lazy Pay for customers to buy goods online and make payments later. PayWorld, another platform, has tied up with an NBFC (non-banking financial company) to facilitate easy credit for its customers. Simpl is also providing a similar service. They all aim at enhancing customer base and improving the revenue stream.