Instamojo makes NEFT transaction free for sellers; introduces new feature
Digital payment service provider Instamojo on Wednesday announced that it has made online transactions through National Electronics Funds Transfer (NEFT) free of cost for its five lakh seller base.
The company has been piloting with NEFT as a payment mode on its platform for the last two months. The service has been rolled out to around 25 percent of Instamojo’s seller base (i.e., little over 1 lakh sellers) at present.
In a statement, Instamojo has said that it is aiming to take its SME base from 5,00,000 at present to 2.5 million by 2020.
Explaining the workings of NEFT on its platform, the company said that Instamojo NEFT or Direct Bank Transfer will work with a Virtual Account Number (VAN). A 20-digit number will be generated with every order or payment, so that one does not have to share their bank details every time he/she shares a payment link.
The virtual account number will also allow one to track who paid, for what purpose, thus helping sellers to easily reconcile their payments from one dashboard, which is an edge Instamojo looks to provide.
So, how will Instamojo’s top line get affected by this?
When asked, Sampad Swain, CEO and Co-founder, Instamojo said,
“There's a small cost for NEFT transactions that Instamojo will absorb for the benefit of our sellers. Like a typical NEFT transaction where the seller doesn't incur any costs, with Instamojo NEFT also, a seller will not incur any costs.”
When asked why they choose to choose NEFT for this offering, Sampad replied,
“Till now, this NEFT option wasn't part of any online checkout process. However, we have partnered with our banking partners to bring this option for our sellers, and are hoping a slice of the broader market will adopt while enjoying other benefits like auto reconciliation, notifications, customer management, and refund management process via Instamojo dashboard."
At present, the cost of NEFT transaction up to Rs 10,000 is Rs 2.50; from Rs 10,000 up to Rs 1 lakh is Rs 5; from Rs 1 lakh up to Rs 2 lakh is Rs 15; and from Rs 2 lakh up to Rs 5 lakh is Rs 25.
While having the ability to have no limit on the maximum transfer value, NEFT is sought by the challenge of not being a instant settlement infrastructure. However, media reports last March suggest that the RBI was increasing the settlement cycle to 23 from 12 currently, to facilitate half hourly settlements instead of the hourly settlement.
However, according to the latest RBI bulletin, NEFT transactions in the country fell from 212 million transactions made in March 2018, to 167 million transactions in April 2018. Even the value of transactions made on NEFT fell from 22.5 lakh crore to 16.3 lakh crore between March and April 2018.
Along with this announcement, the Bengaluru-based startup is also introducing “Next Day Payout” feature, which will be rolled out to select merchant partners as the feature continues to be in the Beta stage.
The company says this is to help SME partners with cashflows, reducing the time taken to receive due payments from three working days to 24 hours.
The ‘Next Day Payout’ product enables SMEs to be paid (by Instamojo) the next day itself without any hindrance. Once the money is deposited for the services, Instamojo keeps the proceedings, which was credited to the SME partner on their platform.
The company is also looking to target close to 1 million small and medium businesses by 2018.