How this startup by ex-KPMG exec is providing payments solution to credit-starved merchants

Today, we are living in a society driven by technology, which in turn is transforming the business and customers. But for 47-year-old Jaijit Bhattacharya, tech-led societal transformation has been the proverbial Gordian Knot. Jaijit always believed that the financially abundant have access to systems, processes, and technology that a majority of the population does not have access to. 

According to him, this begins with the cost of credit. The poor have to pay a much higher cost of credit as they do not have a credit rating, which comes from the fact that they have perhaps never taken an institutional credit.

“This becomes a vicious cycle wherein one does not have access to institutional credit, and so one does not have credit scores, and hence do not get institutional credit. So, the idea was, could we get at least small retailers get access to credit by leveraging their payment data? However, that would imply that we would need to provide them with access to digital money in a low-cost manner,” says Jaijit. 

This led him to start Zerone in 2018 in Bengaluru. The startup provides SoftPOS (a software that converts the smartphone into a payment POS machine) solution built on its proprietary technology SoftPOS.

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What does it do?

Zerone was started to provide small retailers with a low-cost and highly scalable digital payments system that could accept all kinds of payments, including card payments. 

“This could happen if we could convert their existing smartphones into payment PoS machines by simply downloading an app without the need for additional hardware. One could create such an app using Near Field Communication (NFC), but unfortunately, less than two percent of the phones in India have NFC,” says Jaijit. 

Hence, Zerone started building an alternative to NFC that would work like NFC on all mobile phones. Jaijit says, this technology solved only one part of the problem, which was to provide cheap POS machines in a highly scalable manner. The other part of the problem was to provide low-cost credit to small merchants. For this, Zerone developed a technology that converts all smartphones into POS machines, and users can make payments with a simple swipe of their phone.

“We allow any smartphone to be converted into a payment POS machine without the need for any additional hardware to be attached. The SoftPOS accepts payments by another phone waving on the SoftPOS phone or by tapping a card on the phone or by using any existing app such as PhonePe, Paytm, GPay, etc., to pay through a QR code that can be displayed on the screen,” says Jaijit. 

How does it work?

Zerone allows small merchants to avail low-cost credit based on their payment data. The criteria to provide low-cost credit to small merchants is the ability to accurately assess their credit risk profile based on proxy date, and being able to disburse low value credit quickly at low cost, and being able to collect low value repayments at a low cost.

The ZUP SoftPOS enables the above in a seamless orchestration of multiple technologies. “We have filed for four patents on the technology, including two in the US. This technology allows our SoftPOS to initiate payments when one phone waves on top of the SoftPOS phone, without the need for any additional hardware. We use radio frequency waves to orchestrate the payments,” says Jaijit.

A merchant has to simply download the ZUP SoftPOS app and on-board themselves through the app. This would involve doing the eKYC and providing their bank details for remitting the payments. Based on the data available, a credit line will be made available to the merchant, which they use to make payments against invoices. 

The credit line is provided by a backend bank/NBFC. They also help the retailer collect payments from their customer through the same ZUP SoftPOS. The amount received from the retailer’s customer is then used to start making repayments against the credit taken by the retailer. The ZUP system orchestrates the entire retailer payment and credit experience, including default management.

The offering works as a payments-credit combined platform that aggregates retailers, banks, and the extended ecosystem, rather than treating it as a standalone payment or credit system. 

“We target middle-of-the-pyramid retailers who operate in a trusted ecosystem. We charge a fixed-monthly fees for the combined offerings of SoftPOS and credit,” says Jaijit. 

While the team refused to share how much it charges the merchants, Jaijit says, “Our incremental cost of deployment of one more SoftPOS is near zero. The key cost is in outreach to the retailer, which we have significantly reduced due to our unique go-to-market approach. Our cost of on-boarding one merchant is a fraction of the cost borne by other players who also need to do merchant on-boarding.” 

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The team

Jaijit graduated from IIT Kanpur and has an MBA from IIM Calcutta. He is also a PhD from IIT Delhi. Before starting up, he worked for Arthur Andersen (currently Accenture), IBM Research Labs, Oracle, Sun Microsystems, HP, and KPMG India. 

At KPMG, Jaijit met Richard Rekhy, a CA, and the CEO of KPMG India. “Around 2016, I started working on this technology as a hobby, and kept Richard updated on the developments. By 2018, we ended up building a very strong technology and we took the call to take it to the market. Richard quit KPMG in 2017 end, and I moved on from KPMG in 2018 to commercialise the technology,” says Jaijit. 

The duo roped in Pia Bruce, a senior advisor for the UN Women, Co-founder of Angels of Impact, and a founding member of Aidha, which is a micro-business school for domestic workers. She has a Master’s from Harvard University. Another team member is Parag Deshpande, a Former Member of Board and VP Operations of Amex Biz Solutions. 

The other team members include Aditya Loonkar, a CA and former manager with KPMG’s International Taxation and Economic Valuations practice, Akshay Kapoor, who has experience in payment processing and rural loan management, a former banker with Axis Bank, and has an MBA from XIMB, are also part of the team. Vivek Sharma (25) brings in deep technology experience in development and deployment across 12 large projects.

The market and funding 

The team members initially invested their personal savings into Zerone, and also raised funding from angel investors. Recently, Zerone raised a round of funding from Anthill in the form of Convertible Notes. 

Speaking of their investment in Zerone, Devang Mehta, Managing Director, Anthill Ventures, says, “Zerone has shown early promise to be a strong disruptive force in the fintech/payments space. It has a talented team, compelling IP, and a huge growth potential. We look forward to partnering with Zerone, and be in their explosive growth trajectory"

Some of the other prominent players in the space include sound-based payments provider ToneTag, which recently collaborated with Japan’s GMO Payment Gateway. In October last year, ToneTag tied up with First Abu Dhabi Bank, one of the largest banks in the UAE, to deploy sound-based contactless payments. ToneTag counts Amazon, MasterCard, and Reliance Capital as its investors. 

Speaking of their future plans, Jaijit says, “We would like to take the platform to other economies that face similar challenges. We are already in preliminary discussions with potential clients in Vietnam and the Philippines. We would also like to provide additional services through the same platform that enables digital proximity interactions. One can download Zup app and be able to exchange contacts by simply swiping one their phone over another. We would like to help build a larger ecosystem, so there is considerable stickiness to the platform.

(Edited by Megha Reddy)

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