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Revolutionizing digital payment

Revolutionizing digital payment
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Nityanand Sharma, Co-Founder & CEO, Simpl, shares how the company is changing the payment scenario in India.

Take us through Simpl’s journey so far.
Once I was sure that I wanted to start a payments company that can help credit-worthy users and provide seamless payment experience through a pay-later facility, I decided that the core of the company would be trust between the merchant and the users. We have used modern technologies to revolutionize the age-old ‘khaata system’ by digitalising it, keeping the fundamental of the khaata system intact, which is trust. But Simpl is a lot more than just new-age ‘khaata’ because we have reimagined payments from the ground up by making it easy sans all the hassles. From a single merchant in the cloud kitchen brand, Faasos, Simpl has grown to over 1000+ partners. Our aim is to reimagine payments driven by trust, relationship, and loyalty between merchants and their consumers. Today Simpl is focused on large e-Commerce merchants that consumers use frequently, but we believe the opportunity is universal across online and offline commerce

What all solutions do you offer the retail industry?
Simpl has always focused on small transactions that consumers do frequently. We are approaching this segment with a user experience that is superior to all other current payment options from a consumer and merchant perspective, which drives massive engagement. For Simpl, the superior user experience addresses deficiencies of the India payments stack through our deep integration with merchants, which for us, is as the pay-later feature. The most pressing needs of the current market are easy accessibility, replacing cash on delivery, and boosting cart conversions and Simpl solves that for the merchants because we help move consumers away from Cash on Delivery, increase the transaction success rate to 99%+ (from 75%), and, on top of that, increase order frequency by 20% as the checkout experience becomes more seamless and directly embedded in the merchant’s infrastructure.

With the demand for ease of payment, superior user experience, and money management growing exponentially in Tier II and Tier III cities, digital payments have a long way to go in India. And we think there are enough opportunities to focus on in the retail space. While it is too early, currently, we are seeing the rise of small businesses like florists, or bakers leveraging platforms like Dunzo to fulfill orders.

 

What changes have you observed during the COVID-19 era? How has the demand for your solutions changed in this period?
In the pre-COVID time, more than 60% of all e-commerce transactions in India used to happen via cash but that has drastically changed as most of the essentials and food companies have implemented contactless deliveries to ensure the safety of delivery partners and consumers hence, they have stopped COD as a payment option and people are now opting for online mode of payment to place orders.  The need of the hour is to promote digital payments for all transactions including daily essentials. We, at Simpl, are seeing a 40% increase in transactions for essentials from hyperlocal merchants, and 40-45% for medicines compared to pre-COVID days and the trend shows an average 1.5x increase in ticket size and a 40% spike in the overall GMV of offline merchant partners as well.

 

Any changes in consumer behaviour in the COVID-19 era?
The Coronavirus breakout has changed our normal routines, what we buy, and how we live. Prior to the lockdown days, 30-40% of online users ordered groceries and home essentials between 10 AM – 1 PM whereas 60-70% users made transactions between 6 PM – 9 PM. Post lockdown, those transactions are happening on an hourly basis. Online grocery and essential shopping are becoming the new normal during work-from-home routines. The consumer behaviour is shifting towards online purchases rather than offline and once the lockdown is over there will be a behavioural change in decision making and it will also be a key factor in prospects going forward, in terms of the presence crowds, close mingling with strangers may still make people wary for some time.

 

What market factors drove the development of the solutions that you offer? What is the demand for such solutions?
About 90% of India’s population has limited access to financial services, and it created a huge opportunity to reimagine financial services for a world of smartphones backed by incredible amounts of data. India is the fastest-growing mobile commerce market in the world, ~500M people with a smartphone connected to the internet and the country has one of the most advance banking infrastructures in the world; 900M people now have a bank account, all these consumers have debit cards and UPI handles, almost 1B consumers are KYC’d (Aadhar).

On the other hand, more than 60% of all e-commerce transactions in India are done with Cash (Cash on Delivery), only ~25M unique people have a credit card, ~25% of all digital transactions on mobile fail at checkout and a digital transaction typically involves multiple factors of authentication leading to dreadful and cumbersome user experience at checkout. The idea behind Simpl is to help the e-commerce merchants to build a trustworthy relationship with their end customers and it is an elegant solution to address challenges around trust and user experience. Simpl provides consumers a 1-click checkout with pay later functionality to build trust and provide strong buyer protection. This helps online retailers give their consumers an exceptional checkout experience and post-transaction customer service and solves the problem around the digitisation of payments hence, the demand for this ‘buy now, pay later’ product is huge and I believe the ultimate opportunity in Pay Later over a 10-year horizon is to replace the credit card as we know it.

 

Who are your clients? What kind of partnership arrangement do you have with them?
Simpl works with 1000+ merchants like Zomato, Bigbasket, Quick Ride, Bounce, Faasos, Dunzo, etc. Simpl is a B2B2C platform that acquires users directly from its merchant network at the point of sale.  The ‘Pay with Simpl’ button becomes visible to those consumers who are pre-approved for credit on the network. The platform functions as a powerful tool for building a reliable relationship between merchants and consumers through seamless registration without the requirement of KYC and offering one-tap checkout for multiple purchases.

How much does the solution cost?
We do not charge customers for utilising our services, Simpl is absolutely free to use. Simpl’s pay-later business currently generates revenue directly from the merchants, and they pay a Merchant Discount Rate (or “MDR”). This MDR compensates Simpl for the cost of the transaction (covering everything from the credit risk associated with the underwriting to the financing of the advance to the merchant and the full stack cost of collections and servicing)

What are the current trends you are witnessing in this space?
Coronavirus pandemic is forcing businesses and merchants to try digital payment platforms like eWallets, UPI-based apps, and net banking. This is leading to a sharp jump in the number of digital payment users. While this rise is indeed laudable, businesses and merchants must take this grim situation as a perfect opportunity to provide convenience and fungibility to their consumers, in terms of the trust, for their continued primacy. Considering that the society operates on high levels of trust, the advantage of a pay-later or credit system can provide maximum value to the people. The ‘Buy now, Pay later’ segment as a payment category has also seen a surge in first-time users, as credit system or ‘pay-later’ facility provides maximum value to users by allowing them the flexibility to make instant payments on every transaction and paying the total later, at their own convenience. The bill size per user has increased by 30-35% across the board as compared to pre-COVID days.

What are the challenges you face?
We do not see any specific challenges apart from the usual ones faced by startups in this space like hiring and changing regulations. Our online shopping space appears concentrated in the hands of few well-funded startups. As this space evolves, we will see more democratization of online commerce, which we think will be even better for a neutral Pay Later product like ours.

How do you see the market growing? What are the growth drivers?
Pay Later is the fastest-growing category of payments in the world. The macro trend that is fueling this growth and the opportunity is a shift in consumer behavior towards payment instruments that provide exceptional user experience, buyer protection, and affordability with extreme transparency and no fine prints. In India, the opportunity is even greater due to extremely low credit card penetration and usage. Approximately 25M unique people in India have a credit card, compared to ~500M people who have a smartphone. We are a country with phenomenal technology infrastructure around bank accounts, India Stack, UPI & mobile-first commerce, yet the majority of transactions still take place via cash. It’s a huge market opportunity for the pay later space.

How do you foresee the retail changing, going forward? What are your future plans?
As working remotely from home has become the new norm amid the virus scare, people are now being extra cautious and stepping outside only to buy essentials to avoid getting infected in crowded places like supermarkets and grocery stores. Nobody really knows what the world will look like post the pandemic. The crisis has already pushed the global economy into a deep recession and seems poised to leave its mark on how consumers live, how they spend their money, and how they will shop. Moreover, there is a major transition from offline to online.

Our aim is to continue offering a convenient and safe checkout experience to our users. We do so by building a smart data and intelligence layer facilitating commerce between merchants, consumers, and capital providers. Being a neutral entity allows us to be the intermediary of trust that connects the three groups to each other in a way that creates value for everyone involved. Our long-term vision is to offer affordability when required, and loyalty programs to users who deserve it.

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