From the article: [...] [...] And why is the loan so easy to get? Because the fintech company sees all the transactions. They know a lot about the vendor they're loaning to. So this seems like an...
From the article:
The sound box device — first introduced by India’s largest fintech company, Paytm, in 2019 — has been a runaway hit among small Indian businesses. Neighborhood mom-and-pop stores (kiranas) and street vendors, who had traditionally shied away from paying for tech services, have warmed up to the sound box. The smart device — essentially a speaker bearing the logo of the fintech company facilitating the transactions — comes with a built-in SIM card. Most sound boxes can read out payment confirmation messages in English and multiple Indian languages, such as Hindi, Tamil, Telugu, Bengali, and Punjabi. In Indian cities and towns, sound boxes can now be seen across diverse businesses — from kiranas and clothing stores to produce carts and shops selling smoking products.
Sound boxes have become a lucrative proposition for Indian fintech companies. Digital payments have taken off in a big way in India in recent years due to the government’s unified payments interface (UPI) that allows users to make instant bank transfers with mobile phones. The volume of UPI transactions in the country grew from 20 million in the 2017 financial year to 60 billion by the third quarter of the 2023 financial year, according to data from the National Payments Corporation of India (NPCI), which runs UPI. The value of UPI transactions made in the same period skyrocketed from 1,000 crore rupees (over $121 million) to 100 lakh crore rupees (over $1.2 trillion), the data shows.
But this boom hasn’t helped fintech companies in India as they do not make money from facilitating UPI transactions. Sound box subscriptions have therefore become a lucrative revenue stream.
[...]
Sajith Pai, partner at venture capital firm Blume Ventures, believes the device’s success lies in its ability to solve an important problem. “Confirmation that money has come was a perennial issue for vendors,” Pai told Rest of World. “A lot of vendors had feature phones with SMS limits, and hence, confirmations of payments didn’t come in real time as SMS inboxes were full. Some asked to see customers’ phones or asked customers to send [the payments] again, which led to lots of arguments and a poor checkout experience. Sound box [services] seem to have solved that problem.”
[...]
Sound boxes also help fintech companies cross-sell their other financial services to merchants.
Balwant Singh, 32, runs a grocery store in New Delhi with his mother. He bought a Paytm Soundbox in 2020 after realizing digital payment receipts could be doctored. “[Before sound boxes], people were using apps to create fake payment receipts. I got conned a few times,” he told Rest of World. Six months after subscribing, Singh received an instant loan of 3 lakh rupees (around $3,600) from Paytm. He used the money to add more products to his store. “I had never thought of taking up a loan since it involves lots of paperwork and could take months to get processed. Here, I got it instantly so I took it up,” he said. After he paid it off, Singh took another loan from Paytm for 5 lakh rupees (around $6,000).
And why is the loan so easy to get? Because the fintech company sees all the transactions. They know a lot about the vendor they're loaning to. So this seems like an example of giving up a lot of privacy (a vendor wouldn't normally like sharing all that info) and entering into a partnership of sorts. (They'd also be giving up information by applying for a loan the old-fashioned way.)
I love this! I had a chance to take a trip to the Himalayas recently, and it was EVERYWHERE! From tiny shops to big retailers, I just can't believe the rest of the world hasn't caught up yet....
I love this! I had a chance to take a trip to the Himalayas recently, and it was EVERYWHERE! From tiny shops to big retailers, I just can't believe the rest of the world hasn't caught up yet. Imagine cutting out the middle-man (Visa, Mastercard, Amex, etc) and the mom-and-pop stores don't have to pay a 3% fee to accept cashless payments :)
I’m living in a country where mobile direct bank transfer is commonly used. It’s great for sending money between friends and family. However, many people and I still use credit cards for most...
I’m living in a country where mobile direct bank transfer is commonly used. It’s great for sending money between friends and family. However, many people and I still use credit cards for most purchases.
The credit cards (“middlemen”) offer a significant value to the customer: protection. Bank transfers (and debit cards) take money directly out of bank account. In the case of fraud, overcharges, etc, you’re actually out that amount until you notice and get it resolved. You could be screws if they managed to drain your entire account. Credit cards act as a buffer in such cases, on top of having robust fraud monitoring, alerting, and countermeasures. You still have access to all of your money until the credit card company wants you to settle the outstanding balance. A “chargeback” equivalent doesn’t really exist for direct transfers, another useful protection tool. It’s a whole ordeal to try and claw back one of those direct transfers.
That's a very valid point, I hadn't considered that. I guess it makes sense to have a system where credit cards co-exist with the UPI system. It does seem worth it for reducing the friction for...
That's a very valid point, I hadn't considered that. I guess it makes sense to have a system where credit cards co-exist with the UPI system. It does seem worth it for reducing the friction for transactions between friends & family as you mentioned! I'd love to dig deeper at some point and grok how the system works...
Of course, credit cards exist in India, but they haven't really taken off. People usually overspend, manage poorly, and accumulate debt. However, the recent financial boom has allowed for the...
Of course, credit cards exist in India, but they haven't really taken off. People usually overspend, manage poorly, and accumulate debt.
However, the recent financial boom has allowed for the expansion of several financial products, which has undoubtedly facilitated credit availability, but individuals don't grasp them and end up in all kinds of trouble. I'll give you an example: There was a boom in "buy now, pay later" and "pay-in-three" services up until last year, which were popular with teens, but they ran into debt because they overspent and had no regular source of income. Thus, those services were banned by the banking authority.
Apart from that, there is a domestic equivalent to Visa, Mastercard, etc. called Rupay, but it is only accepted in India and is not accepted elsewhere. In the future, it might grow.
Regarding the Merchant Discount Rate (MDR), the government is considering allowing a fee, but that would be challenging because some consumers would inevitably start preferring cash. Recently, 1.1% MDR was introduced for purchases using specific payment methods and totaling more than INR 2000.
Rupay is part of the same global payments network as Discover/JCB/UnionPay and so on, so so long as the issuing bank allows non-domestic use, those RuPay cards should work outside India just fine....
Rupay is part of the same global payments network as Discover/JCB/UnionPay and so on, so so long as the issuing bank allows non-domestic use, those RuPay cards should work outside India just fine.
It's why Discover is really popular with East/South Asian communities here in the US, as those partnerships mean it's ironically easier to find a place that takes Discover in these countries vs Visa/Mastercard/Amex.
I am surprised that UPI and the like did not enable debit/credit card linking at launch, though. Are debit cards just not a thing in India, then?
My bad. I should not have made the broad generalisation that Rupay isn't accepted outside of India. Yes, Rupay supports Discover/JCB, although I'm not sure how popular they are in other countries....
My bad. I should not have made the broad generalisation that Rupay isn't accepted outside of India.
Yes, Rupay supports Discover/JCB, although I'm not sure how popular they are in other countries. However, VISA and Mastercard are quite popular in India, and practically everyone accepts them. And, because Rupay was created to challenge the VISA/MC duopoly, they did not form a partnership with them for overseas markets.
Further, because VISA/Mastercard dominate global e-commerce, almost no one tests to find out if their Rupay card works on any international website that accept Discover/JCB. Anyone who wants to make an international purchase would most likely have a VISA/MC debit or credit card.
On the other hand, practically all domestic e-commerce sites accept Rupay because they mostly use unified payment gateways such as Razorpay/PayU etc.
I don't think the creators of UPI anticipated such widespread success, so they didn't add too many features at launch. However, because it has changed the way people transact in everyday life, they are now attempting to expand/experiment. There is no need to link a debit card to UPI because it allows users to link their bank account. But, since credit cards are not connected to bank accounts, a retailer must have a POS terminal in order to accept payments made by swiping or tapping. But with UPI, you only need a QR code and no additional hardware, which lowers costs and makes it easier to accept credit card payments, which could aid in the penetration of credit cards in the Indian market.
Before UPI, debit cards were the primary method of payment; however, since UPI eliminated the transaction fee, more people now prefer UPI. Nowadays, people primarily use debit cards for online transactions (UPI is supported on online payment gateways as well) or when a sizable amount is involved. The daily transaction cap for UPI is INR 1,00,000 ($1200), which is sufficient in the majority of cases.
Credit Cards support for UPI is being run on a trial basis. Currently only homegrown Rupay network cards of 8-9 banks are supported. Biggest advantage is we get all credit card features minus the...
Credit Cards support for UPI is being run on a trial basis. Currently only homegrown Rupay network cards of 8-9 banks are supported. Biggest advantage is we get all credit card features minus the charges. All transactions over UPI have zero charges.
Does it work outside India? The payment system seems to be specific to India:
Does it work outside India? The payment system seems to be specific to India:
Digital payments have taken off in a big way in India in recent years due to the government’s unified payments interface (UPI) that allows users to make instant bank transfers with mobile phones. The volume of UPI transactions in the country grew from 20 million in the 2017 financial year to 60 billion by the third quarter of the 2023 financial year, according to data from the National Payments Corporation of India (NPCI), which runs UPI. The value of UPI transactions made in the same period skyrocketed from 1,000 crore rupees (over $121 million) to 100 lakh crore rupees (over $1.2 trillion), the data shows.
Yes, it is limited to India, but they are working on ensuring compatibility with other payment systems. For example, they have linked UPI with Singapore's PayNow. In addition, UPI is a component...
Yes, it is limited to India, but they are working on ensuring compatibility with other payment systems. For example, they have linked UPI with Singapore's PayNow.
In addition, UPI is a component of Indiastack, a collection of Open Source technologies that any country can use. So, if other nations adopt it, that might improve interoperability. While the rich world may not employ it, I believe it can be beneficial to developing countries.
From the article:
[...]
[...]
And why is the loan so easy to get? Because the fintech company sees all the transactions. They know a lot about the vendor they're loaning to. So this seems like an example of giving up a lot of privacy (a vendor wouldn't normally like sharing all that info) and entering into a partnership of sorts. (They'd also be giving up information by applying for a loan the old-fashioned way.)
I love this! I had a chance to take a trip to the Himalayas recently, and it was EVERYWHERE! From tiny shops to big retailers, I just can't believe the rest of the world hasn't caught up yet. Imagine cutting out the middle-man (Visa, Mastercard, Amex, etc) and the mom-and-pop stores don't have to pay a 3% fee to accept cashless payments :)
I’m living in a country where mobile direct bank transfer is commonly used. It’s great for sending money between friends and family. However, many people and I still use credit cards for most purchases.
The credit cards (“middlemen”) offer a significant value to the customer: protection. Bank transfers (and debit cards) take money directly out of bank account. In the case of fraud, overcharges, etc, you’re actually out that amount until you notice and get it resolved. You could be screws if they managed to drain your entire account. Credit cards act as a buffer in such cases, on top of having robust fraud monitoring, alerting, and countermeasures. You still have access to all of your money until the credit card company wants you to settle the outstanding balance. A “chargeback” equivalent doesn’t really exist for direct transfers, another useful protection tool. It’s a whole ordeal to try and claw back one of those direct transfers.
That's a very valid point, I hadn't considered that. I guess it makes sense to have a system where credit cards co-exist with the UPI system. It does seem worth it for reducing the friction for transactions between friends & family as you mentioned! I'd love to dig deeper at some point and grok how the system works...
Of course, credit cards exist in India, but they haven't really taken off. People usually overspend, manage poorly, and accumulate debt.
However, the recent financial boom has allowed for the expansion of several financial products, which has undoubtedly facilitated credit availability, but individuals don't grasp them and end up in all kinds of trouble. I'll give you an example: There was a boom in "buy now, pay later" and "pay-in-three" services up until last year, which were popular with teens, but they ran into debt because they overspent and had no regular source of income. Thus, those services were banned by the banking authority.
Apart from that, there is a domestic equivalent to Visa, Mastercard, etc. called Rupay, but it is only accepted in India and is not accepted elsewhere. In the future, it might grow.
Up until recently, one could only link their bank account and utilise UPI ID/QR to pay everywhere. However, they now allow users to pay with their Rupay-enabled Credit Card by connecting it to their UPI account. So, that's definitely helpful.
Regarding the Merchant Discount Rate (MDR), the government is considering allowing a fee, but that would be challenging because some consumers would inevitably start preferring cash. Recently, 1.1% MDR was introduced for purchases using specific payment methods and totaling more than INR 2000.
Rupay is part of the same global payments network as Discover/JCB/UnionPay and so on, so so long as the issuing bank allows non-domestic use, those RuPay cards should work outside India just fine.
It's why Discover is really popular with East/South Asian communities here in the US, as those partnerships mean it's ironically easier to find a place that takes Discover in these countries vs Visa/Mastercard/Amex.
I am surprised that UPI and the like did not enable debit/credit card linking at launch, though. Are debit cards just not a thing in India, then?
My bad. I should not have made the broad generalisation that Rupay isn't accepted outside of India.
Yes, Rupay supports Discover/JCB, although I'm not sure how popular they are in other countries. However, VISA and Mastercard are quite popular in India, and practically everyone accepts them. And, because Rupay was created to challenge the VISA/MC duopoly, they did not form a partnership with them for overseas markets.
Further, because VISA/Mastercard dominate global e-commerce, almost no one tests to find out if their Rupay card works on any international website that accept Discover/JCB. Anyone who wants to make an international purchase would most likely have a VISA/MC debit or credit card.
On the other hand, practically all domestic e-commerce sites accept Rupay because they mostly use unified payment gateways such as Razorpay/PayU etc.
I don't think the creators of UPI anticipated such widespread success, so they didn't add too many features at launch. However, because it has changed the way people transact in everyday life, they are now attempting to expand/experiment. There is no need to link a debit card to UPI because it allows users to link their bank account. But, since credit cards are not connected to bank accounts, a retailer must have a POS terminal in order to accept payments made by swiping or tapping. But with UPI, you only need a QR code and no additional hardware, which lowers costs and makes it easier to accept credit card payments, which could aid in the penetration of credit cards in the Indian market.
Before UPI, debit cards were the primary method of payment; however, since UPI eliminated the transaction fee, more people now prefer UPI. Nowadays, people primarily use debit cards for online transactions (UPI is supported on online payment gateways as well) or when a sizable amount is involved. The daily transaction cap for UPI is INR 1,00,000 ($1200), which is sufficient in the majority of cases.
Credit Cards support for UPI is being run on a trial basis. Currently only homegrown Rupay network cards of 8-9 banks are supported. Biggest advantage is we get all credit card features minus the charges. All transactions over UPI have zero charges.
Does it work outside India? The payment system seems to be specific to India:
Yes, it is limited to India, but they are working on ensuring compatibility with other payment systems. For example, they have linked UPI with Singapore's PayNow.
In addition, UPI is a component of Indiastack, a collection of Open Source technologies that any country can use. So, if other nations adopt it, that might improve interoperability. While the rich world may not employ it, I believe it can be beneficial to developing countries.
It is indeed specific to just India, unfortunately.
Upi is specific to india but japan has adopted similar payment method recently which is becoming popular there as well.