What is the situation with online banking in India

This material is dedicated to two Indian startups related to money transfers and online banking. It is interesting in both of them that both startups received serious funding from American companies and funds, but at the same time focused exclusively on India. Read about how to gain recognition from Western investors by developing a product for your (in this case, quite problematic) region.

Razorpay Offers Stripe Payment Services

The success of companies such as Flipkart , Snapdeal and Ola has attracted widespread attention to e-commerce opportunities in India, where the development of this attractive business is fueled by high consumer demand, wide Internet access opportunities and generous funding for venture capital firms. At the moment, a new startup called Razorpay , one of the participants in the current recruitment YCombinator, will try to use this trend, enabling more startups and larger IT companies in the country to facilitate the integration of payments in their services.

Razorpay recalls Stripe, a graduate of YC, in that it provides a fairly simple interface and access to companies that would like to accept online payments for their goods or services. Using the Razorpay APIs, the company will be able to arrange payment acceptance with a few lines of code, and then customers will be able to pay by credit, debit card or Internet banking services (online bank transfers are a popular service in India). However, Razorpay differs in that the startup was created by a team from India and works exclusively with Indian businesses.

And it is not as simple as it seems. Now, in order to be able to accept payments in this country, a company needs to do a lot of paper work, go through bureaucratic red tape and wait some time in the process of debugging interaction between different regions of the country. This is a rather difficult obstacle: it sharply reduced the number of companies that now provide payment services and blocked the way to India for many payment companies that could radically change the current situation. (For example, Stripe is not used in India, and PayPal, although it works, but faces its own difficulties ).

This, in turn, led to a “chain reaction” of the emergence of new startups across the country.

The difficulties of integrating a payment system into an online service were experienced by the founders Shashank Kumar and Harshil Mathur. Looking for an idea for their business, a couple of entrepreneurs felt the need for a payment system. Then, as Kumar said, they understood “how much is needed to get it” before integrating, which in itself was not easy. “We thought that we could solve the problem not only for ourselves, but also for others,” said Mathur.

So Razorpay appeared.

Although Stripe had competitors in the person of PayPal, Google and others, when the company first entered the market, many enterprises, as it turned out, were already ready to switch to Stripe, because "this does not completely suck." Razorpay faced a slightly different task: there are well-known players on the market likeCCAvenue , BillDesk and PayU , and the wider market has not yet fully formed.

“The ecosystem of payment services in India is actually still in its infancy,” says Kumar. “We are more likely to give impetus to business development in this area than to radically change the landscape.”

Part of the problem is the insufficient distribution of bank cards, when cash is used as the standard payment method for delivering goods from the online store. And this in turn affects the amount of fees from the payment made, given that many payment services, according to Kumar, charge a “double-digit” commission. For comparison: Razorpay currently offers two options - paying 2% or 2.5% for a successful transaction, each of which has its own characteristics.

So far, Razorpay, whose growth is mainly due to word of mouth, is showing pretty good results. One of its first customers was the Shifter Cargo Delivery Service , a marketplace for NanoWE nanotechnology expertsand a startup in tourism and hospitality Zostel . Mathur told me that over the past three weeks the number of their customers has increased by 100% every week, and the transatsky volume - by 300% per week.

The Razorpay core product was created by partners when they were still living in India. Then they improved it and went to California. Partnership with YC allowed the founders to "look at the world from a different angle and become more open," says Kumar, who worked for two years at Microsoft before creating Razorpay. “But we plan to return to India at the end of the program and settle in Bangalore,” said Mathur.

This experience will enable them to succeed in the fast-growing Indian market. Every two years, the volume of online payments made in the country doubles, and soon the payment market in India will become the third largest after the United States and China, as one of Y Combinator's partners, Kat Manalak, notes.

MobiKwik Indian Payment Startup Raises $ 25 Million From Tree Line, Cisco, AmEx, and Sequoia

The development of e-commerce in India has led to the launch of a large number of startups using the proliferation of smartphones to provide new mobile payment solutions. Earlier this year, Alibaba invested a fairly large amount in Paytm, and now MobiKwik is literally bombarded with money.

MobiKwik startup based in New Delhi managed to raise $ 25 million in another round of financing led by Singapore's Tree Line Asia hedge fund. A couple of interesting strategic investors took part in the transaction: Cisco and American Express.

Sequoia Capital, a well-known investment fund, also took part in large-scale round B. In 2013, MobiKwik raised $ 5 million in round A and is going to receive $ 100 million in round C, which is scheduled to be completed in the second half of this year.

Its competitor, Paytm, claims 25 million users are registered in the system, however, in addition to e-commerce, the service covers financial transactions using e-wallets and mobile payments. MobiKwik claims that at present “over 15 million” users have registered their e-wallets in his system, and the startup is seriously planning to increase their number to 100 million by the end of next year.

In connection with the proliferation of credit cards in India, small - not to mention the low level of use of bank accounts - mobile wallets. They are used in more complex payment options compared to the usual payment [in cash] upon delivery, and this method is more attractive compared to bank accounts, which can be difficult for residents of rural areas.

MobiKwik assures that the creation of a network of retail outlets will contribute to the spread of electronic services among more people. The startup said that it has a network of more than 100,000 outlets throughout the country, where customers can replenish their wallets and also make a direct payment. This is very important, because, despite the growing prevalence of smartphones in India - which we observe almost every day - the market is still in its infancy. Therefore, the offline component there plays an important role for any electronic service.

In addition to providing assistance in making payments, MobiKwik stated that it had submitted an application and received ( like Paytm) permission of the bank to make payments. The startup is planning to “revolutionize the provision of financial services in India, using mobile technology to attract those with whom modern banking networks could not establish contact.”

Similar to what has already been said about the introduction of Paytm the ability to make cashless payments, online payment services are beginning to increasingly intersect with the services of ordinary banks and banking services from mobile operators. I wonder what the future plans of MobiKwik are.
For example, attracting such reputable industry players as American Express and Cisco will clearly not prevent a startup from going beyond the usual help in making payments.

“We are delighted that American Express and Cisco are working with us. We will try to use their vast knowledge of financial transactions, user behavior and advanced technologies to make MobiKwik the most reliable payment source in India, ”said Bipin Prith Singh, founder and CEO of MobiKwik.