How are things with online banking in India

This material is dedicated to two Indian remittance-related startups and online banking. It is interesting in both of them that both startups received serious funding from American companies and foundations, but at the same time they are focused exclusively on India. How to achieve recognition from Western investors, developing a product for your (in this case, rather problematic) region, read below.

Razorpay offers Stripe style payment services.

The success of companies such as Flipkart , Snapdeal and Ola drew general attention to e-commerce opportunities in India, where high consumer demand, broad Internet access opportunities and generous financing for venture capital companies contribute to the development of this attractive business. At the moment, a new startup called Razorpay , one of the participants in the current recruitment of YCombinator, will try to exploit this trend, allowing more startups and larger IT companies in the country to facilitate the integration of payments into their services.
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Razorpay reminds 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 with a credit, debit card, or Internet banking services (online banking 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 this is not as easy as it seems. Now, in order to be able to accept payments in this country, the company needs to do a lot of paperwork, go through bureaucratic red tape and wait some time in the process of debugging interaction between different regions of the country. This is quite a difficult obstacle: it drastically reduced the number of companies currently providing payment services and blocked the way to India for many payment companies that could radically change the current situation. (For example, Stripe in India is not used, 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 founders Shashank Kumar and Harshil Mathur experienced the difficulties of integrating the payment system into an online service. Looking for an idea for their business, a couple of entrepreneurs felt the need for a payment system. Then they, as Kumar said, 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.

And so Razorpay appeared.

Although Stripe had competitors in the face 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 is not a complete suck." Razorpay was faced with a slightly different challenge: proven players like CCAvenue , BillDesk and PayU are present in the market, and the broader market has not yet been fully formed.

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

Part of the problem lies in the lack of distribution of bank cards, when cash is the standard method of payment for delivering goods from an 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 "two-digit" fee. For comparison: Razorpay currently offers two options - payment of 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, shows quite good results. One of its first customers was Shifter , a cargo delivery service, a marketplace for nanotechnology experts NanoWE, and a tourism and hotel business startup Zostel . Mathur told me that over the past three weeks, the number of their clients increased every week by 100%, and the volume of transacts increased by 300% per week.

The main product of Razorpay was created by partners when they were still living in India. Then they improved it and went to California. The 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 India’s payment market will become the third largest after the United States and China, as noted by one of Y Combinator’s partners, Kat Manalak.

Indian payment startup MobiKwik raised $ 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 spread of smartphones to provide new solutions for mobile payments. Earlier this year, Alibaba invested a fairly large amount in Paytm, and now MobiKwik is literally throwing money.

Based in New Delhi, MobiKwik startup managed to raise $ 25 million in the next round of funding, led by hedge fund Tree Line Asia from Singapore. The transaction involved a couple of interesting strategic investors: Cisco and American Express.

The well-known investment fund Sequoia Capital also became a participant in the 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 about 25 million registered users, but in addition to e-commerce, the service covers financial transactions via e-wallets and mobile payments. MobiKwik claims that at the moment “more than 15 million” users have registered their e-wallets in his system, and the startup seriously intends to increase their number to 100 million by the end of next year.

Due to the proliferation of credit cards in India, small - not to mention the low use of bank accounts - mobile wallets appear. They are used in more sophisticated payment options compared to regular payment [cash] upon delivery, and this method is more attractive compared to bank accounts that may be difficult for people in 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 across the country, where customers can replenish their wallets, as well as make a direct payment. This is very important, because, despite the growing prevalence of smartphones in India - which we see 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 he had applied for and received ( like Paytm ) permission from the bank to make payments. The startup plans to "revolutionize the provision of financial services in India, using mobile technology, to attract those with whom modern banking networks have not been able to establish contact."

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

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