What is PayNearby all about?
PayNearby is about accentuating the existence of retailers. They are already doing great work; we are just trying to add a little to make it better. The idea is to harness their presence and cater to people in the nearby locality who trust the retailer.
The retailers are onboarded and registered on our platform through Aadhaar-based e-KYC as a banking correspondent for our banking partner, which is Yes Bank. All retailers using our platform are Yes Bank banking correspondents. We intend to take various financial services to last-mile customers through these banking correspondents as they trust their retailers.
How are these banking correspondents (BCs) different from other banking correspondents of banks? What role is tech playing here?
BC services is one of the services which adds revenue to the retailers. Our features like BuyNearby, DeliverNearby, CashNearby and BankNearby ride on top of this platform and allows the retailers to utilise the feature that most suits them. It is estimated that about 20% of fintech in India is for the digitally savvy and affluent only. Our aim is to simplify technology in a granular and sachetised manner format and take it to the 80% population through an assisted medium. This set of people is not otherwise reached by ‘digital only’ approach. The idea is that a lot of people may not use digital directly, but they will consume it through assisted programs.
How does this happen?
Transactions are simple. In the Aadhaar-ATM service that a retailer offers, the consumer comes, and puts his fingerprint on the UIDAI-approved device. On the app, the customer needs to select his bank, and put his Aadhaar number; no bank account number is required. All of this is then sent to Yes Bank, National Payments Corp. of India (NPCI) and Aadhaar to verify the authenticity of the customer. Then it goes to the customer’s bank to debit the account. The money is debited real time and sent to the retailer. The retailer can then give the amount to the customer from the cash that he has. Similarly, on remittance, the customer gives the cash to the retailer, and the retailer sends it through IMPS or NEFT (Immediate Payment Service and National Electronic Funds Transfer) depending upon which bank the money is going to. There are some rural? banks that are not yet on IMPS.
How do the BCs and your platform make money?
Just like a retailer earns a commission when he does a mobile recharge, there is a certain fee permitted to the retailer here through the Bharat Bill Pay System (BBPS) format. In case of remittances, he gets to charge a small fee from the customer. In contrast to the fee of 5% charged for a money order at a post office, he charges about 1% to the consumer. The consumer is happy to pay that amount as he does not need to waste a day travelling to a bank, standing in a queue at the bank and in the process waste a day’s wage. When the customer withdraws, the card issuing bank pays a fee, and that fee is shared with the retailer as well.
We manage the entire platform and we believe that no social enterprise is viable without a commercial benefit. We make a very thin margin. Each type of transaction has a different margin, around 2-5 basis points of the value.
How many BCs have come on-board Nearby until now?
We have at least 287,800 retailers on-boarded as of 29 August and of that, 13,700 transacted yesterday for remittance service. About 80,000 of these retailers offer Aadhaar ATM service, about 105,000 have IMPS for transfer of funds. As there is an overlap here, there are about 150,000 to 160,000 retailers active on the platform. All these retailers have touched close to 30 million consumers till now. The others are being trained on the processes. Not everyone starts to work from day one. There are some who want to start a little later. We do lose retailers at times as the business is also a little cyclical. Like withdrawals take place around the time of salary credit. The average amount of withdrawal is about ₹ 2,800 per transaction. On remittance, the average is about ₹ 3,900.
Is the entire system focused only on cash withdrawal, remittances and bill payments? Do you plan to expand it to other financial services like investments and insurance?
The way forward is BuyNearby, which is the service for grocery purchase online through local kirana shops. At present, we have about 300 retailers with about 1,500 customers in Mumbai. We will be expanding it soon. Gradually, we plan to give retailers options to activate selling of mutual funds and insurance. The vision is that after a year from now, we should be able to add a small amount of mutual funds and insurance to the grocery list of a customer. Mutual funds, insurance, gold and loans are all in the pipeline. Banking correspondents are allowed to offer mutual funds, micro-insurance and pension products.
We will offer these through one partner for each of these services and only very specific products will be on offer. We are refining the products based on a hypothesis that if a choice is given to a customer, you have to tell him a lot. But if you tell him that the choice is just to take or not take, the job becomes easier. We want to narrow down to one product in each of these categories.
For insurance, we are already testing the offerings. The products being tested are from non-life insurance categories like health and motor insurance. Our concern for not going for life insurance policies is the customer segment that we operate in.