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Bengaluru-based digital ledger app Khatabook has till date secured funding worth $90 million within just two years of its launch from prominent investors GGV Capital, Sequoia India, Tencent, B Capital and even sports celebrities like Mahendra Singh Dhoni
Bengaluru-based digital ledger app Khatabook has till date secured funding worth $90 million within just two years of its launch from prominent investors GGV Capital, Sequoia India, Tencent, B Capital and even sports celebrities like Mahendra Singh Dhoni

Digital ledger apps see higher adoption in small towns

  • Founders and investors in the space said after covid-19 hit India, adoption of digital ledge products such as Khatabook and OKCredit has been on the rise, with more than 10 million active merchants present across these platforms

BENGALURU: As more users from smaller tier towns and cities come online for the first time due to the availability of cheap data and smartphones, a slew of tech startups such as Khatabook, OkCredit, Dukaan, and Chqbook have carved out a niche market targeting micro and small merchants.

From paan shops to medical shops to even goldsmiths, independent small and micro sellers are increasingly shifting their manual bahi khatas--traditional book-keeping ledgers--to smartphones using mobile apps.

Founders and investors in the space point out that after covid-19 hit India, adoption of digital ledge products such as Khatabook and OKCredit has been on the rise, with more than 10 million active merchants present across these platforms. Industry estimates show that there are at least 60 million small and micro merchants in the country currently.

Bengaluru-based digital ledger app Khatabook has till date secured funding worth $90 million within just two years of its launch from prominent investors GGV Capital, Sequoia India, Tencent, B Capital and even sports celebrities like Mahendra Singh Dhoni. Khatabook lured investors with its organic growth strategy which helped the app on board around 10 million small and micro merchants who came on to the app to do simple book-keeping of their daily transactions.

According to Ravish Naresh, chief executive of Khatabook, the startup has sellers from at least 95% of Indian districts, extending up to 10,000 towns and cities. To add more users, Naresh is betting on adding new features such as inventory tracking, income tax filing in the near future.

Similarly, another Bengaluru-based digital ledger statrup named OkCredit backed by Tiger Global and Lightspeed has recorded book-keeping transactions worth $7 billion till date. The startup which was founded in April 2017 currently has an active base of 5.5 million sellers.

Harsh Pokharna, chief executive of OKCredit, said that small merchants like kiranas or a paan shops lodge a maximum of 100 transactions a day out of which 30% of the transaction could be made exclusively on credit, mostly from the merchant’s loyal or repeat customers.

“As a small store owner, the biggest worry is recovering this money before end of the month, and hence it becomes very important for the merchant to keep a track of these transactions…End of the month, these credit transactions made to repeat customers may very well help the merchant breakeven and make some profits," Pokharna added.

However, as soon as covid-19 struck India, small and medium merchants were unable to sell non-essentials, and many shifted to selling essential products during the lockdown. Some of these merchants, including medical shops, supermarkets, and restaurants also began using social media tools such as WhatsApp to list their inventory online and sell to their loyal customers directly as movement of people were restricted. This gave rise to a completely new segment to existing apps like Khatabook, and OkCredit who are now helping merchants create an online shorefront with unique websites.

Suumit Shah, co-founder and chief executive of online storefront app Dukaan which recently raised $6 million in Series A financing told Mint that apart from small merchants, even home makers and students have turned to online re-selling by creating their own online storefronts.

He added that more than 30% users who are in the age group of 18-24 years, while the rest include both retailers as well as wholesalers selling to small merchants directly. Dukaan currently has over 2.7 million sellers on its platform, and a large chunk of these sellers were added in the last 4 months alone.

However, investors and industry experts point out that monetizing such sellers characterized by meagre transaction amounts, but high volumes could be challenging especially as most small and micro merchants make thin margins from their products.

“When you are acting as enabler of retail using software means, it is going to be challenging to monetize…If you are doing a commission cut monetization model, you can only take a very small percentage in margin cut, as most sellers won’t be willing to part with their margins," Karthik Reddy, managing partner, Blume Ventures said

Reddy added that software businesses (like Khatabok, Dikaan, OkCredit) who offer convenience and efficiency to small merchants, may monetize by providing short term financing, working capital loans, providing inter and intra city logistics, features for simplifying payment of income taxes in the future.

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