The company is called Local Pay and we call ourselves an alternate payment gateway for e-commerce. If you shop online and you don’t have credit cards or debit cards, or if you feel insecure about using a credit card or debit card to transact online, you can choose Local Pay, and pay cash at a local retail outlet.
This article is provided by the Deloitte Institute of Innovation and Entrepreneurship.
We started life in August 2012 and are targeting markets where the rate of internet penetration is fairly high, but where credit cards or debit cards are not highly used and cash is still largely preferred. India is our first market and we now have an office in Calcutta.
One of my partners comes from a family business background in India. He has a very good background in the market. The other, our CTO, is from Estonia. We complement each other as each of us brings in a unique background and experience to the table.
The biggest factor in our business was the regulatory aspect. In order for us to start operations, we require approval from the Reserve Bank of India because payments is a highly regulated sector in India. As a young company, getting access to regulators and policy makers has been a daunting task.
Just to give a sense of the numbers in India, in 2011 there were more than 130 million internet users in India and of those only eight million people transacted online.
We’re completely bootstrapped so far but we will need to raise money, probably later in 2013, to set up a sales force and to develop a business development team. We are in constant contact with a few angel investors and hopefully this will culminate in our first round of fundraising when the requirement arises. We will not seek external money until we realise that our growth will be impeded by the lack of money at our disposal.
Our closest competition is cash on delivery, which effectively means that people pay in cash upon receipt of merchandise. Using cash, e-commerce merchants lose out on working capital. Moreover, cash handling is not the core competency of delivery companies and the risk involved in adopting a cash on delivery payment method for e-commerce merchants is significantly large.
We firmly believe there’s massive potential in the market. There’s a huge unbanked population in India, which has the buying power, but doesn’t have access to some products. So, if Local Pay takes off, we will essentially be reducing this digital divide. It’s important that people start using technology. The benefits are tremendous – economic and social. That’s a very big part of our purpose.
Ravi has an MBA from London Business School.