Payments Innovations in India

Payments innovations have captured attention in India, as they have transformed the landscape significantly. While one might think that the issue has largely been addressed, especially with the advent of UPI making money transfers incredibly straightforward, there is still much to explore. Consumers now favour digital payments, and merchants across India have embraced this shift. The country has established one of the most advanced payment infrastructures globally.

Identifying Pain Points in Payments

The challenge for investors was not to find yet another generic payments company. Instead, it was crucial to identify where the payment process remains inefficient or cumbersome. Once a focus is directed towards specific industries and particular use cases, the gaps where moving funds remains complicated, costly, and unclear become evident. This revealed a fascinating area of opportunity for Better Capital.

Skydo: Streamlining International Payments

Skydo serves as a prime example of addressing a specific need. For Indian businesses or freelancers seeking payments from clients outside India, the historical process has been surprisingly complex. Transfers often involve bank wires, foreign exchange markups, compliance regulations, and extensive documentation, lacking transparency regarding actual costs. The issue was not the absence of channels for receiving international funds; rather, it was the experience that fell short of modern expectations.

Skydo has aimed to simplify the payment process for global customers, making it as straightforward as local transactions. The company provides transparency concerning foreign exchange rates, streamlines compliance and documentation, and reduces the friction traditionally associated with cross-border payments. Presently, Skydo operates under the RBI’s cross-border payment aggregator framework and serves tens of thousands of Indian businesses and freelancers.

What stands out about Skydo is that it was not payments merely for payments’ sake. Rather, it addressed a clearly defined issue, with payments being central to the solution.

Vendekin: Redefining Vending Machine Transactions

Vendekin originated from an entirely different perspective. When Aroon launched Vendekin, vending machines were predominantly designed for cash transactions, operating on basic hardware. However, for unattended retail to gain traction, it was imperative that transactions be digitalised. Vendekin initially introduced a mobile payment system for vending machines and subsequently expanded its offerings. With digital payments in place, the company was able to innovate around the machine, inventory management, operations, and ultimately enhance the overall unattended retail experience.

Driffle: Transforming the Gaming Marketplace

Driffle is another intriguing example, even though it may not immediately register as a payment company. Operating as a marketplace for gaming and digital goods, the complexity of building a global platform necessitated addressing various transactional attributes. Buyers may be situated in one country, while sellers could be located in another, leading to a diverse range of currencies, payment methods, and seller preferences across markets. To facilitate a seamless experience, Driffle has developed sophisticated payment infrastructure that manages transactions between users and vendors.

Shopflo and Inai: Elevating Payment Experiences

Better Capital has explored such ideas in numerous other instances over the years. Shopflo represented one of the initial investments focused on the checkout process. The insight identified the need for a great checkout experience alongside payment acceptance, as customer drop-offs occur frequently before transactions are completed. Hence, Shopflo aimed to enhance the checkout flow for online merchants and was ultimately integrated into Pine Labs. The acquisition merged Shopflo’s checkout capabilities with Pine Labs’ expansive payments infrastructure.

Inai ventured from a unique standpoint. As online businesses sought global expansion, they faced challenges such as managing multiple payment gateways, differing payment methods, failed transactions, and the intricacies of reconciliation. Inai developed software that optimises this complexity, which was acquired by Chargebee, integrating its technology into a more extensive payments and revenue framework.

Challenges with Certain Ventures

Not every initiative succeeded. Bon was an early venture focused on financial services and payments tailored for gig workers, primarily drivers. Although the concept appeared sound, the company faced difficulties in sustaining operations. Nucleon is another instance, tackling the healthcare arena where various elements like payments, insurance, hospital workflows, and finance converge in a convoluted manner. The complexity of this problem continues to challenge the company as it searches for effective solutions.

Learning from Experiences in the Payments Sector

These instances are significant when assessing an investment approach. Early-stage conviction investing entails forming a viewpoint regarding emerging challenges or shifts in the market. Meeting innovators tackling these opportunities from diverse angles and supporting selected initiatives often occurs without a clear path to future evolution. While some projects flourish and become substantial, others may be acquired, struggle due to persistent hurdles, or ultimately fail—a reality of the investment landscape.

The critical evaluation remains whether the initial observation was valid. The insight surrounding payments has stayed fairly constant. Moving money has become significantly simpler in India, laying a remarkable foundation. However, not every payment experience has been adequately resolved. Cross-border business transactions differ markedly from local payments, and unique issues arise in sectors like gaming, unattended retail, healthcare, and gig work.

Many fascinating opportunities continue to exist, not in simply creating another payment mechanism, but in identifying and addressing the fractured transactions. Understanding the underlying problems and reshaping experiences to remedy them may result in innovative payments solutions or present opportunities for broader business growth.