Online Payment Fraud: What Is It and How Razorpay Prevents It

FeaturedFraud Prevention for Online Businesses

This is the second blog in our series on online security and fraud prevention. To understand more about online safety (how to distinguish between a secure and non-secure website, how to ensure you are making a secure payment) read the first part here. To understand how online payment fraud occurs and the steps to prevent it, read on!


There is a reason why banks put up disclaimers announcing that their employees do not ask you for sensitive data, or that you should never reveal details like your OTP to an unknown person.

Online payment fraud is a reality of the internet age we live in and the numbers are only set to increase with the increasing digital adoption in India. According to a study by the credit information company

Experian and the International Data Corp (IDC), the fraud risk in India is currently pegged at 8.1 points; second only to Indonesia (8.7 points) and significantly higher than the average 5.5 points in the Asia Pacific region.

A 2016 consumer study conducted by ACI Worldwide places India at the fifth position in terms of total card fraud rates; behind Mexico, Brazil, United States, and Australia.

As they say, the best weapon against any problem is education; so let’s begin by understanding the different types of payment frauds that occur in India and how online sites and payment gateways like Razorpay prevent it.

Online Payment Fraud: The Different Types

The most common types of online fraud occur via phishing or spoofing, data theft, and chargeback or friendly fraud. We have explained these in detail below.

Online Phishing or Spoofing

Phishing is the process of accessing one’s personal information through fraudulent e-mails or websites that claim to be legitimate.  The information gathered this way can include usernames, passwords, credit card numbers, or bank account numbers.

The most widely used method for phishing is to redirect an online user (from an email or SMS) to an “official” website where they are asked to update their personal information.  You are thereby tricked into revealing personal information that you would ideally not reveal to anyone else.

Phishing can also occur via other electronic means such as SMS, instant messaging, and on email. You can be redirected to make a payment on a website that looks legitimate, but which is created to capture your card details so they can be used later.

According to reports, India is the third-most targeted country for phishing attacks, after the US and Russia.

Data Theft

Sometimes, dishonest employees or partners can steal credit card data from businesses and use this for committing fraud. Most online sites take stringent measures to ensure that such privacy breaches do not occur.

Instead of storing credit card details as is, for instance, websites and payment gateways use methods like tokenization and encryption to keep the data secure.

Razorpay takes data security very seriously. We are a certified ISO-27001 compliant organization, which means we undergo stringent audits on our data privacy processes.

Chargeback Fraud or Friendly Fraud

Let’s say a customer makes an online purchase. Later, they claim that the purchase was made fraudulently and ask for a chargeback – even though they made the purchase themselves! (A chargeback – in the simplest of terms – is an order from a bank to business, asking it to return the amount paid for a possibly fraudulent purchase.)

This is known as chargeback fraud or friendly fraud, where business processes a transaction since it seems legitimate; only to be issued with a chargeback later on.

Chargeback frauds cause GMV losses and are a hassle for any business. We have a Razorpay Chargeback Guide that will help you understand why chargebacks happen and take steps against fraudulent charges.

The Effect of Payment Fraud on Businesses

As per the current terms and conditions, a credit card issuer (i.e., the bank) does not consider the cardholder liable for any fraudulent activity; for both card-present and card-not-present frauds.

Therefore, payment frauds involving credit cards have a significant effect on the business community and a significant impact on a merchant’s bottom line. Every time a customer issues a chargeback, it leads to loss of both inventory and GMV. This is especially true for retail establishments, where the profit margins are usually small.

Regarding industry, the subscriptions industry continues to have the highest rate of fraud for two main reasons:

  • Subscriptions are essentially a card-dependent service; wherein the USP of the service is that the customer does not have to make manual payments. It is easy to claim that one’s card was used without knowledge in such a scenario.
  • Fraudsters and hackers use subscription services to ‘test’ cards. Online subscription services usually provide a one-month free trial, but one needs a credit card to initiate the trial period. Since the value is negligible, such payments usually go unnoticed by a card owner. If the card details are incorrect, the subscription business shares a detailed authorization error; thus making it easy for the hacker to modify their strategy and continue using the cards.

Razorpay: How We Help Businesses Reduce Fraud and Mitigate Risk

Apart from the mandatory protocols, Razorpay has its processes (developed in-house by our tech whizkids) to detect and prevent fraud and mitigate risk. As a payment gateway and a converged payments solution company, we take data security very seriously.

By delving into our data and analyzing patterns, we have been able to institute processes that ably discern between a ‘normal’ and a ‘suspicious’ transaction with credible accuracy. These systems are divided into two types:

a) Systems for detecting ‘Merchant Fraud’

Merchant fraud occurs when someone creates a fake or bogus company with no intention of selling any product to the customer. The business appears legitimate; but since it offers no actual goods or services, all users who make an online purchase only end up losing their money.

As a payment gateway, Razorpay has strict processes in place to vet every company which uses our gateway for processing payments. Some of the ways how we check for merchant fraud include:

KYC checks: Adhering to strict KYC norms even before we onboard a business is an integral part of fraud mitigation. We have an in-house ‘Risk and Activation’ team that runs background checks on new businesses and vets them before they are ‘live’ on our payment gateway.

At Razorpay, we take this check one level higher by monitoring all suspicious and potentially fraudulent businesses, and the transactions that originate from them.

Transaction monitoring: Razorpay Payment Gateway has an inbuilt ‘Risk’ logic which can sniff out a possible fraud faster than a K9 squad. Let’s say a merchant who gets 3-4 online orders in a day suddenly starts to get 300 daily orders.

A sudden spike in transaction velocity (number of transactions per minute/hour/day), volume (amount transacted for), or pattern (international orders for a local brand) is an indicator of fraud and our systems immediately flag such transactions for further investigations.

Our ‘Risk’ logic also has 72 odd rules for monitoring the thousands of transactions on our payment gateway on a daily basis. This logic is designed according to the merchant, and our logic pathway can easily differentiate between standard day-to-day transactions and those that carry a high probability of risk.

b) Systems for detecting ‘Customer Fraud’

Customer fraud occurs when a stolen or lost card is used for suspicious activities. It can also occur for other payment modes. Not only does this affect the user, but it is also detrimental to e-commerce websites as it increases cases of refunds and chargebacks, and leads to loss of GMV.

At Razorpay, we strive to protect both our merchants and our customers. Which is why we conduct extensive transaction monitoring as well to protect both their interests. How do we do it? Here’s a peek:

Checking for hotlisted cards: Every time a card is used for payment, our gateway connects with the card provider to check if the card has been hotlisted. (Hotlisting means that the card has been blocked temporarily or permanently for use). This is done in real-time so that a verified transaction is still completed within seconds, while the suspicious ones get flagged.

Pattern-based transaction monitoring: We also use geographical and pattern-based transaction monitoring (as for detecting merchant frauds) to identify suspect transactions. This helps us in preempting and preventing chargeback frauds and other types of customer frauds. We have a hit ratio of being able to identify 85% of fraudulent cases in advance.

Online Fraud Prevention: The Future

Online fraud will remain a contentious issue even in the days to come. The more we connect and transact online, the bigger the threat. Moreover, since we cannot eliminate it, the solution must be to remain on guard every single second. The only way to prevent online fraud is through vigilance and regulation.

A good example here is the 3D Secure (3DS) protocol that VISA had developed to keep its customers safe, and which has since been adopted by other card companies like American Express, MasterCard, and JCB International.

A similar process is the 2FA used in India, which is mandatory for all cardholders and card-issuing banks. The RBI has also mandated online alerts for all card transactions – even those where the cardholder physically swipes their card at a PoS system.

For all transactions considered suspicious, cardholders have the option to issue a ‘de-activation request’ immediately and hotlist their cards.

The Indian government’s decision to appoint a nodal agency for dealing with phone frauds – called the FCORD initiative – is another praiseworthy step. We at Razorpay are also in touch with the MHA, which has designated the FCORD as the Nodal Agency for reporting and preventing Cyber Crime frauds in India, regarding the same.

While a zero-fraud system will take some days to achieve, we are constantly building new processes to minimize fraud risk for all consumers.

The bottom line though remains this: If you are building an e-commerce website, remember to follow all the protocols mentioned above and minimize the risk of fraud. Alternatively, find a payment gateway (hello there!) that has stringent security protocols already in place. We’re just a click of a button away!

How Secure Are Your Online Payments?

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At Razorpay we strive to make every transaction done via our payment gateway a secure payment. We’re a technology-first online payments company and online payment security is in our DNA. We employ a ‘no stones unturned’ approach to safeguarding the interest of both the online businesses who use our products, as well as their consumers.

We also understand the assurance of secure payments is one of the primary drivers behind the choice of a payment gateway.

With the growing number of e-commerce users and transactions in India,, it is important that we are all aware of the mandatory security protocols for e-commerce websites; so that we can avoid fraudulent situations. As the saying goes, prevention is better than cure.

In this article, let me walk you through the security protocols and processes followed at Razorpay, and which you should look for, too, every time you transact online.

online payment security architecture and information flow

1. TLS Encryption

Data security on e-commerce websites or an online payment system begins the moment a user lands on the site. The TLS Certificate tells users that the data transmitted between the web server and their browser is safe.

As a payment provider, Razorpay uses the highest assurance SSL certificate on its website which is the EV SSL (Extended Validity SSL) certificate.

Without TLS Encryption in place, all data sent over the Internet is unencrypted and is visible to anyone with the means and intent to intercept it. An easy way to check if the e-commerce websites you frequent are SSL certified is to look at the URL and see if it uses ‘http://’ or ‘https://’ protocol.

The additional ‘s’ signifies a secure e-payment system. You can also look for the padlock icon at the beginning of the URL. Modern web browsers in their race to make the Web secure by default are now following the opposite paradigm – mark HTTP sites as “insecure”.

2. PCI-DSS Compliance

The PCI Security Standards Council is a global organization that maintains and promotes compliance rules for managing cardholder data for all e-commerce websites and online payment systems.

The Payment Card Industry Data Security Standards (PCI-DSS) is in effect a set of policies that govern how sensitive cardholder information should be handled.

Fact: The PCI Security Standards Council was created as a joint initiative by the four major credit-card providers: American Express, Visa, MasterCard, and Discover, in the year 2004. Over the years, the PCI-DSS standard has become the guiding principle for online security across the globe.

For an e-commerce website or an online payment system to be PCI-DSS compliant they have to follow certain directives:

Maintain a secure network to process payments: This involves using robust firewalls which can protect against malicious security threats. Further, the website or payment gateway should not use default credentials like manufacturer provided PINs and passwords, and must allow customers to change this data as needed.

Ensure all data is encrypted during transmission: When cardholder data is transmitted online, it is imperative that it be encrypted. Razorpay encrypts all information you share using checkout via TLS (Transport Layer Security). This prevents data interception during transmission from your system to Razorpay.

Fact: On the Razorpay Payment Gateway, all the details entered by a user like their name, address, and credit/debit card information are used only to process and complete the order. Razorpay never stores sensitive information like CVV numbers, PINs etc.

Keep infrastructure secure: This directive involves keeping abreast of new PCI-DSS mandates and using updated software and spyware to protect against known software vulnerabilities, running regular system and software scans to ensure maximum data protection.

Restrict information access: An important part of securing online payments on e-commerce websites is restricting access to confidential information so that only authorized personnel will have access to cardholder data. Cardholder data must be protected at all times – both electronically and physically.

3. Tokenization

Tokenization is a process by which a 16-digit card number gets replaced by a digital identifier known as a ‘token’. This is done to ensure the safety of the original data while allowing payment gateways to securely access the cardholder data and initiate a secure payment.

Fact: Even if a website gets breached and the tokens stored are hacked, it is immensely difficult to reverse-engineer the actual card number from the token itself. To do this, one needs access to the logic used for tokenization, which is not publicly available.

Credit card tokenization helps e-commerce websites improve security, as it eliminates the need for storing credit card data, and reduces security breaches. For more on how tokenization works and impacts online payments, you can read our in-depth blog.

4. Two-Factor Authentication

Two Factor Authentication, aka 2FA, or two-step verification is an extra layer of security added by e-commerce websites to ensure a secure payment for a customer.

This is a customer-facing authentication process, mandated by regulatory bodies like RBI, in that the transaction is processed only after the user enters a detail that only they could know, or have at hand (like a physical token or a security key). Many banks and other e-payment gateways also use the 2FA for their own payment modes.

Fact: 2FA is not a newly-minted technology, but it has recently become the de-facto method of authentication in the digital age. In 2011, Google announced 2FA for heightening online security for its service. MSN and Yahoo followed suit.

When you use Net Banking for a transaction, you are first asked to enter your username and password. As a final confirmation, the bank sends you an OTP on your registered mobile number. This process has been mandated by the RBI, is divided into two levels of authentication:

What the user knows: In this step, users fill in their card/Net Banking details such as username and password. This helps the payment gateway recognize which bank the card belongs to.

What the user (and only the user) has: This step is known as ‘Authorization‘ and is done through the OTP/PIN/CVV. The bank (and the payment gateway) can then confirm that the request for payment is initiated by the rightful user.

5. Fraud Prevention

Apart from these mandatory protocols, most e-commerce websites and payment gateways have their own fraud and risk prevention systems. Big data analytics and machine learning play a huge role in devising these risk prevention and mitigation systems.

By delving into our customer’s data and analysing patterns, we at Razopray can discern between a ‘normal’ and a ‘suspicious’ transaction with credible accuracy. Apart from this, there is a lot that you as a customer can do to reduce the risk of fraud. 

Always remember that:  

– Anyone of importance will never ask for your card data/passwords up front. Banks and financial service providers have a safe protocol to gain admin access to an account if the need ever arises.

– Passwords are safer when you don’t write them down. Keep strong passwords that you can remember, change them frequently, and refrain from writing them down somewhere.

– You have the right to dispute suspicious charges on your card or accounts. Raise a chargeback request for any unidentified transaction on your card. You have a legal right to a resolution.

If you are building an e-commerce website, remember that fraud prevention requires that you follow all the above-mentioned protocols. Or find a payment gateway (hello there!) that has stringent security protocols already in place. We’re just a click of a button away!

GST Invoices : Create and Send GST-compliant Invoices with Razorpay

FeaturedRazorpay-GST-Invoices-Launch

With GST coming into effect in 2017, all Indian businesses are now required by law to create GST-compliant invoices – both on paper and electronically.

The number of e-invoices across the globe is on the rise (volume of e-invoices in 2016 was approx. $30 billion worldwide, with an average growth of 10-20% per year); as has the volume of e-retail, with global transactions crossing the $2.3 trillion mark in 2017.

This led the think tank at Razorpay to have another of our lightbulb moments – we already had the infrastructure for businesses to accept payments online.

Why not merge it with an invoicing feature so that accepting payments against a GST-compliant invoice becomes easier for everyone? This would automatically cut down the need for multiple software and make the payment process more seamless for everyone included.

So, we set to work. And the outcome is an intelligent software that provides automation of GST incorporation into invoicing – a feature that very few products in the market currently allow. As the Product Manager for this new feature, I am proud to introduce you to ‘Razorpay GST-compliant Payable Invoices‘.

gst invoicing software

Razorpay GST Invoices – How Do They Help?

Invoices have been in trend since the ancient times when merchants used clay tablets to keep a record of supply. In the simplest of terms, an invoice is a “document which states the supply of goods and services and forms the basis for a tax levy”.

GST-compliant invoices differ from the earlier VAT invoices by a few crucial factors:

  • It is important to mention details like GSTIN of the supplier and the customer, the place of supply, the HSN/SAC codes which are specific to the goods/services being sold.
  • The invoice needs to have a clear breakup of the tax levied. Just stating the value of tax is not enough; there needs to be a breakup of the CGST/SGST/IGST components.
  • It is mandatory to issue invoices for all registered supplies as not doing so will be considered an offence under the law.

For a B2B business, e-invoices are an effective way of managing compliance as well as saving costs. It is estimated that creating invoices online can help reduce operational costs by 60-80% vis-a-vis paper-based invoicing. However, this saving does not mean much if you spend money on multiple software for payment, accounting and for invoicing.

GST Sample Invoice

The Benefits of Using Razorpay GST Invoices

The Razorpay GST Invoices gives you access to a single powerful system- where you generate invoices and collect payments via the same software.

Ultimately, this helps your business reduce operational costs, reduce payment delay and delinquency, and manage cash flow in a better manner.

Most importantly, it adds an informational element to the transaction. The customer knows exactly what they are paying for upfront.

The hallmark of any good product is that it simplifies an industry pain point and helps improve business processes. Our invoicing feature helps you in the following ways:

  • You can create ‘Payable Invoices‘ for B2B or B2C transactions easily and accept payments via a single process. For monthly recurring invoices, you can use our APIs to create invoices in bulk.
  • Automatically include the GST breakup in your invoices. Since this is linked to the HSC/SAC codes of the supplied items, there is zero chance of error in levying taxes. Remember, GST tax rates vary according to the tax bracket of the item and correctly calculating tax is an important part of creating GST-compliant invoices.
  • Your customers can choose to pay from multiple payment options available on Razorpay or even use Virtual Accounts to make offline payments against the invoices. This enables customers to make instant payment – anywhere, any time – and helps businesses maintain regular cash flow for important tickets.
  • The ‘Dashboard Tracking’ option allows you to tally Account Receivable (outstanding amount) and the money collected/received from your Razorpay dashboard. There is no need for a separate accounting software for this.
  • In certain cases, your customers may want to make partial payments against an invoice. Let’s say they only wish to credit a small amount as an advance and expect to be able to pay the rest when they receive the goods. Razorpay GST Invoices come with a ‘Partial Payment’ option for such use cases.

Most importantly, you can use our software to create invoices even if you’re not registered under GST. Our intuitive and intelligent software can be used to create normal invoices without GST taxes that can be sent to your customers as proof of transaction.

Creating GST Invoices with Razorpay – The Process

At Razorpay, we have always been very particular about keeping the user flow/user experience simple, so that our users – whether they be a startup or an established business –  can use the product seamlessly. We have tried to do the same with the GST Invoices and I have detailed the process below.

For easy understanding, I have broken down the process into five steps from creation to reconciliation.

GST Invoice Generation

Step 1: Creation and Generation of GST Invoices

  • To create an invoice for a customer, begin by adding all the necessary details such as the GSTIN of the customer, PAN details, mobile phone, and email id.
  • Next, add item details of the goods/services sold to the customer. You can choose the HSN/SAC codes for the same, and add it to the invoice.
  • Once you add the item details and the place of supply, the GST will be automatically calculated by the software. The GST rate is linked to the item code and the place of supply; hence there is zero chance of error.

You can save the details for further use. This will help in the mass creation of invoices and faster creation of recurring invoices.

Step 2: Sharing of GST Invoices

  • The invoices are shared via email and SMS (you added these details in the first step).

Note: Even in legacy software, the sharing has to be done manually. However, Razorpay automates the process so that it is easier and faster.

Step 3: Payment

  • You can share your bank details over the same mail to facilitate online payments. This works for ‘Payable’ invoices that need to be paid online.

Step 4: Notification

  • If the invoice is paid online, you will receive notifications via the webhooks available on our site. If the payment is done via RTGS or NEFT, then it needs to be manually tallied.

Step 5: GST Reconciliation

  • Reconciliation for Razorpay GST invoices is done the same way as for any other invoice. You will have to account for the monthly ‘Account Receivables‘ and ‘Invoices Issued‘ and ensure that they both tally.

So there! The easiest invoicing solution for businesses is now in town – Razorpay GST- compliant Payable Invoices. Have you used it yet?

TDR, MDR and Other Payment Terms Simplified

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So, there I am. A newbie in the world of geeks, trying my best to understand terminology I wouldn’t have been caught dead using just a few days back.

Yes, it’s KT (knowledge transfer) time at Razorpay and as the new kid on the content block, I need my grey cells to absorb as much of the payment-related terms as they can.

And that’s when it hits me. If understanding these bywords is hard for someone who’s been in the fintech industry for a while, I wonder what others go through.

So, whether you are a startup enthusiast, SME owner, or just a curious Lannister who likes to know things, here’s a simplified introduction to payments and some of the oft-used terms in the industry. I hope you find them useful!

For the purpose of this blog, let’s take a look at a simple payment flow and the terms associated with this:

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1. Aggregator/Gateway

A payment gateway is a technology that allows merchants to accept online payments from their customers. PayPal, WorldPay, MIGS are some well-known examples of payment gateways.

Now, customers have their own preferred method of making a payment. If I was buying my favorite beverage on ChaiPoint, I might pay for it via NetBanking, while somebody else might prefer a wallet or UPI.

A payment aggregator brings together all these various modes of payment in a single interface, thus allowing the user the flexibility of choice.

2. Authentication

When you are dealing with high volumes of money on a daily basis, fraud and risk must be minimized. The authentication process is what helps payment gateways verify that you are who you say you are and prevent fraudulent transactions.

As mandated by the RBI, every online transaction in India undergoes two levels of authentication:

  • Verification of payment details: This helps the payment gateway recognize which bank your card belongs to so that they can process your payment faster.
  • Verification of user or Authorization: This is done through the OTP/PIN/CVV. When you enter these correctly, you essentially tell the bank (and the payment gateway) that you are the person using the payment mode, and have initiated the request for payment.

3. Acquiring/Issuing Bank

Now, these are two very similar-sounding terms which can get a bit confusing at first. So, listen closely! Simply put, an acquiring bank is a bank which facilitates the transaction through its gateway. And the issuing bank is the one used by the customer when making a transaction.

Let’s say that I used my HDFC credit card for a purchase at ChaiPoint. The transaction was processed via Razorpay. The issuing bank – which gave me my card – is, therefore, HDFC.

Now, Razorpay has to channel my money to ChaiPoint, and it does so via the gateway provided by SBI. Thus, the acquiring bank, in this case, will be SBI. In a sense, the acquiring bank is the partner bank for the payment gateway.

**These terms become even more important when we talk of issues like refunds, or card holder’s verification. The onus is on the issuing bank to verify the details entered by the cardholder and validate the transaction.

4. Merchant/Nodal Account

As defined by the RBI, a nodal account is an account created by an e-commerce, payment gateway, wallets, and aggregators specifically in order to accept digital payments. A merchant account is a temporary virtual account that a business creates with a payment gateway.

For instance, Razorpay has a nodal account for accepting and processing payments. When a merchant signs up with Razorpay to use our services, we create dedicated merchant accounts for them, which act as temporary vaults for payments.

Every payment made by a user is first directed to the Razorpay nodal account and managed through the specific merchant account.

Once the funds are deposited into the merchant account, the merchant is free to do as they please with it. So, they can effectively choose to send the whole amount to any of their business’ current accounts, or use it to make payments to their vendors and other associates using a feature like the Razorpay Route.

Most Indian banks offer the facility to open a current account. You can also create one through a private service provider.

Now, I know what you are wondering about and here’s the answer to your query – a merchant account and a business’ current account are indeed two separate entities.

Provided by your payment processor, you can use the merchant account only to accept digital payments from your customers, and disburse it to your vendors. Your current account, on the other hand, is where funds from both cash and card transactions are added, and which you use to pay salaries and bills.

5. Capture

To help you understand this term better, let’s analyze the anatomy of the transaction I made at ChaiPoint earlier.

The process began with me choosing to make a purchase online. I picked my favored mode of payment, entered the details, and confirmed the payment.

Voila! I see that the money has been debited from my HDFC account and credited to Razorpay’s nodal account. It now needs to reach ChaiPoint’s account and for this to happen, ChaiPoint has to ‘capture’ the payment so that Razorpay knows where to forward it to – almost like sending out a virtual Thank You, and a confirmation that the money indeed belongs to them.

And if ChaiPoint does not raise this ‘capture’ request within a stipulated time (5 days from the date of payment) then the amount is automatically refunded to my account.

6. Settlement

Once the transaction has been ‘captured’, the payment gateway i.e. Razorpay has to ‘settle’ the amount with ChaiPoint. Note that the money has still not been transferred to ChaiPoint’s merchant account. This is because even though the authorization, authentication, and capture (in most cases) happen in real time, the fund transfer follows a separate cycle.

Banks transfer the amount to Razorpay’s nodal account first, and this usually takes 1-2 days. Razorpay then sends it to ChaiPoint’s merchant account, and this happens 2-3 days after the transaction was first made. This is known as a settlement

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So far, we have looked at the flow of money from the user to the merchant and understood the terminologies involved. Now, let us understand the process of reversing a transaction (as in the image above) and the terms used in this flow.

7. Refunds

Refund is as refund does. Come on, we have all done this at least once in our lives!

A refund is, in essence, a reversal of a transaction made by a user. In cases where the user is not happy with the goods or services purchased, or if they have paid for said purchase without actually receiving anything, they can ask for their money to be refunded.

The process is complicated and if you have ever wondered about it, here’s a wonderful blog that should clear all your doubts.

**Refunds and chargebacks may seem similar, but there is a difference in their machinations. A refund is initiated by the merchant (with or without a request from the user) because they failed to provide the goods/services agreed upon. A chargeback is a customer asking the issuing bank to forcefully remove money from the merchant account because the charges levied by the merchant are not valid.

8. Chargeback

The world of online payments is not just APIs and code. Every once a while, it can read like an interesting whodunit. Imagine a scenario where a customer has been charged for transactions on his credit card, which he claims he did not make. Is this a case of amnesia? Sour grapes, or a shopping affair gone wrong? Or, an intent to defraud? Whoa!

When a customer contests a charge made on their card, the issuing bank immediately issues a ‘chargeback’.

Again, in the example that we have used till now, let’s assume I ask my issuing bank to initiate a chargeback against ChaiPoint for transactions billed to my credit card. ChaiPoint will now get its best Sherlocks on the case to prove the validity of these charges within 15 days, failing which I am entitled to get my money back. End of story.

While as a payment gateway Razorpay is not directly involved in initiating chargebacks and refunds, we are a part of this digital infrastructure and do our best to resolve such issues quickly. Ideally, a business would like to stay away from chargebacks because it causes both loss of inventory (if you did make a sale), as well as money.

All the charges levied on a digital transaction are also levied in case of a chargeback.

**The Fair Credit Billing Act of 1974 (USA) is widely considered as the genesis of chargebacks. In India, this would fall under the ambit of the Consumer Protection Act, 1986.

9. TDR/MDR/Bank Charges

As we have seen till now, there are a lot of steps and entities involved in a successful online transaction. Since all of these entities offer a service to the user, they are entitled to a small fee which we have detailed below:

Bank Charges: This is the amount that the acquiring bank charges for providing card payment services. This rate is in guidance with specifications provided by the RBI (Reserve Bank of India). One of the components included is the ‘Interchange’ which is a fee given by the acquiring bank to the issuing bank for their card transactions.

Processing Charges: Your payment aggregator might also have to pay certain fees to other players in the loop like online wallets or banks for processing payments of a specific type. They would include this in the amount they charge you for every successful transaction.

TDR – Transaction Discount Rate: This is the amount that the payment gateway charges the merchant while transferring the money to their merchant account. This is specified by the gateway itself and includes the above charges. In India, this is interchangeably used in common speech with MDR (Merchant Discount Rate).

In conclusion, TDR = Bank Charges + Processing Charges + Taxes

**Payment Aggregators also provide additional services and products for managing your payments and hence on a case-to-case basis, may charge an additional service component.

And there’s more, but that’s for another time!

This obviously is not the end of the terminologies, but this is where we will stop for now. The Indian payments industry has been evolving rapidly and payment gateways have become essential for all businesses; whether online or operating out of a brick-and-mortar space. Hopefully, these jargons have helped you understand our world better!

Razorpay ePOS App – Simplifying Digital Payments for Offline Businesses

payment app by razorpay

The issues that offline businesses usually face with accepting digital payments include ease of use, lack of expert knowledge, multiple apps for different modes and so on.

The fact is that while we have come a long way with the digitization of payments, there are still a number of businesses that are waiting for their perfect match when it comes to digital payment apps. We, at Razorpay, are glad to announce the relaunch of our new and improved ePOS app. Read this article to know what this payment app has in store for you.

Razorpay ePOS: Not just another digital payment app

During our research, we found that the current payment collection process is complex and time-consuming in the informal sector. 

With all of the technological advancements around us, no business should struggle to get paid by their consumers. They should rather be able to focus more on their business growth. They should be able to reach a wider audience spread across geographies.

And hence, we came up with Razorpay ePOS: the easiest way to accept digital payments instantly. One of the latest offerings from the Razorpay product suite, this product is custom-tailored to fuel the growth of growing offline businesses. 

Razorpay ePOS for businesses and beyond

Our aim with this payment app is to provide a real alternative to cash and deliver a hassle-free user experience without compromising on user data. Whether you are waiting to integrate a payment gateway or looking out for an alternative to door-to-door payment collection, ePOS is the solution for all of it. 

With this app, all growing businesses across sectors can create payment links within minutes. They can share these links via Facebook, Instagram, Whatsapp, email, SMS and any other social media platform. Your customers can then choose to pay via any mode of their choice, like credit/debit card, netbanking, UPI, wallets and more!

To make it the best experience for you and your customers, we offer no monthly limit, online KYC and a lot more- with zero maintenance charges!  

Use cases of Razorpay ePOS app

Before we dive deep to understand the offerings of Razorpay ePOS app, let’s understand who it is designed for.

Kirana store owners

Let’s start with one of the most prominent use cases. There are approximately 6.65 million kirana stores in India. Until 5 years back, all of these shops used to accept payments in cash. 

Cut to 2020 and almost everyone from a tea-stall owner to a supermarket owner is sticking a couple of QR codes to accept payments. How about collating all the payment modes in one place with one QR code? Or even better, train the cashiers at those stores to share a payment link real-time and accept payments. No POS machines, no QR code and yet the payment is done! 

Delivery based businesses

There are a number of tiffin service providers, bakers etc who provide on-the-go services. You place an order with them over a call or WhatsApp and they send an executive to deliver your items. Often, either the buyer is short of cash or the delivery executive has to spend a lot of time hunting for exact change. 

The ePOS app can be of great use to ease this process. The seller can send a payment link either when the buyer places an order or when a delivery executive departs. The buyer can pay the exact amount instantly, that too with a payment mode of their choice. 

Freelancers

Often when we hear the word ‘freelancer’, we think of the comfort they avail. But that’s not always the reality. Freelancers are often seen waiting for their payments. They are also used to hearing excuses like, ‘Its a bank holiday.’ 

Razorpay’s ePOS app can be a saviour to this struggling group of people since they can send the payment link via any channel with all the details and breakdown of the final amount. In fact, they can also send a payment reminder if needed, bringing in relief from those awkward follow-up calls. 

Homepreneurs & tutors

There has been a rise in home-based businesses in the last few years. There are a lot of people selling decor items, handicrafts, fabrics and so on right from their home. Often, they market those goods via WhatsApp, Instagram and Facebook. However, the only hurdle they face is accepting payments, due to which they also see higher drop-off rates. 

With the Razorpay ePOS app, they can create payment links for all of these products while sharing them with people. A potential buyer can choose to buy and proceed right away. The best part is that these homepreneurs can also manage their business right from the Razorpay dashboard and make better decisions. 

There’s a strong use case for teachers, trainers and therapists, who either provide in-person sessions or online sessions. They can create and send payment links via a platform of their choice and manage their funds in a much better way while avoiding the hassles of the in-cash payments. 

Features of Razorpay ePOS app

One of the most frequently asked questions to us during our launch was: How is this app different from the others? There are two things you can trust Razorpay with closed eyes: security and speed. Here are some of the features of this app:

Accept payments 24*7

Forget the hassle of visiting your bank or customer’s door a number of times to get your own money. Razorpay allows you to accept payments anytime, from anywhere. All you need is an active internet connection and you are set to accept payments directly from any of your social media channels. 

No mandatory business registrations

One of the issues that a lot of freelancers and unregistered businesses face with digital payments platforms is the requirement of a company PAN or documents alike. With Razorpay, it doesn’t matter if you are a private or a public limited company, LLP, kirana store owner, NGO, a contracted freelance service provider, a homepreneur, we have a working solution for you. 

Also, Razorpay offers 100% digital onboarding and KYC experience. All you need to do is, enter some basic details about your business and you are all set to accept digital payments! 

Go cashless

There’s a drastic change in the way people have started buying and paying. Both, the consumption habits and the way of paying have now turned online. And the fact is that this trend is here to stay. Make sure you cater to your audience their way by going cashless! 

Payment Links, the major offering of the Razorpay ePOS app is the easiest substitute for cash-on-delivery and point-of-sale payment methods for your business. The ease of use of this application empowers you to teach every member of your staff: cashier, delivery experts, account manager and so on to send a link within minutes. Not just this, they can also send a reminder in case the payment has not been made. 

100% safe and secure money movement

Razorpay’s security channel and risk detection work 24*7 to detect fraud, prevent hacking and cases like money laundering. Besides, we are also PCI-DSS compliant which makes sure that your money is in the safe hands. 

Accept payment via any social media platform

As mentioned earlier, after you create a payment link, you can choose to copy and paste the link to share it across through any social media channels like WhatsApp, Facebook, Instagram etc. Decrease the drop-off rates and convert potential customers in real-time.

Multiple modes of payment

Razorpay supports over 100+ payment modes including Credit and Debit Cards (Visa, Mastercard, Rupay, AMEX, Diners), Net Banking from top 50+ banks, UPI (Web Collect & UPI Intent), Online Wallets, EMI and NEFT/RTGS payments.

Easy tracking and reporting 

Analyze your earnings from the Razorpay ePOS app on the go & stay on top of your goals. Make better business decisions using insights from the real-time data and reports available on the dashboard. You can also choose to download the reports for your convenience! 

24*7 Support

One of our core aims is to provide our customers with the best-in-class service. Our customer support experts are available any time of the day through email, live-chat interface and call to ensure that you get answers to all your queries instantly. 

In conclusion

If you are a business owner and want to speed things up and keep a track of all the incoming payments even when you are away from your factory, office or shop, download this app right away. Give your business the digital push it deserves with the Razorpay ePOS app.

Download the Razorpay ePOS app.

Also Read

Money Movement Decoded for Online Gaming Companies

payment solutions for online gaming companies neobanking razorpay

The online gaming industry has seen a rapid expansion in recent years. It owes its growth to many attributes like increased smartphone penetration, accessible data, affordable tech, and the rise of the digital payments user base. 

Lately, we’ve seen the upsurge of several popular online games like PUBG, Fortnite, and more, successfully stirring up the interest of the youth of India. With more and more gamers joining the bandwagon, the demand for online games has increased. 

This has resulted in the outset of many online gaming companies in India. payment solutions for online gaming companies neobanking razorpay

The many forms of online gaming

“Online gaming” has multiple interpretations today. With so many different modes of gameplay, genres, channels, and player formats, the categories of online gaming are diversified.

However, among the most popular categories are freemium games and online real money games.

Freemium games

The word freemium is a fusion of free and premium. Freemium games are free to play, but compel the gamer to unlock features and customisations by paying the company. These types of games have mostly been sought after in recent times.

Online real money games

Online games that gamers play to win real money, which can be transferred to their digital wallets or bank accounts are called online real money games. These games are in high demand and are increasingly getting noticed by gamers.  payment solutions for online gaming companies neobanking razorpay

Online gaming and digital payments

Online games offer a ton of advanced features to be unlocked by gamers. And, Razorpay has already powered digital payments to several online gaming companies. 

Freemium games with in-app purchases are usually powered by Razorpay Payment Gateway, and the games that require month on month payments to unlock special features, typically use Razorpay Subscriptions. 

Let’s see how Razorpay powers online real money gaming companies.

There are two segments of online real money games. 

  1. Pay to play – where the gamer pays the company before playing
  2. Play to win – where the gamer wins money after playing

Play to win games are all the rage right now. Backed by well known VCs like Sequoia, RummyCulture, Dream11, MPL, Howzat, and more are very famous for their play to win games. 

In both these segments, instant gratification carries a lot of weight for these games to be as successful as they are. And that is simply because of the nature of these games. 

A gamer can collect their winnings after completing a game against an opponent. This means, it is not a continuous, cumulative victory, but a timed one. The gamer does not have to accumulate a certain number of points to collect their winnings. This means they might as well collect their winnings after the conclusion of each and every game. 

So, let’s talk about how these online real money gaming companies pay their winners. 

Essentially, rewarding the winner is considered a payout, a customer payout in particular. And, most of the time, there are many problems associated with making payouts traditionally.

  • Gaming companies need to make sure that the payouts are processed within banking hours so that the gamers get their money as early as possible
  • They have to wait out the cooling period after adding each one of the bank account details
  • UPI and IMPS based payouts have a cap on the total number

This is exactly why online gaming companies need a better solution so they can make timely payouts and ensure that the gamers get their winnings instantly. RazorpayX, a neobanking platform, helps with exactly that.

RazorpayX Payouts

Payouts helps automate the process of making payments to the winners, getting rid of manual intervention. 

  • The winners can be paid instantly via IMPS, UPI, without having to worry about bank hours
  • There is no cooling period, companies can make payouts to accounts immediately after adding them
  • No cap on the number of transactions

[ Read more: How to Simplify and Automate Payouts ]

Most online gaming companies do not require the gamer’s bank account details while setting up a gamer profile. So, how can they make sure the winners are awarded?

Again, RazorpayX has a solution.

RazorpayX Payout Links

Payout Links is the easiest and fastest way online gaming companies can disburse funds into the winner’s preferred bank account via IMPS or UPI. 

A Payout Link can be created on the RazorpayX dashboard. If there is a need for multiple Payout Links, APIs can be used. 

Upon sending the Payout Link to the winner, all they have to do is verify themselves via OTP and enter their preferred bank account or UPI ID. On successful entry of their account details, they receive their refund almost immediately. They will also be notified if there is an error with the account details they have provided, so they can re-enter the details or try with a different account.

The verdict – RazorpayX for online gaming

With RazorpayX, gaming companies need not make the winners wait for 5 to 7 business days to collect their winnings.  payment solutions for online gaming companies neobanking razorpay

Retain, Engage, Scale: Three Reasons to Build a Subscriptions Business

razorpay subscriptions

Here’s what a typical morning looks like for most people. After a few minutes of scrolling through the headlines on your preferred news app, you check how long it will take for your breakfast to be delivered. While you wait, you select your morning playlist on your favourite music app, and just like that, you enter the world of subscription services.

Today, most of our basic requirements are fulfilled by businesses running on the subscription model. Swiggy, Netflix, Amazon, BigBasket Daily, Spotify and most of the other big players are betting big on this model and it’s quite a shift from how we have started paying for just what we want, how we want!

But what has caused these companies to move from their traditional model? Subscriptions help these companies provide their users with the following:

1. An excellent experience to their customers by letting them enjoy the service seamlessly

2. Reduction in the friction of a consumer coming back to go through the checkout journey again

3. Affordability to customers, as they only have to pay for the services on a monthly basis versus a yearly lump sum amount. This, in turn, improves customer retention

Go ahead and check the trends of purchases on your website. Does 80% of your sales come from 20% of your existing customers? If yes, the retention of these customers is critical for your business and the subscriptions model allows you to do just that. 

Let’s deep dive and take a look at why subscriptions can make sense for your business.

What are subscriptions?

Subscriptions are the payments made to businesses in accordance with a predetermined schedule that customers sign up for. These types of payments are processed electronically, usually from a customer’s preferred mode of payment- credit or debit card, bank account, physical mandates and UPI.

Depending on the payment gateway that a business uses, they can give their customers the option to set up recurring payments using different payment modes. 

How did Razorpay subscriptions start in India?

Traditional modes of subscriptions like physical NACH and ECS have been prevalent in India for a number of decades. They have been helpful in allowing customers to invest money, borrow money and insure their assets.

However, with the increase in disposable income and opening up of digital modes of payments by the government of India, digital modes of recurring payments such as cards and e-mandate have become more popular. 

Customers have started trusting the subscription model not just for their financial needs, but for other necessities like groceries, rentals, online educational courses and more as well.

While businesses work hard on encouraging customers to go for the subscription model, a payment gateway plays a big role in helping them convert the customers. This includes:

  1. Clear messaging on the user interface which creates trust in the mind of the customer
  2. Wide number of payment options for the customer to choose from
  3. Easy to follow steps for the customer to reduce drop-offs

A number of gaps in the existing products on the market encouraged us to build something what we today call Razorpay Subscriptions. 

[Also Read The Secret Sauce Behind Running A Successful Subscription Business]

Razorpay Subscriptions

Razorpay subscriptions offer quick and easy integration for businesses. With a single integration, you can go live on all modes of a recurring payment, something that none of our competitors offer.

It is one of the easiest products to use and is designed for businesses of all types. 

It offers multiple modes of setting up recurring payments for customers such as recurring on cards, e-mandates, physical mandates and UPI mandates.

Go live instantly by using subscription links via the Razorpay dashboard or integrate our APIs to give a seamless experience to your customers.

What modes does Razorpay Subscriptions support?

With Razorpay Subscriptions, you can offer a number of payment options for your customers. These include recurring on using credit cards and debit cards. Recurring on bank accounts using e-mandate, physical mandates and UPI mandates.

How Razorpay is disrupting this space

Razorpay is building the future of payments with its robust product suite. Here’s how Razorpay is disrupting this space:

  • Avail industry best success rates on credit cards with Razorpay’s homegrown banking solutions
  • Beat the competitive pricing and get industry-best plans with Razorpay
  • Accept payments from across the globe with utmost ease
  • Our physical NACH product – Razorpay PaperNACH – reduces the traditional TAT of 2 weeks to just 5 days, at the same time cutting down extensively on your operational costs
  • Make the best of open APIs, easy and quick integrations and 100% online processes
  • 24*7 support by our payment experts
  • One-time sign up to avail all of the Razorpay products 
  • One point integration to offer multiple payment options to your customers

Which industries rely on Razorpay subscriptions?

razorpay subscriptions

All of the above-mentioned facts clearly state that the model of recurring payments is here to stay!

Advantages of Razorpay Subscriptions

Customer retention

It is not wrong to mark this as one of the most important benefits of recurring payments. The core idea of recurring payments is to accomplish the objective of the customer and keep providing value to them over time. It helps a business build a substantial level of trust and a higher number of your customers turn into what businesses call “sticky” customers.

Ability to scale

Often, customers’ needs change dramatically, depending on a number of factors like budgets, available resources, options etc. Recurring payments offers your business a way to adapt to changing needs and keep growing at the pace you want.

Stronger relationships

The recurring payments model is not about finding one customer and moving onto the next one. As a service provider, it allows you to build a relationship with your customers in a way that they value you as much as you value them.

Does Razorpay Subscriptions sound like a plan for your business? With all the changes in the ways customers behave, it has become important to bring about a change in the way you do business as well. Check out Razorpay Subscriptions and take your business a step ahead.

 

Healthifying Your Fitness and Weight Loss Goals

HealthifyMe

From being primarily a services company that provided access to nutritionists and fitness trainers anywhere-anytime, HealthifyMe has evolved into a pure-play product company.

With over 10 million users and a consistent 4.6-star rating, India’s largest and most-loved health and wellness app, HealthifyMe has continued to grow beyond the Indian subcontinent.

HealthifyMe needed a payment solution that made two things happen – seamless user experience and the ability to experiment fast. As a universal app, HealthifyMe has already proven to be successful in Singapore and Malaysia.

As we spread our wings across more countries, we are sure that Razorpay is going to be an integral part of that journey as well.

How HealthifyMe uses Razorpay

Razorpay enabled a flawless integration, and the growth engine of HealthifyMe now extensively uses Razorpay as the only gateway. The web vertical is a significant space for HealthifyMe. 

We went back to the web because we have a lot of users who we cannot reach through our regular channels of marketing. Razorpay powers 100 percent of our web payments.

HealthiFyme

Razorpay as the payment gateway powers purchases directly from HealthifyMe’s Facebook and Google ads. The company has noticed a massive increase in conversion rates and has been able to iterate and experiment to learn and fail quickly. 

We are hoping that Razorpay will power over 30% of our revenue by March, next year. We are sure that this is one partnership that will last for a long time to come.

Q&A with Anjaan Bhojarajan, VP, Growth and Head of Product, HealthifyMe

HealthifyMe is one of the largest and most loved health and wellness apps in India. Could you tell us more about your product and business model? 

In terms of product lines, HealthifyMe is a premium app. The business model can be compared with Tinder and Linkedin, who have done well in the freemium model business. 

If you go premium, you get access to fitness trainers, workout plans and many more. This is our core business model. We don’t run Ads in our app.

Generally, people work with a nutrition and fitness trainer for 6-12 months. The business has grown, we have built credibility around it over the last five years, probably the only app in India or around the world that has scaled to this level. 

The free version of our app has calorie counting. With our workout-tracking, you can check your calorie burns, intake, weight and water consumption, which makes sure that you are hydrated enough. 

Tell us about your AI nutritionist Ria. Do premium subscribers get access to this classic coach model? 

Ria is our knowledgeable AI nutritionist and has been in existence for the last three years. As part of the coaching plan, Ria helps us with real-time analysis. The feedback from Ria keeps our premium subscribers on track and makes sure they are eating healthy and stay fit. 

Meanwhile, Ria learned from the behaviours of trainers and became powerful enough to launch its plans. Courtesy of Ria, our Smart Plan is an AI-powered offering. 

We have 10 million users across the world and about 1 million from South East Asia because we went local in Singapore and Malaysia last year. 

Why did you choose Razorpay as your payment service provider?

Razorpay has helped us build a whole new business line. The payment service provider powers 100 percent of our web payments. 

Razorpay has a great checkout mechanism, helped us educate users about our plans, and the new conversion ratio has been through the roof after the integration. 

Integration was flawless. You have the best inline checkout page. Business point of view Razorpay has done wonders for us. 

Power your payments with Razorpay Payment Gateway today.

Why Are Payment Gateway Settlements Not Instant?

Every business or enterprise expects its customer’s transaction to reflect in their account directly. But even today, in the era of digital-first platforms, these settlements are not instant. To give you more clarity on the payment gateway settlement process, let us show you what happens behind the scenes. 

Settlement process: A business’s perspective

Settlements is a process through which a business receives a certain amount paid by their end-users via online transactions for a particular product or service.

In this case, an individual pays via a payment gateway on the business’s website or app, and that amount is transferred to the business’s account by the payment gateway. 

Here’s what a typical settlement process looks like:

Step 1: The cardholder inputs their bank account or card details on the Razorpay checkout form to pay for a product or service 

Payment Checkout

Step 2: After successful authentication via OTP or 3D secure, the money is debited from the cardholder’s account, and the individual receives a confirmation notification for the same

Payment Checkout

Step 3: The transaction amount is routed via the card networks to Razorpay’s acquiring banking partners

Payment Checkout

Step 4: Once Razorpay receives the amount, it is settled to the seller’s bank account after the deduction of a specific fee

Payment Checkout

Why don’t payment gateways settle instantly? 

Payment settlements may look like a very straight-forward process, but they are not. The primary reason why settlements are not instant is that money movement at every step of the process is not immediate.

Also, the underlying complexities of reconciliation is an additional challenge that stands in the way of instant settlements. 

Well, reconciling transactions can be a nightmare for accountants, and here’s why:  

  • Every bank has or offers a different settlement cycle. Hence, the time-frame for the acquirers can vary. For example, Bank A may usually settle within a day, whereas Bank B may take two days to pay. Keeping track of these timelines and consolidating it all in a single sheet does take time
  • Bringing along a whole new level of complexity are refunds and chargebacks. In case of refunds, a customer expects them immediately. But refunding the money without reconciliation puts the business at risk
  • The business owner can end up paying back an amount that was never received. Also, it would be a disaster when the bank statements and reconciliation documents would fail to show a clear picture

When does Razorpay settle a business?

For every business on the Razorpay Payment Gateway, we define a settlement schedule–the time from the date of payment capture to when the business should receive the due amount.

As per the schedule established for the business, the settlement is created only for captured payments and refunds requested for the captured payments. 

Earlier, the complete process used to consume T+3 business days for domestic transactions (T being the date of payment capture).

Today we are glad to announce that customers can unlock faster settlements at no additional costs. Yes, the settlement cycle has been upgraded from T+3 to T+2 by default. 

Note: Razorpay doesn’t schedule settlements on weekends.

Here’s the Razorpay T+2 settlement chart:

Razorpay Settlements

Note: Maximum settlement time – four days

To settle this

Settlements usually depend on the multiple intermediary hops. In the case of cards, the acquiring bank, card network and issuing bank are involved.

In case of a payment method like UPI, along with the acquiring and issuing bank, NPCI also plays a role. This is why the amount of time taken to process the settlements also depends on the mode of payment used to make the transaction. 

The entire money movement process in online payments happens via nodal accounts. This means that payment gateways cannot earn interest from the money they hold or move on behalf of their customers.

At Razorpay, we are genuinely devoted to providing the best payment experience, not just for the businesses that work with us, but also for their end customers.

We truly believe that if online payments have to replace cash, then it has to provide the same ease of use, which is what we strive to achieve. 

To make settlements even smoother, and to help businesses manage their working capital requirements efficiently, we also provide 24x7x365 On-Demand Instant Settlements. Read about that here.

Click here to accept payments with Razorpay Payment Gateway.

2020 – The Year for Neobanking in India

RazorpayX - neobanking platform

Banks have been around forever. In India, the history of banking dates way back to 1750 BC. We have traditionally been dependent on banks for all of our financial needs, as individuals as well as businesses. 

Banks have offered us everything that we have required – from current or savings accounts to credit cards, various types of loans and also, insurance and investment plans. But with fintech startups, the dependency on traditional banks for these services is gradually decreasing, especially for businesses.

These new-age banking services providers are commonly known as neobanks. They are using technology to unbundle traditional banks. And how!

Lately, “neobank” has become somewhat of a buzzword in the fintech space. Quite a few neobanking platforms have emerged in the last few years, creating a storm at a global level. The term itself has gained so much momentum because of the media that it has become a hot topic.

Banking has moved forward in leaps in bounds in the past few years. The way businesses and individuals consume financial services has changed significantly ever since neobanking, API banking, and open banking became prominent in 2016. 

It’s no secret that traditional banks are on the front of increased competition from many arcs of the digital world. Neobanks are expanding rapidly, using state-of-the-art tech to win over customers, who demand simpler, faster, and more efficient financial services. In recent years, neobanks have become the next big thing in fintech. 

So, we wanted to bring you a snapshot of how neobanks are on the way to transform financial services globally. RazorpayX neobanking platform - RazorpayX - what is a neobankrazorpayx - neobanking platform

The expansion of neobanking platforms

Fintech startups all over the world, especially in banking and financial services have over 15 million consumers, out of which, over 50% of the consumers are acquired by neobanks. 

The incredible growth opportunity for neobanking platforms is sprouted by their low-cost business model, which has resulted in high adoption by small and medium-sized enterprises, as well as businesses with variable incomes and earnings, and businesses that embrace innovative tech. 

The speed of neobank adoption has intrigued investors, corporates, as well as venture capitalists all over the world. 

[ Read more: Everything You Should Know About Neobanks ]

Neobanking in India 

Globally, neobanks are entirely digitised. But, in India, regulations don’t permit 100% digitised banks. Fintech companies showcasing themselves as neobanks offer services that are built on top of traditional banking services. 

Regulatory framework for neobanks in India

Neobanks in India emerged as a comprehensive aid for banking and financial services, as well as for small and medium-sized businesses. But, RBI’s regulatory policies neither agree nor disagree with the factuality of fully digitised online banks – meaning, in India, neobanks aren’t 100% digital. 

Back in 2018, RBI kicked all forms of cryptocurrency to the curb, with an explanation that crypto transactions would be a threat to security. Also, other tech innovations like online currency and associated banking services appear to have come to a halt. This has put a damper on the tenacity of new business models since regulatory guidelines are muddled. 

However, in August 2019, RBI ushered in a new regulation for the testing of new fintech innovations in a restricted ecosystem, which is motivating for emerging fintech companies. 

Business banking with neobanking platforms

Neobanks have taken business banking to the next level on the grounds of their enormous range of offerings to businesses. 

Usually, businesses have to deal with dreary and dull processes involving payouts and disbursals. These processes take up many hours of manual effort owing to buggy software and complex infra systems. 

Neobanks are supported by the traditional banking infrastructure, and in return, neobanks help sell current accounts. With the partnership, neobanks provide all the benefits of traditional business banking, along with customised reports, flexibility for bulk upload, easier failure identification, scheduling of payouts, and so much more. And, RazorpayX is at the forefront of the banking revolution in India.

With RazorpayX, businesses can

  • Manage their contacts and end-to-end payout operations via powerful APIs
  • Get notified about their payout status and tracking codes through webhooks
  • Make 24*7 payouts, disbursals, and refunds through UPI, NEFT, RTGS, and IMPS
  • Recharge, store or transfer funds to their RazorpayX account for payouts
  • Offer 24*7 instant refunds and payouts to their customers and vendors etc., without any manual intervention
  • View financial summaries of all their transactions and drill down views of transactions at a contact level
  • Instantly access and download financial reports and summaries of their contacts
  • Get complete control and visibility of their finances with real-time summaries, without any help from financial analysts
  • Automate and execute payroll, compliance, and contractor payments with a dual tax regime compliant payroll software

The RazorpayX story

Traditional business banking is not the most efficient way to manage finances. And, several Razorpay merchants told us how suboptimal their business banking experience is. Since we were already spearheading payments, we thought about giving business banking a shot.

We conducted a survey among 1500+ CxOs and spoke to 400+ merchants to understand their business banking experience.

  • 64% of companies believe their payment service providers are best equipped to solve their payment challenges as opposed to banks
  • 10x as many companies polled believe payment service providers innovate better than banks
  • 36% of businesses believe manual dependency and reconciliation are the biggest challenges in their current money management

And so, we started our neobanking journey by creating a whole new platform on which we could build products and integrations. We created an entire API and dashboard payouts platform over a virtual account setup that merchants could use during the early access in 2018. As we scaled, we realised current accounts are the heart of the product to support higher volumes of transactions.  razorpayX dashboard - neobanking platform During our event FTX 2.019, we announced RazorpayX’s expansion into current accounts, payroll, and corporate credit cards. 

We built RazorpayX with Current Accounts in partnership with RBL Bank and included all standard banking services like cheque book, debit card, and accounting statements. For payroll, we acquired Opfin, a payroll and HR management software company, that also manages tax filing and compliance via a unified platform, without having to hire any external vendors.

We wanted to take this platform just a little bit further with Corporate Credit Cards.

We’re partnering with banks and networks to build corporate credit cards from the ground up that offer immense flexibility with limited-time credit period and auto-repayment for businesses. These cards powered by our credit intelligence engine can be used to make payments towards Google Ads, Facebook Ads, AWS, Business Travel, and so much more.

[ Read more: RazorpayX – How We Built a Startup in a Startup ]

The future of banking with RazorpayX

Online real money gaming is a forthcoming industry in India. The key aspect of making a great game that attracts a huge customer base is to ensure the game winners are rewarded, and really fast. The business model is all about providing its customers with instant gratification.

But, relying on netbanking and other manual payment modes are not the best way to go about disbursing the prize money to the winners. RazorpayX has helped companies like Mobile Premier League, RummyCulture, Pokersaints, and many more to transfer winnings immediately, and with ease.

The year for neobanking

There are over 42.5 million small and medium-sized businesses throughout India, constituting nearly 95% of the total industrial units in the country. But, only 47% of these businesses have been able to access tools for payments, disbursals, and other vital processes.

Furthermore, about 23% of SMEs use ERP software and CRMs. This means, there’s a huge market opportunity for neobanks, especially since they have a lot to offer. 

The gig economy of India has over 15 million contract workers and freelancers, who actively boost the growth of startups. And just like SMEs, only about 67% of the gig economy has access to innovative tech that helps with money management. Neobanks can help the gig economy by enabling independent workers with customer management and banking services.

Over the last 3 years, India has seen the rise of neobanks with 811 by Kotak, Yono by SBI, RazorpayX, Open, NiYo, and more. And, these neobanks have been successfully helping SMEs, large enterprises, and the gig economy with billing, cashflow management, disbursals, vendor management, and so much more.

Special Report: The Impact of Lockdown on Digital Payments

covid-19 era of rising fintech

Life during a pandemic is not something we anticipated. With social distancing, these trying times have affected the way we go about our daily lives. While we are still confined to our homes, trying to keep safe from COVID-19, the distress still persists. The pandemic has also devastated businesses across industries, including digital payments.

We analysed the digital payments made before and during the lockdown for our 5th edition of The Era of Rising Fintech report and gathered some noteworthy observations and insights.  

All findings in this report are based on digital payments made on the Razorpay platform during March and April 2020.

Key highlights

  • There was a 180% surge in NGO donation transactions in the past month since the beginning of the lockdown
  • During the lockdown, industries like utilities (bill payments), IT & software, and media & entertainment grew by 73%, 32%, and 25% respectively
  • Industries like travel, real estate, and food & beverage, and  groceries were hit the hardest as they observed a slump of 87%, 83%, 68%, 54% with closed establishments and cancelled travel plans
  • Mobile wallets exhibited impressive growth in the lockdown period, with Jio Money growing by 66%, Amazon Pay by 63%, and Paytm by 43%
  • In tier 2 and 3 cities, the mobile wallet wave swept over as they continued to witness a massive surge in wallet transactions for bill payments
  • Before the lockdown, UPI at 46%, remained the most preferred payment mode and continued to be so at 43%, 30 days into the lockdown
  • We firmly believe that fintech companies are likely to gain the profound trust of Indian consumers in the months to come
  • With tier 2 and 3 cities rapidly adopting the digital route for making payments, we foresee a gradual rise in digital transactions across industries

Fintech: 2020 and beyond

  • The trade impact for India has been estimated to be $348 million, according to the UN Conference on Trade and Development
  • We believe that the pandemic may boost demand for fintech-related services for consumers and offline businesses
  • We can also anticipate an expansion in various spheres like consumer banking, neobanking, as well as wealth management 
  • Investments in financial technology and opportunities for partnerships are likely to grow manifold as the fintech industry continues to burgeon steadily

 

Introducing Saved VPAs for UPI Payments through Razorpay

save upi vpa razorpay

UPI has become the most preferred payment method across India, but one problem that consumers still face is remembering their UPI Virtual Payment Address (VPA). Given the way VPAs are structured, it often also happens that they are entered incorrectly. 

We have observed this to be a major challenge when businesses on our platform accept UPI payments from their consumers. Nearly 20-25% of consumers enter an invalid VPA. Hence, to make your end user’s experience fast and seamless, we are happy to introduce the ‘Saved VPA’ feature on our Standard Checkout.

This feature will allow users to save their UPI VPAs so that they don’t have to enter the same again.The best part is that this feature is aligned to the existing Saved Card feature of Razorpay. So if you are already using the Saved Card feature, it will be really easy for you to understand and integrate. 

We have enabled the Saved VPA by default for all businesses on our Standard Checkout.

What problem will ‘Saved VPA’ solve? 

Let’s start with a simple question – Do you really remember all your UPI account VPAs? We know this is not easy. 

In the current scenario, the customer is asked to enter their VPA whenever they are carrying out a transaction via the UPI Collect flow (enter VPA to proceed). Data for users on IOS and desktop shows that 99% of UPI payments are done through the UPI Collect flow (the rest is UPI QR code). For users on Android, there are many apps/platforms where UPI intent (click on app to make payment) option is still not available. 

In all of these cases, the user has to enter his correct VPA address to make the payment. Let’s take an example: Rahul has created accounts in all the major UPI apps and has linked his 2-3 bank accounts with these UPI apps. Let say, his VPAs are: 

  • Google Pay: user_name@okhdfcbank (note: not just okhdfc), user_name@okaxis, name@okicici (note: not okicicibank) 
  • BHIM: Slightly easy to remember – phone_number@upi
  • PhonePe: phone_number@ybl or user_name@ybl
  • PayTM: phone_number@paytm

There are many other apps and platforms in the market for the user to register and create a VPA. The UPI VPA is different for different apps and platforms. No wonder then that someone like Rahul will end up taking a long time to make UPI Collect payments and often end up entering incorrect VPAs. 

No more incorrect VPAs

As the feature name suggests, Saved VPA allows customers to save their UPI VPAs so that they don’t have to enter the same again and again. The user has to just tap on his Saved VPA to initiate a new UPI payment. This feature helps in improving your overall user experience, reduces cart abandonment, reduces time taken by the user to complete the transaction, and improves payment success rate.

Initial insights have shown that the success rate for UPI Collect payment goes up by upto 15% with this feature.

Razorpay Saved VPA benefits:

  • VPA details are stored within a PCI secure vault
  • Removes the need for the businesses to store the VPA details
  • Ideal for businesses wanting to implement a quick checkout process for known customers
  • Seamless process to add and delete VPA details within the vault

USP: Global Saved VPA

  • Razorpay Standard Checkout allows users to store their VPA while carrying out a transaction for a business and can then be accessed (with login credentials) wherever Razorpay Standard Checkout is enabled, even with other businesses
  • For example: A user who is visiting Cure.Fit for the first time will be able to fetch and use his Saved VPA, if he has done a UPI transaction on any other business using Razorpay, like IRCTC.

For Server to Server/Custom UI integration, you will be able to fetch customer VPAs that were entered on your site or platform using local tokens.

How does this work?

  • You can save the details of a VPA entered by the user on Checkout
  • The entered VPA details are saved as tokens by Razorpay
  • On a repeat visit, while making a payment, the customer is shown all the generated tokens
  • The customer selects Saved VPA and completes the payment by just tapping on the shown VPA

Saved VPA is secured by PCI-DSS compliance 

  • Encryption through PCI-DSS compliance: First things first, Razorpay does not store your data as it is. Razorpay is PCI DSS compliant. The PCI Security Standards Council is a global organization that sets compliance rules for managing user data for all online payment systems. What this means for you is that your online transactions are encrypted to ensure there is no data interception
  • Tokenization to prevent exposure of data: The sensitive UPI information entered by the customer is stored and secured as “tokens” in Razorpay. This “token” is a unique set of characters that replace your original VPA address. This allows the payment to be processed without exposing your sensitive details
  • Consent to save: In case of Razorpay Standard Checkout, the customer’s explicit consent is taken to store the details. A checkbox is shown with the ‘Saved VPA’. option

Want to get this enabled for your business? Leave us a query here and we will get back to you. Not a Razorpay Customer? Sign up today for the ultimate payments experience!

Rang De – Uplifting Rural Entrepreneurs Across India

Rang De was started to address the huge unmet need for affordable credit for livelihood to overcome poverty. The inspiration for Rang De came from Muhammad Yunus and his contributions at the Grameen Bank. In its earlier avatar, Rang De has successfully reached out to 65,000 entrepreneurs and helped them build sustainable livelihoods.

“Our unique model leverages technology to connect social investors to rural unbanked entrepreneurs.”

Since their inception in 2008, they’ve been persistent in providing credit at affordable interest rates to credit-starved communities–early-stage or new entrepreneurs from low-income households.

Razorpay has helped Rang De in serving thousands of rural entrepreneurs across India with affordable credit by helping them raise social capital online from social investors. They have just relaunched Rang De as an NBFC-P2P. They are now regulated by RBI and are excited to be working with Razorpay in their new avatar.

“Rang De’s rural entrepreneur network is growing at 50% month on month and Razorpay has played a critical role in enabling this.”

Rang De uses a key Razorpay feature called Smart Collect (Virtual Payment Account) to receive repayments from their borrowers across India. Smart Collect makes their operations super efficient and also cost-effective.

Razorpay smartcollect

All of Rang De’s repayments from their borrowers are powered by Razorpay Smart Collect. 

They plan to serve 1 million low unbanked entrepreneurs with affordable credit across the country in the next 5 years, Razorpay’s Smart Collect is going to save them 100s of man-hours every month in doing this.

“Integrating our core product was quite easy with Razorpay. Two weeks off the block, and we were able to migrate most of our social investor’s credit balances from Rang De’s older platform into our new NBFC-P2P platform.”

That’s a lot of saved manual effort since all of their repayments now come through Razorpay and are reconciled in real-time. 

Rang De wanted a unified payment gateway for web and mobile, which passed the high-security standards mandated by RBI. With Razorpay, they got more than they asked for.

The story of Rang De

We asked, Ramakrishna NK, Co-founder and CEO of Rang De, to tell us more about the birth of Rang De and the way forward for it.

1. What are your company’s vision and goal?

By reaching out to underserved communities and offering them credit at affordable interest rates, our vision is to make poverty history in India.  

Started in 2008, Rang De is a pioneering peer-to-peer lending platform. Our mission is to reach out to early-stage, first-time entrepreneurs from low-income households and provide them access to venture debt at affordable interest rates. 

Our unique model leverages technology to connect social investors (lenders) to rural entrepreneurs, Rang De has been able to reach out to 65000 entrepreneurs with credit at really affordable interest rates and helped them build sustainable livelihoods and create jobs. 

Recently, we have transitioned into an NBFC P2P and are on a mission to provide credit to 10 million credit-starved entrepreneurs across India.

2. What was the idea behind the birth of Rang De? 

The idea behind Rang De emerged in 2006, the same year when Muhammad Yunus won the Nobel Peace Prize for his work in the field of microcredit. We felt that credit could be a powerful tool to help people fight poverty.

However, the interest rates that borrowers were being charged were exorbitant. We felt something had to be done about it. That’s how Rang De was born – to connect individuals who needed access to credit with Individuals who could lend small sums of money.

3. What is the problem(s) your company is solving?

Our idea was to leverage the power of the internet to connect individuals who want to make a difference sustainably, by creating sustainable livelihoods to thousands of individuals who are either denied or not offered credit. 

By tapping into the power of many, and decentralizing the source of funds, we have been able to significantly reduce interest rates on our loans to change the lives of potentially millions of credit-starved individuals across the country.

4. How do you see your company growing in the coming years?

We see credit as that financial opportunity that could help people overcome poverty. In the next five years, we would like to reach out to 10 million individuals across the country and provide them with access to need-based customized credit.

Upgrade to a Dual Tax Regime Compliant Payroll Software this Financial Year

dual tax regime opfin

Earlier this year, the Finance Ministry of India introduced the dual tax regime, a whole new tax regime to the existing one, bringing in prevalent changes to the way taxes are calculated for employees from the financial year 2020-2021.  

Since the financial year has just begun, businesses need to quickly upgrade to a payroll software that is compliant with the dual tax regime and automate their payroll process.

Let’s talk a little bit about the tax regime.

As opposed to the higher tax slabs with benefits and exemptions, the new tax regime is all about lower tax slabs, but without the benefits and exemptions. The Union Budget 2020 allows employees to choose from the two options.

dual tax regime payroll software

  • The new income tax for employees whose income lies between ₹5 lakh and ₹7.5 lakh is 10% whereas according to the old regime, the income tax is 20%
  • The next slab is for the range between ₹7.5 lakh and ₹10 lakh, where the tax is 15% while the tax is 20% in the old regime
  • Employees with income between ₹ 10 lakh and ₹ 12.5 lakh would pay 20% tax, which is reduced from 30% in the old regime
  • Finally, for income over ₹ 15 lakh, the tax is 30%

The perks of the new income tax regime

Lower taxes

Your employee can take home more money than before under the new tax regime since the taxes are reduced. Meaning, your employee need not exclusively invest in tax saving schemes.

Fewer compliances 

The new tax regime is very straightforward compared to the old regime. Except for NPS, savings interest from the post office, and PPF, benefits, and exemptions are cut off, making the tax filing process much simpler.

Flexible investments 

With the new tax regime, your employee can personalise their investments that provide better fluidity to withdraw their money.

Like we mentioned before, the benefits and exemptions are nearly cut off. HRA (House Rent Allowance), housing loan interest, investments like life insurance, provident fund, etc. (Section 80C investments), medical insurance, education loan interest, savings bank interest, and leave travel allowance are removed.  

What exemptions are still available in the new regime

  • Leave encashment on retirement
  • Scholarship received for education
  • Funds received on VRS up to ₹5 lakh
  • Maturity amount and short term withdrawals from NPS
  • Pension commutations
  • EPF
  • Death, retirement benefits

How to choose between the two income tax regimes

Your employee should consider both the advantages and disadvantages of the new tax regime in comparison with the old one. They should calculate their deductions, income after taxes, and the total tax for their annual income, based on both the regimes. 

This will help them understand what works for them the best. 

How the new income tax regime will impact your payroll 

Payroll compliance is absolutely important, especially when there is a change in regulations. Having an out-of-date payroll software will definitely not help you with change management and will limit your productivity since payroll can be largely time-consuming if done manually. 

Also, let’s not disregard the fact that your HR team will have to spend hours and hours every month to keep step with compliance, whereas they could be contributing to the business. 

If you’re wondering what can help your business minimise impact, let’s introduce Opfin, a payroll software that will put an end to all your payroll processing troubles. 

Opfin is compliant with the dual tax regime. The payroll software allows your employee to choose their preferred regime during the time of their investment declaration for the financial year. 

They can also see their projected taxes for the year based on their income and regime so that they can make an informed decision keeping their tax liabilities and savings in mind. dual tax regime Your employee can then file their declarations and edit them based on their regime. Opfin also recommends a breakup predicated on their salary, so that they’re aware of the benefits of both regimes. 

This helps you completely automate your payroll process without having to worry about the dual tax regime compliance, without any manual intervention.

[ Suggested read: Automate Your Employee Salaries with Opfin ]

Opfin for all your payroll needs

Relying on outdated payroll software will create a big setback for your business.

Opfin will help you carry out your business operations without any interruptions since the software scales itself and helps you stay up-to-the-minute with changing regulations and compliance.