Is 30% RTO the Cost of Running an E-commerce Business?

thirdwatch ecommerce return to origin fraud

It is no surprise that the Indian economy is more of a cash-driven market, especially in the e-commerce sector. Unlike the e-commerce industry in USA/Europe, COD is the forerunner in the Indian market. 

COD suits the Indian mindset and can make up to 70 percent of Indian e-commerce businesses. With smaller players, customer credibility is also in question, which can further accelerate the need to introduce COD to their business.

However, there’s a bigger problem in question when it comes to the Indian e-commerce industry– Return to Origin (RTO) costs. These RTO costs can be especially high in the case of COD orders.

What is RTO?

RTO is when orders cannot be delivered and have to be shipped back to the warehouse. This puts a significant cost burden on e-commerce firms as they lose a lot of money in shipping it back and forth.

Here’s how e-commerce companies lose money in these orders:

  • Forward & reverse logistics
  • Blocked Inventory (Items stuck in transit)
  • Physical quality check and re-packaging of returned items
  • Increased probability of damage to fragile items, and hence more money spent in shipping them
  • Operations cost in processing this order

We took time out to see what the actual numbers of RTO orders and what their share was. Here’s what we found– in case of COD orders, the percentage of RTO orders can be as high as 40 percent!

This means that at least one out of three orders were failed orders and were returned. When one-third of your orders have the potential to damage your bottom line, rather than adding value to it, it’s no doubt that the situation is worrisome.

Is there a pattern to these cancelled orders?

We took a closer look to see if there were any patterns to these orders, and if these patterns followed a Modus Operandi and we discovered a few interesting insights. Here’s what we found out:

  • Customer error (Intent is there but incomplete address, phone number, etc)
  • Orders from transitory addresses (hotels, friend’s place, etc)
  • Price-sensitive intent (Reorder because of drop in price)
  • Impulse buy but without paying (there is no downside to refusing delivery)
  • Intent to fraud (Habitual fraudsters)
  • Placing an order without any genuine intent

So, what is the solution to this?

Companies often perceive these costs as “mandatory” since there’s no proper solution set in place. Companies have little choice and fewer tools to prevent RTO — they just take it as a ‘cost of doing business’.

Some businesses also resort to static, generic solutions like the following:

  • Blocking all transactions on International credit cards
  • Not delivering to certain pin codes or cities
  • Capping the order size

But, what’s wrong with static solutions?

Well, sometimes, static solutions can do more harm than good as many genuine orders are lost in the process, not to mention customer dissatisfaction when they hit a dead end on a static solution. This can even affect customer relationships on a long-term basis. 

Solving the RTO problem by manually scanning every order does not work either due to the sheer scale of the problem and evolving nature of fraud techniques. 

With the Indian e-commerce market becoming hyper-competitive, firms need better solutions as they cannot afford to lose customers and orders. 

The way forward

Machine Learning technology offers an attractive solution as it addresses all the challenges in preventing fraud — scale, complexity and changing patterns.

  • Employing Machine Learning for fraud detection

Catching digital frauds requires us to first gather the ‘Forensic Evidence’. Every user interaction leaves behind a subtle digital forensics trail like proxy IP, device ID, email address, time to order, etc. 

Machine learning models combine hundreds of such innocuous parameters, which are seemingly unrelated, to identify the patterns that indicate fraud. These patterns are later used to zero down on customers who perform a fraud across different websites and make it to the blacklist.

  • Enriching the data

Machine learning and natural language processing are used to differentiate between real and fake address. This is only the beginning. Transaction and user data can be enriched by adding context to it.

For example, by adding the price of the user’s phone device or categorizing an address as five stars or one star, we turn meaningless data (phone model) into actionable information that increases the accuracy of the red or green flag that the machine learning models generate for every transaction.

  • Observing the user

Fraudsters are habitual in nature. They leave similar footprints on multiple sites. Network effects can be harnessed by pooling in anonymized data to predict and prevent fraudulent behaviour. This de-incentivises and penalises fraudulent behaviour across the ecosystem.

Moreover, e-commerce firms will truly know their customers so that goods are delivered to a person not merely to an address.

Most importantly, RTO will no longer be just the “cost of doing business”.

Curious to know more about how we’re solving this for merchants? Get in touch with a Thirdwatch expert today!

India’s FinTech – An Unbalanced Adoption

FinTech firms in India are setting new benchmarks for financial services in the country. A large number of Indians are today not catered to by financial service providers in the country. This is a huge segment of the market that FinTech firms are looking to tap into through their innovations, a majority of which come from startups. Hence, their use will only rise as awareness grows, consumer concerns fall and technological advancements reduce switching costs.

India already has the second-highest FinTEch adoption rate in the world, at 52%, second only to China. According to Credit Suisse, the digital payments industry is currently pegged at $200mn and is expected to grow five-fold by 2023.

On the whole, the FinTech industry is backed by the government as well. Initiatives such as Jan Dhan Yojana, Aadhaar and UPI have enabled a larger number of Indians to access financial services. Consequently, the business environment has flourished thanks to programs like Startup India, which has enabled more companies to cater to this ecosystem. 

Additionally, The National Payments Council of India (NPCI) has leveraged the growing presence of mobile phones with the introduction of UPI. This has helped in the reduction of the cost of infrastructure for FinTech ventures substantially. With the smartphone user base expected to expand, the digital banking footprint is projected to grow faster than ever before.

But all of this is currently happening on a large scale in urban India. FinTech has become an almost ubiquitous part of our lives, but our fellow citizens in rural India are still way behind. The fact that they can’t afford these services coupled with illiteracy is some of the reasons for this. 

Additionally, the needs of the population without bank accounts are very different from the traditional population. The need for money and the spending habits of a daily wage worker in a smaller town or village are very different from those of an office goer in a bigger city. Transitioning to digital platforms is difficult for people who have spent their life using cash. 

But that’s not to say that things are not changing. They are because smartphones and internet access are both increasingly available more easily in every part of the country. The government is working in unison with FinTech companies to make sure that this part of the population also gets access to financial services and products. FinTech companies are also adapting themselves to meet the needs of this segment as Indian consumers in smaller areas become more accepting towards UPI platforms and mobile phone wallets.

On the other hand, that is complicated in an economy like India which is dominated by MSMEs. And for MSMEs, entering the digital realm for payments can be complicated. But on the plus side, FinTech companies have taken it upon themselves to build products that solve this problem. Payment gateways are one such example. Sure, the margins might be low, but the scale definitely isn’t. This is why more massive payment gateways target a handful of giant retailers. This makes it that much harder for FinTech companies catering to the latter to come up with sustainable business models. Fintech is supposed to enable small companies and has done so in mature economies. 

In all, FinTech firms are establishing themselves as noteworthy providers of financial services, with the greatest traction not only in banking but also increasingly in insurance and wealth management. They are demonstrating success in innovation, whether as a new business model or a new service and, in the process, are shaping the future of the financial services industry. As a result of the rise of FinTech, we are moving to a world where products are unbundled from full-service incumbent firms and bundled by platforms that disrupt traditional merchant-consumer relationships by allowing consumers to manage their finances on the go. 

Although we are on the right path, we also have a long way to go, to make sure we are able to strike the balance, in the next five years – FinTech has the potential to democratize access to finance in ways that we are yet to comprehend completely. Hence, it is imperative, that the financial services industry and the government put together a collective effort to leverage the benefits of FinTech for the betterment of the Indian society as a whole.

This story was first published on ET BFSI.

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UPI Overhauls Cards as the Preferred Payment Mode at 45%


Surprising how UPI has grown so much to become the preferred payment mode in September. UPI, since its inception, has become quite the champion amongst payment modes. Anybody and everybody who accept payments, are now providing UPI as a default payment mode.

So, if you’re wondering what UPI has to offer in September, you’re in for a treat! Without further ado, let’s discuss UPI, the most preferred payment mode in India!

Before we get into the details, let’s bounce off of the different types of UPI payments and their significance. 

Although the use-cases for UPI payments are bountiful, we primarily use the payment mode for two kinds of payments.

  1. P2P (Person to Person) – UPI was initially a P2P payments enabler in 2017, meant for transactions between two people
  2. P2M (Person to Merchant) – After it took the payments space by a storm, it transitioned into a P2M mode, wherein people could make payments through UPI to merchants, both online and offline

Since Razorpay is a payments platform, it oversees P2M transactions from a multitude of businesses like BookMyShow, IRCTC, Zomato, to name a few. To better represent the efficacy of the transactions, we’re considering P2M transactions of UPI alone carried out on the Razorpay platform.

UPI vs other payment modes 

For the first time ever, UPI went past cards and other popular modes to become the most preferred payment mode in the month of September! 

UPI methodwise contribution preferred payment mode

We’ve been observing UPI transactions since 2017, and we always saw that cards (debit & credit) took the bigger chunk in the method-wise split, while UPI always stood right behind cards. But, the tables turned in September.

UPI contributed to about 45% of the total transactions we observed at Razorpay, while cards pitched in 42.56%, taking the second place.

You may think the difference is minuscule. But, with 350,000+ businesses on the platform, you can only imagine the number of transactions taking place every minute, every day. So, the 2% difference is a big deal. 

As much as people love swiping cards, the ease of simply not carrying cards anymore took precedence.

Netbanking summed up a total of 9.29% as wallets superseded bank transfers by 0.38%.

How UPI became the preferred payment mode

In our August month’s issue, we talked about UPI’s adoption skyrocketing. And, it’s no different this time either! 

The growth of UPI is always an interesting trend to stay updated with. We’ve seen the numbers vary across ranges and extremities. 

The payment mode is truly an innovation in fintech since it has been able to simplify payments like never before. And this very fact makes its elevation an exciting trend to observe. 

UPI transactions preferred payment mode

We looked at all UPI transactions from the month of April to September to analyze how much the payment mode has ascended. Keeping the month of April as the base value (calculated upon values of previous months), we can see that there has been sustained growth in the overall transactional value, as well as volume. 

Although May was an anomaly for various reasons, UPI managed to brush off the dust and swing right in from August, while discovering a new crest in September.

By 37.33%, UPI went through the roof in September, for the first time ever!

Next up, let’s take a look at how some of our favourite UPI apps did in September.

App-wise contribution

Since UPI was the biggest player in terms of payment mode, it’s only right we understand how much of a contribution each one of our popular UPI apps bore.

app wise contribution preferred payment mode

As always, the Google Pay drift continued as the app furnished a hefty 61.33% of the total UPI transactions there were carried out in September. PhonePe too, without changing its spot, followed Google Pay by handing out 24.2%.

Contributions of PayTM (5.94%) and BHIM (4.55%) saw a steady number, around the ballpark of the last few months. 

UPI apps of banks (constituting “others”) like Syndicate Pay, Kotak Mahindra, and more, along with Mobikwik, Airtel Payments Bank, Amazon Pay, accounted for a total of 2.45%.

Like UPI, UPI apps have also seen variations in growth. Some of the apps have seen a consistent rise, while others have fallen back. You can read all about it in our UPI Wars story.

Let’s see what tug-of-war went on in September. 

The evolution of UPI apps

app wise growth

We analyzed a high value and volume of UPI transactions to determine the growth of each UPI app, and the results were quite satisfying.

Google Pay, although the most used, adopted app, still saw a massive growth of 40.77%, while PayTM jumped up the ladder from August to 37.8%. And, PhonePe contended to claim its place at 34.01%.

While this war continued, BHIM silently made its way up by 31.17%.

Bank UPI apps like SBI (20.66%), HDFC (11.1%), and ICICI (10.38%) made the list by showing significant growth. Samsung Pay, ICICI Pockets, Mobikwik, WhatsApp Pay, Andhra Bank, and more (grouped as “others)”, also caught up by a total of 20.15%.

UPI transactions from across the country

Now that we’re fully aware of the growth of UPI and UPI apps, let’s dive into some geographical specifications to understand where these transactions came from.

preferred payment mode - upi transactions from across the country

As we’ve worked on the UPI series for a few months now, we had a few predictions about the states and cities’ contributions.

Karnataka, as always, was the #1 contributor of UPI payments in September, as 28.42% of the total UPI transactions were carried out in the state. While so, Maharashtra retained its place just after Karnataka at 14.51%.

Telangana and Andhra Pradesh collectively saw 10.48% of the total UPI transactions, and the NCR region contributed 8.77%.

Now, let’s jump into the contribution of cities

In our August month’s report, Bangalore gobbled up the first place, and the same went on in September as the city pitched in 39% of UPI transactions. 

Hyderabad also had a significant number of transactions (12.3%) just like Pune (9.4%). Mumbai made its name on the list for the first time at (7.1%) followed by Chennai at (6.1%).

Note: You may wonder how Karnataka’s contribution is 28.42% while Bangalore is 39%. The reason is, the state split is different from the city split. We consider the whole country to provide state-wise contribution, whereas we look into 15 cities and calculate their contribution.

While we’re on city-wise contribution, let’s get to the tier wise split.

Tier wise contribution

63.85% of UPI transactions were carried out in tier 1 cities, while tier 2 and 3 cities came through with 30.19% and 5.97% respectively.

Will UPI continue to be the preferred payment mode?

We’re as curious as you are! 

With UPI disrupting the payments space and climbing to the top as the most preferred payment mode, its impact is only getting bigger and bigger. 

It’s incredible to see newer innovations making their mark. This is proof that convenience always wins over most other parameters. 

Let’s explore more of Indian fintech next month, with another exciting UPI update. 

See you then!

(All findings are only based on transactions held on Razorpay platform in September 2019)

* * * * *

This story was first published in Inc42.

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How to Make Your Payouts More Efficient

Automated Payout

A payout is the transfer of funds from your business account to a contact’s fund account. You need to have sufficient balance in your business account to process a payout. The various methods available for a payout are IMPS, NEFT, RTGS and UPI

Are those payouts instantaneous?

Although IMPS and UPI payouts are near-instant, the other modes work only during banking hours. But we live in a world of ‘We want it now’, where sometimes the cooker explodes and everybody feels the heat. For instance, let’s say you had a significant business transaction to make, and you realise that the bank working hours are over. What do you do? Apart from the banking hours, there are other limitations like: 

  1. Limitation on bulk transfer (IMPS and UPI)
  2. Cooling period on adding beneficiaries 
  3. One cannot verify bank account before transferring 
  4. Complex infra systems 

There it goes, your ship is under attack. So what do you do?


Whether you are making a one-off payment or processing a batch of hundred, move money seamlessly with RazorpayX, a platform to accelerate disruptors by making their financial operations intelligent, automated, and business-focused. Regardless of who you are, SME or enterprise, new age or incumbents.  For every payout, you need to specify the amount, the contact and the purpose of the payout. The payout amount and the payout charges are deducted from your business account balance every time a payout is made. These appear as a debit against the business account on the successful creation of a payout. In case a payout fails at any stage of its processing, a reversal is created, which results in a credit to your business account. Payout process

A diagrammatic overview of the payouts process in RazorpayX

By integrating with our flexible APIs and dashboard tools, customers can: 

  1. Accept and manage payouts via NEFT, RTGS, IMPS, UPI and more
  2. Upload contacts in bulk and share payouts in one go
  3. Track, automate and accelerate money movements for informed and impactful business decisions 

For example, Medlife, one of India’s fastest growing healthcare firm, wanted a solution to settle their million+ customers’ payouts from their closed wallets to bank accounts. RazorpayX helped Medlife offer a one-click payout to the customer’s bank account without requiring any human intervention. Results: 

  1. Instant payouts from customer wallets
  2. Increased flexibility on the usage of wallet
  3. A new stream of revenue via wallet linked loyalty offers

Secure, fast and cost-effective payouts are very critical to enhance customer experience, and one of the key element to increase business success.  So, what does efficiency mean for you? 

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What Does a Payment Gateway Do With Your Data?

Three years, four years back, did you imagine that payment gateways would be so omnipresent in your life? Probably not. And yet, here we are. Today, you run into a payment gateway every time you’re making a digital payment. You interact with a payment gateway when you pay Rs 100 for groceries or when you buy an iPhone worth a lakh from an ecommerce company.

Payment gateways have, without doubt, made online transactions very convenient. But a lot of customers typically do face some kind of anxiety when they pay online. Even when we understand that the transaction is going to be secure, there is always a fear at the back of our minds when we enter in our card or bank details. It’s our hard-earned money on the line, after all.

However, since digital payments are not going anywhere but upwards in terms of usage, let’s understand how secure your online transactions are and what exactly a payment gateway does with your data.

Encryption through PCI-DSS compliance

First things first, a payment gateway does not store your data as is. The best payment gateways are PCI-DSS compliant. The PCI Security Standards Council is a global organization that sets compliance rules for managing cardholder data for all online payment systems. PCI-DSS is now the global standard for online security. What this means for you is that your online transactions are encrypted to ensure there is no data interception.

Basically, all the details that you enter like name, address, card information, netbanking details, etc are used only to complete the transaction. The payment gateway never stores sensitive information like CVV, pin or password. 

https:// for higher security

Coming back to the encryption bit, data security begins the second you land on a website. A payment gateway uses the highest assurance SSL certificate, which allows TLS encryption of your data. This is a lot of jargon, but in simpler words, you can just look at the URL in your browser. An https:// protocol means that the website you are on is secure.

Most ecommerce companies today work with secure payment gateways to ensure that the data of their customers is not compromised. You can also check if the website or payment gateway page is secure or not by looking for the https:// in the URL, but to additionally understand how payment gateways ensure security, let’s look at something called tokenization.

Tokenization to prevent exposure of data

You enter your 16-digit card number into a payment gateway’s interface. What the payment gateway does is that it replaces this 16-digit number with a single token. This “token” is a unique set of characters that replace your original card number. This allows the payment to be processed without exposing your sensitive details. Tokens are assigned randomly, which makes it extremely impossible to reverse-engineer the actual card number from the token. 

Let’s dig in deeper with an example. Tokens can be of two types–format preserving and non-format preserving. Format preserving tokens maintain the appearance of the card number while non-format preserving tokens are alphanumeric numbers. 

Card number Format preserving token Non-format preserving token
5945 XXXX 5953 6391 4111 8765 2345 1111 25c92e17-80f6-415f-9d65-7395a32u0223

The best payment gateways use non-format preserving tokens as they are more secure. 

Beware of common payment frauds

While a payment gateway does its best to ensure that your data cannot be breached, there are fraudsters out there who are working equally hard to try and exploit your sensitive information. As someone who transacts digitally, you can also do your bit by understanding common methods of frauds to make sure you don’t fall victim to them.

Common Online Payment Frauds
Type of fraud What it is What you can do
Phishing or spoofing Process of accessing your personal information fraudulent emails or websites that claim to be legitimate Think twice before you click on links that appear fraudulent and don’t give out your personal information unless you’re 100% sure of the recipient
Data theft Card and other data stolen from businesses by dishonest employees Don’t deal with companies that you are not aware of or ones that don’t maintain stringent data security norms
Fake schemes and offers Offers that provide heavy discounts on illegitimate products  Don’t fall for offers that seem too good to be true. Verify the company and the product before you make the purchase

Over and above this, you should also use two-factor authentication to make online payments. It adds an extra layer of security to your digital transactions. For example, even if your data is compromised and someone gets access to your card details, they won’t be able to complete a transaction without the OTP that comes to your phone number if you have two-factor authentication enabled. 

In conclusion, payment gateways and online transactions are by and large secure in today’s world. You can go ahead and transact digitally with sufficient peace of mind. Just ensure that you keep your eyes wide open to not fall into any traps.

Also read: What is a Payment Gateway and How Does It Work

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What are Automated Payouts and How Are They Helping SMEs?

“We regret the inconvenience. We are trying to clear the process from our end. You can expect the transactions to be cleared by tomorrow.”  “We haven’t received your invoice. Your cheque is in the post. The person who authorises your payment is not in the office today.“

If you are familiar with the above excuses, you should also know that they come with consequences. Unexpected delays in payments can hurt businesses that have little or no cash reserves or credit to rely on. Especially in a traditional small business, every individual wears many hats and deals with myriads of stakeholders. He or she strives to manage relationships while maintaining a high level of efficiency. And, it becomes very difficult if a business sticks to a manual process for paying vendors, customers, suppliers, etc. 

Here’s how the end-to-end payment process for most organizations (SMEs) looks

A user logs in to the respective banking platform and enters transaction details for every payment done. Now, to authenticate each transaction detail and ensure everything is in order, you require another hand to oversee the security process. Piece of cake, isn’t it? 

It’s all pink skies and blue unicorns when you are getting started–manually inputting and routing every single payment sounds feasible. But what will you do when the scale and the sheer volume of transactions grows? Automate your financial ecosystem.

How can SMEs benefit from automated payouts?

For example, a small scale business uses cheques as a form of payment. Here we go again, it’s paper! And the risks of cheques getting lost in the mail is equivalent to an extended waiting period known as “We’ll get back to you soon.” 

It isn’t always the form of payment, blame the process of tracking payments too. Companies can lose money and damage relationships with vendors by missing deadlines, or even issuing a refund to the wrong person. It’s tough to track them if you are on your own and rely on traditional payment systems. 

Traditional banking systems are often difficult to operate, due to clunky, outdated systems and technology. Most banks grapple with legacy infrastructure and are unable to deliver products and services with ease and agility.

Customers using banking solutions are often faced with a range of problems like:

  1. Lengthy approval processes
  2. Heavy UI, complicated user flows
  3. Outdated systems that are not integration-friendly
  4. Poor customer tech support for queries

An automated payout system can help you avoid late payments, issue instant refunds to your customers, and help pay your vendors. Most importantly, the CRM serves as an eagle eye (control and visibility) for your financial operations.


For businesses small or large, new age or incumbents, we offer you RazorpayX–a platform to accelerate disruptors by making their financial operations intelligent, automated and business focussed. 

By integrating with our flexible APIs and dashboard tools, customers can

  1. Accept and manage payouts via NEFT, RTGS, IMPS, UPI and more
  2. Upload contacts in bulk and share payouts in one go
  3. Track and analyze money movements for informed and impactful business decisions

Traditional Business Banking Vs RazorpayX

                Traditional Business Banking                              RazorpayX
Countless hours of manual effortsBetter customer experience with instant payouts  
Glitchy software and complex infra systemsControl, track and analyze all types of money movements from a single dashboard
Complex and non-flexible money movement viewsManage and track money movements from vendors, customers, and more
No insights on payouts Off-the-shelf analysis of payouts made


Automation is the need of the hour for India’s large SME sector. With the right technology, business owners can focus more on customers, and let the technology take care of processes. It eliminates drudgery, avoids the troublesome situations. The result, efficiency becomes the epitome of your business. 

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Subscription Economy: Business Impact of Rapidly Changing Consumer Needs

Technology has summoned a change that has enabled people to decide what, how and when they want a specific service or product. And, also dictate how they want to consume and pay for it.  

With the advent of intelligent customers, hard-selling has become a thing of the past. From Xennials to Millennials, everybody loves the flexibility, convenience and personalisation that technology has to offer.

Today, customers prefer access without ownership, flexible, just-in-time consumption of products and services are preferred over heavy, long-term investment models. One size fits all’ is no more a mantra that works for customers. Unique, personalised offerings are what works, where every customer is empowered to tailor his/her own experience. 

These factors have led customers to lean towards new consumption models like Subscriptions instead of traditional purchase models. 

All about subscriptions

Subscriptions is a business model where the customer decides to consume goods or services on a periodical basis and not as a one-time event. The payment for subscription plans is also made regularly. Subscriptions plans are tailor-made to meet customers consumption preferences. 

Primarily, there are three forms of subscription models: 

  • Access-based: Follows a periodical fee (monthly, quarterly, yearly) to obtain access to products or services based on individual needs 
  • Curation-based: These consist of curated or personalised items, meant to help customers discover and sample products. Curated products are sold as ‘subscriptions boxes’, and popular categories include beauty, fashion, food, and learning
  • Replenishment-based: A model that allows customers to automate their consumption of everyday consumables, like razors, milk, etc

Surprisingly, the history of subscriptions dates back to the1800s, where newspapers and magazines made their sales through subscriptions. Since then, subscriptions through its unique distribution model has paved the way for innovation across diverse industries.

Learn how to start your subscription business.

Subscriptions economy in India

It took a while for the subscription model to gain a foothold in India. But the success of brands like Amazon Prime and Hotstar has proven that there is a massive market for subscription businesses in the country.

With the internet, online commerce and digital payments, the subscription business model in India is now moving online. The earliest player to leverage online subscriptions in India were media and publication businesses. 

Driven by engaging content and a convenient way to consume, Indians took to OTTs (over-the-top media services) like Netflix, Amazon Prime and Hotstar. According to Pixights, Indians on average spend Rs 295 per month on an OTT platform. Also, about 62% of Indians have subscribed to three or more such platforms. 

Download the full report here.

What is driving subscriptions upheaval in India?

India is in the midst of an e-commerce boom. Over 40% (about 472 million users) of the country’s population is internet-enabled, making India the world’s second-largest user base. This massive internet penetration has put the Indian e-commerce market on an upward growth trajectory. From $38.5 billion in 2017, the market is projected to grow to $200 billion in 2020, surpassing the US to become the second-largest e-commerce market in the world.


Today’s Indian consumer is time-constrained, but resourceful, hence leaning towards quick, convenient and hassle-free shopping and payment experiences. Customer convenience is no more about having a plethora of options; it’s all about getting relevant, curated products and services at the right time and place. This is what subscription businesses fulfil. 

Also read: Payment Method for Generation Now: Cardless EMI

What is a Neobank? Everything You Should Know


Lately, Neobanking has become a buzzword in the fintech community. The term has gained momentum since it’s been taking the spotlight on the news and media. But do we know what it’s all about?

Neobanks are taking over the fintech industry by a storm, on a global level. We see a new player on the market every day whose primary intention is to simplify financial services to a greater extent. Let’s understand what it truly means.

What is Neobank?

A neobank is a kind of digital bank without any branches. Rather than being physically present at a specific location, neobanking is entirely online.

It’s a wide umbrella of financial service providers who beseech today’s tech-savvy customers. Neobanks can be called fintech firms that provide digital and mobile-first financial solutions payments and money transfers, money lending, and more. 

Neobanks don’t have a bank license of their own but count on bank partners to provide bank licensed services. 

As the financial landscape is shifting towards customer experience and satisfaction, a gap has developed from what the traditional banks offer to what customers expect. And, Neobanks are making an attempt to fill that gap.

Most traditional banks are bogged down by their legacy-based infra. So, they crumple when it comes to aiding SMEs with financial services like providing a payment gateway, an invoicing software, multiple views of cash management, among others. 

This disparity, along with the explosion of mobile technology, it only makes sense that banking services can coalesce with other financial services.

Why Neobank?

In recent years, we’ve seen a massive drift in the finance industry. With over 2000 fintech players in the country, digital payments are embraced at such a large scale. Customers are moving away from physical banks and physical cash, and more towards online banking and wallets. 

In our recent report, we talked about how India is moving towards an era of rising fintech. We talked about how Indian consumers transact digitally, and the numbers are growing on a rapid scale. More and more people are getting comfortable making online payments through Google Pay, Paytm, PhonePe, and more, now more than ever.

If we think about these numbers, we can see the potential neobanks have in the country. Neobanks provide the fluidity that traditional banks don’t. They can easily sustain themselves and turn out to be profitable.   

How does a neobank work?

Unlike a traditional banking system, neobanks have a completely different business model altogether. But, like traditional banks, neobanks do make money marginally between money inflow and lending. 

And, since there isn’t a physical location and that they’re completely online, the customer fees are slashed by a significant amount. Because Neobanks are customer-centric, they provide personalized services to their customers that are fired up via technology. 

Data-driven decisions drive the decision-making process of a neobank. Since their platforms are also very modernized, it becomes easier for them to collect and analyze data and understand how their customers behave in the neobanking ecosystem. Based on these observations, they create cohorts of customers based on their actions rather than merely sticking to one or two data points. 

What are the advantages of neobanking?

Since neobanks are completely digital, they open up a wide window of advantages to a customer. Here are some key points that may interest you into moving towards a neobank.

Hassle-free account creation

We’re all fully aware of the pain we need to go through to create an account in a traditional bank. The process may not be as elaborate as before, but the hiccups aren’t completely gone. This tedious process is completely eliminated while creating an account with a neobank. 

Neobanks don’t have a storefront like we discussed earlier. So, you don’t have to go anywhere to create an account. You can do it in a couple of simple steps, right at the comfort of wherever you are, and on your phone!

And, you’ll have the account ready in just a couple of minutes!

Seamless international payments

In the case of traditional banks, it isn’t always that we get a debit card that can be used anywhere in the world, or transact internationally. We may have to ask for an upgrade, make a request, and finally have an international debit card.

You don’t have to worry about any of that if you have an account in a neobank. You can use your card to make purchases, or transact while you’re abroad, with current exchange rates.

User-friendly interface

Neobanks are all about providing an excellent customer experience. This also means you don’t have to work through a glitchy netbanking site anymore. You don’t have to worry about a mobile app that isn’t very responsive.

Neobank apps are very crisp, clean, and user-friendly. They’re highly responsive and well-designed to suit the needs of a customer. The ease of use is what makes the app such a hit amongst its customers.

Smart reporting

Transactions made via neobanks are immediate. The transaction details are populated instantly providing you with an up-to-date balance on your account, at all times. All of your transactions and payments appear on your app and, you don’t have to go anywhere else for this information. 

The neo-app also provides you with an overview of your expenses, along with a savings goal which can be customized to best suit your needs. This helps you manage your finances in a much better and informed manner.  

Neobanks are great for businesses, too!

So far, we talked about how much customers can do with neobanks. Now, let’s understand how businesses can make the most of neobanks.

If you’re a business, you often have to deal with long, tedious processes involving payments and disbursals. Often, you end up spending hours and hours on manual efforts every month because of multiple buggy software and complex infra systems. 

Money movement views can also be super tricky because of complexity. Oh, and let’s not forget that you’ll receive no insight on payouts to make impactful business decisions.  

With a product like RazorpayX, you get to simplify, accelerate, and supercharge every aspect of your financial operations! From accepting payments and managing cash flow to reconciling transactions and flexible payouts.

  • You end up saving 10x time because of instant payouts with reduced manual effort  
  • You provide a superior customer experience 
  • You’ll have access to a unified platform that helps you make, control, track, and analyse all forms of money movement from its powerful dashboard.
  • You also manage and track money movement to vendors, customers, employees, etc. through in-depth Financial CRM.

The result, you ask?

You make informed, impactful business decisions with off-the-shelf analysis on payouts mode!

And, there you have it, some light on the buzzword “neobanks!”

Bengaluru Records Highest UPI Transactions – 40% in August

upi transactions data august 2019

The secret sauce behind digitisation is the rapid adoption of technology that becomes a solution only after it solves a specific challenge. UPI has been hailed as the future of digital payments in India, a solution that’s adding newness, stirring an uprising of new world order in payments.

And, supporting this digital hullabaloo are the cities that never sleep.

UPI contribution across regions – The numbers will guide us home

Seems like Karnataka has been pushing the right buttons. 30.10% of India’s digital transaction makes the southern heart the numero-uno in UPI transactions. Namma Bengaluru lived up to its name and gobbled 40.06% of UPI transactions among the top 15 cities of India.

Maharashtra has seen a steady flow of 14.37% of UPI transactions, while Pune contributed 8.7% towards the growth. 

No rest for the growth rate in Andhra Pradesh, as the numbers pile up to a healthy 11.90%, which makes Hyderabad the second most-digitised city after Bengaluru. 

Here’s a Tier wise split infographic. 

There’s no stopping now. Yes, Tier 1 cities like Bengaluru, Hyderabad, Mumbai and Chennai are adding the necessary fire to the digital economy, which is responsible for 66.43% of UPI transactions in the country.  

However, Tier 2 and 3 cities have maintained the order with 27.87% and 5.70% of the digital home run. We also see Pune, Kolkata, Jaipur, Gurgaon and Noida joining the rush. 

UPI transaction In the last six months – Days of future past 

The rush is for real, and things are about to change. Enough said, let’s investigate the figures from March 2019 to August 2019. 

There’s been a dramatic turn of events in terms of growth, and authorised transactions for August, only shows how UPI could soon be a stepping stone of sustainable growth for an interoperable digital payments ecosystem. 

UPI trend In August – Like the Rock of Gibraltar


As consistency and chemistry go hand in hand, Google Pay, again, rakes in the highest moolah with 59.75% UPI transactions. Yes, sustaining an audience is hard, and someone knows how to raise the stakes. 

Whereas, facing the behemoth is PhonePe with an accelerating contribution of 24.91% of UPI transactions. As the numbers roll further, significant players like Paytm and BHIM muster 5.93% and 4.73% respectively. 

And, not to forget the banks. To name a few dominant players, ICICI, SBI, Axis and HDFC collectively contribute less than 2% of UPI transactions. 

UPI app wise growth – And justice for all  

Let’s talk about growth. 

The favourite of the masses, Google Pay has capped a 14.60% growth rate in August. This isn’t all, PhonePe is on the rims to call it even with a 12.93% advancement in this number tear-jerker. 

While Paytm has recovered and witnessed a 4.49% improvement in August. In terms of adoption, everyone tasted success except the NPCI powered BHIM app with a negative 0.49% drop compared to July. 

And, the tides have turned for the banks as HDFC ousts ICICI from the top spot with a 10 pointer. Whereas, SBI and Axis maintain the ground with 9.90% and 4.32% growth rate. 

Contribution across payment modes – Meanwhile, on the flipside 

It’s interesting to find that the contribution as well as the growth of the UPI players are on the same rate in August. We can debate all-day-long over plastic money and digital payments, but the preference of the customers do matter. 

Let’s see what the numbers say. 

  • As far as convenience is concerned, plastic money is still favoured amongst the masses, but it has seen a slight dip compared to 47.10% in July. With 44.10% usage rate, it remains undisputed
  • UPI is no more the new kid on the block. A 3% usage increase in August, which takes it to 40.78% – closer to the plastic czar
  • Netbanking saw a nominal dip from 12.66% in July and retained the third spot with an 11.37% share
  • Wallets, bank transfers, eMandate and EMI saw identical numbers like 1.73%, 1.24%, 0.73% and 0.04%

Average ticket value – At sixes and sevens

According to our insights, customers are clinging to old ways of making large value transaction. Because they are used to it, or they are concerned about the security in UPI transactions. 

Let’s face the stats. 

Key pointers:

  • The trust factor has increased in EMIs compared to any other payment option
  • Cardless EMI has marked a separate identity for itself, as people are enjoying the convenience of paying money with or without a debit/credit card
  • Whereas, the frontiers of their territories: bank transfers, netbanking, cards and eMandate keep a steady pace upwards
  • Still unpopular for large value transactions, UPI claims the last spot, which we believe will change shortly

Always forward. Always. 

For now, we can rejoice the ascension of the overall UPI transactions, improvement in ATV values and the increase in authorised transactions because the fable is fanciful and pleasing in itself. But It’ll be interesting to see what comes next. Whether or not UPI remains the de-facto mode of online payment, we will be back, only with the assurance of reality. 

The data presented here is based on transactions carried out on the Razorpay platform.

This story was first published in Inc42.

RBI Opens Up Recurring Payments on Cards – A Step Ahead for Digital Payments

All of us are well aware of the various initiatives that the Reserve Bank of India has been undertaking to make digital payments safe and secure. At various stages over the past few years, the RBI has announced measures to ensure that the Indian consumer doesn’t feel compromised at the time of transacting digitally and is able to make digital payments with ease. 

On Wednesday, RBI came out with a circular to propagate the use of cards in making recurring payments. The circular says that beginning September, consumers will be able to use their cards to make recurring payments to businesses through the process of e-mandate. The e-mandate and additional factor of authentication (AFA) will have to be done only once at the time of the first transaction. All transactions happening later on will be carried out automatically without the requirement of repeated AFA. 

The RBI has set a cap of Rs 2,000 for such transactions and notified that they will be allowed on debit cards, credit cards and prepaid payment instruments (PPI) including wallets.

At present, recurring payments can be made only using credit cards. The same could be done earlier through debit cards, but RBI had put a hold on that facility citing security issues and fraud cases. The fact that now debit cards and other prepaid instruments will come into the recurring payments ambit under stringent rules and regulations spells good news for the Indian consumption story. 

We believe that this move will enable consumers as well as merchants to greatly benefit by doing away with the hassle of authenticating payments time and again. The RBI circular also mentions that consumers will be given the facility set the recurring payment for a predefined fixed value or a variable value. To ensure that the cardholder is safe, he or she will also be able to specify a maximum value of the transaction as well.

Furthermore, to safeguard the interests of the consumers, RBI has said that they will receive a notification via SMS or email a day before the recurring transaction is to be carried out. This notification, which will carry details about the amount, date and reason for the transaction, will allow cardholders to take a call on cancelling the transaction, if they wish to do so. Of course, the cardholder can withdraw the e-mandate at any point as well. 

This facility will go a long way in further promoting digital transactions within the country. More so because consumers will not be levied any extra charges for setting up an e-mandate for recurring payments through their cards. 

For businesses in India, especially the ones where the average ticket size is lower but the transaction volume is higher, the ability of their customers to make recurring payments using cards will open up entirely new streams of user acquisition. Debit cards greatly outnumber credit cards in India today. Wallets are also used extensively. This means that a higher number of consumers will now potentially be able to make recurring payments. 

Players in the food-tech, insurance-tech, SaaS, fitness, cab aggregators, and bike rental services, etc are businesses that will benefit immediately once consumers are able to make recurring payments using debit cards. Providing a seamless payment option is only going to lead to lesser drop offs and higher profitability. 

We see this as the beginning of a shift towards one-click checkout. The average transaction times goes down for customers and the ability to retain users increases for businesses. On the whole, this is a significant step taken by the RBI on the back of what the industry has been asking for a long time. It will clear out safety concerns around recurring payments and enable more businesses to adopt the subscriptions model. 

This story was first published on Inc42.