Paytm speakers help Indian merchants make digital payments

Abbas Ali, a vegetable vendor in an upscale New Delhi neighborhood, started accepting digital payments in 2021. But every time a customer paid online, the 48-year-old, who can’t read or write , had to call his son to confirm payment was received.

Customers, often in a hurry, become impatient. Ali would have to spend more time looking after them than he had back when he only accepted cash. Eventually, another salesperson suggested he subscribe to a “sound box” – a nifty internet-connected device that plays payment confirmation messages. “Before, I had to wait five to ten minutes after each transaction to get confirmation,” Ali said. Rest of the world. “I can now focus on other customers while the payment is in process. I installed two sound boxes…one from Paytm and the other from PhonePe.

The sounding board device – first introduced by India’s largest fintech company, Paytm, in 2019 – has been a smash hit among small Indian businesses. Neighborhood Family Stores (Kiranas) and street vendors, who had traditionally been reluctant to pay for tech services, warmed to the sounding board. The smart device – essentially a speaker with the logo of the fintech company facilitating transactions – comes with an integrated SIM card. Most dialogs can read payment confirmation messages in English and several Indian languages, such as Hindi, Tamil, Telugu, Bengali, and Punjabi. In Indian cities and towns, sound boxes can now be seen in a variety of businesses – from kiranas and clothing stores to production carts and shops selling smoking products.

Sounding boards have become a lucrative proposition for Indian fintech companies. Digital payments have taken a huge boost in India in recent years thanks to the government’s Unified Payments Interface (UPI) which allows users to make instant bank transfers with mobile phones. The volume of UPI transactions in the country increased from 20 million in fiscal year 2017 to 60 billion in the third quarter of fiscal year 2023, according to data of the National Payments Corporation of India (NPCI), which operates UPI. The value of UPI transactions made during the same period increased from 1,000 crore rupees (over $121 million) to 100 lakh crore rupees (over $1.2 trillion), according to the data.

But this boom has not helped fintech companies in India as they do not make money from facilitating UPI transactions. Sounding board subscriptions have therefore become a lucrative source of income. A Paytm spokesperson said Rest of the world that in the third quarter of fiscal 2023, the company’s gross revenue from Paytm Soundbox subscriptions reached Rs 1,197 crore ($150 million). The company has 6.8 million devices deployed across the country. The spokesperson said Paytm has partnered with a domestic manufacturer to produce both hardware and software for its sounding board.

“[Before sound boxes], people were using apps to create fake payment receipts. I’ve been had several times. »

The success of Paytm’s sounding board has prompted other fintech companies to launch their own versions. BharatPe was the first to compete with Paytm in the segment – ​​he launched his sounding board, BharatPe Speaker, in June 2022. PhonePe followed suit with smart speaker a few months later – the company has so far deployed 2.2 million devices in India, a spokesperson said Rest of the world. GooglePay joined the race earlier this year, piloting its Soundpod soundbox in kirana stores nationwide. Several Indian banks, such as IndusInd Bank and AU Small Finance Bank, have also launched similar schemes, hoping to take advantage of the growing popularity of sounding boards.

Sajith Pai, a partner at venture capital firm Blume Ventures, believes the device’s success lies in its ability to solve an important problem. “Confirmation that the money has arrived was an ongoing issue for sellers,” Pai said. Rest of the world. “Many vendors had feature phones with SMS limits, and as a result, payment confirmations were not arriving in real time as SMS inboxes were full. Some asked to see customer phones or asked customers to send [the payments] again leading to many hassles and bad payment experience. sound box [services] seem to have solved this problem.

While Paytm is the market leader in sounding board subscriptions, growing competition has forced it to cut its monthly fees by more than half. Ali initially paid 300 rupees ($3.6) to install his Paytm Soundbox in 2021, with a 125 rupees ($1.5) per month subscription. After PhonePe launched Smart Speaker with no setup fees and a monthly payment of just 1 rupee, Paytm lowered its subscription fee to 78 rupees (about $1). Although PhonePe has now increased its monthly fee and introduced a setup cost, Ali doesn’t mind paying for two subscriptions. “If a [device] not working due to technical issues, my customers can make payment on the other device,” he said.

“As part of the introductory offer, initial configuration and monthly rental were available at only 1 [rupee], provided that the merchant performs more than 25 transactions per month. There is now a nominal setup fee of Rs 299 [$3.64] charged to traders followed by monthly rental fees which vary from 50 to 100 rupees [61 cents to $1.22] depending on the city where the merchant is based,” the PhonePe spokesperson said.

Sounding boards also help fintech companies sell their other financial services to merchants.

Balwant Singh, 32, runs a grocery store in New Delhi with his mother. He bought a Paytm Soundbox in 2020 after realizing digital payment receipts could be tampered with. “[Before sound boxes], people were using apps to create fake payment receipts. I got screwed many times,” he said Rest of the world. Six months after signing up, Singh received an instant loan of Rs 3 lakh (about $3,600) from Paytm. He used the money to add more products to his store. “I had never thought of taking out a loan as it involves a lot of paperwork and could take months to process. Here I got it instantly so I took it,” he said. After paying it back, Singh took out another loan from Paytm for Rs 5 lakh (about $6,000).

Adnan Bhat

The Paytm spokesperson noted that Soundbox subscriptions have helped the company expand loan distribution to merchants. The number of disbursed merchant loans increased by 253% year on year in the third quarter of FY2023, with the value of these loans reaching 1,825 crore rupees ($221 million), they said. “Over 85% of value disbursed this quarter was to merchants using a Paytm payment device, indicating a strong correlation between device deployment and loan distribution. Additionally, 45% of disbursements were repeated loans to traders [like Singh] who have already taken out a loan,” the spokesperson said.

The company also expects significant growth opportunities in the small credit market in the coming years. “Our device deployment is seeing sustained traction with deployments of 900,000 to 1 million devices each quarter,” the spokesperson said.

Upasana Taku, co-founder of digital payment app MobiKwik, said Rest of the world Sounding boards have the potential to help fintech companies grow beyond revenue. MobiKwik launched its own device, MobiKwik Vibe, in January. “As we roll out our sound boxes, we anticipate our user base will grow as it will likely attract new merchants looking for value-added services to help them run their businesses more efficiently,” Taku said, noting that the device enables fintech companies to earn deeper. overview of transaction patterns and business operations. “This data can be used to develop more targeted and effective marketing campaigns, and identify new cross-sells. [or] upsell opportunities for other products and services,” she said.

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