Fast-tracking Merchant Payment Acceptance in India!

Over the past few years, I’ve had the opportunity to study merchant payment acceptance a lot more closely — and I’m still baffled by some of the practices in the industry. Some of the strange interpretations of the word risk & fraud make genuine merchants go around in circles trying to accept electronic payments. Many people think the cost of signing up a merchant, the cost of the terminal and the Merchant Discount Rate are the reasons why the penetration is low — and while these are factors, they are not the real reasons.

Many merchants who want to accept cards are just not allowed to, and those who are allowed to have to toil hard to get this privilege with reams of paperwork.

If we want to make cards an alternative to cash, then let’s just treat both the same way.

So how do we rapidly increase the acceptance network?

With the advent of low-cost, portable mobile POS solutions costing under Rs. 3000 ($50) and with SmartPhone penetration going through the roof, we have a unique opportunity to actually flood the market with Mobile POS solutions — and drive up acceptance of electronic payments. In many cases banks are now willing to nearly give these terminals away for free too.
The debate about whether cards survive or it all becomes a mobile-based solution is missing the big picture. The key initiatives we need to take are to make payments electronic — and for this end, we need to eliminate any and all friction in the system.

Here are some suggestions that can fast-track electronic payments:

Focus on self-service & instant on-boarding for small merchants.
  • This means merchants should be able to go to an Amazon or Flipkart site or a Croma store and just buy a terminal at their own cost and link their bank account and start accepting payments. At least up to say 25K to 50K rupees per month we should allow self-KYC. This should also be allowed for online or mobile merchants. This is analogous to allowing mobile wallets up to Rs. 10,000 with minimal/self-KYC. This itself will move the needle significantly — and once someone is doing 25K to 50K rupees per month, it is worth doing the full KYC and paperwork. As long as money is going into a bank account that has been previously KYC’d why do we need to do anything else.
Eliminate any incentives that make cash more attractive to the consumers
  • This means eliminating any surcharges for face-to-face transactions especially at gas stations and utility companies. Cash should never be cheaper than card.
Liberally enable third-parties to become merchant aggregators and service providers.
  • Bringing people into the digital payments eco-system should always be encouraged — and transaction risk in days of Chip & PIN or MSR + PIN is minimal.
Raise limits for Cash@POS from Rs. 1000 to something like ATM transactions — or at a minimum Rs. 5000. Allow consumers up to 3 free ATM OR Cash@POS with drawls per month.
  • In many cases this is the low-cost ATM — so let’s treat it that way.
All these can be done with a simple swish of the pen — in some cases by the RBI and in other cases by individual banks.

I hope the banking fraternity will allow such product & business model innovations to take a front-seat and give us all an opportunity to massify the acceptance of electronic payments in the country.

Let 2016 be the year of electronic payments in India — and let’s lead from the front and take on the evil of cash!


Full disclosure: I am a co-founder & shareholder of Ezetap, a Mobile POS solution Provider.