Next Day & Instant Payouts: habit building credit lines for businesses

Making of credit lines that disbursed over ₹100 million in 60 days of launch

“It takes too long for the money to reach my account.”

Businesses use Instamojo to receive a payment. It takes up to 3 working days for the money to hit their bank account (payout). Settlement cycles are an industry standard (T+3 settlement cycle).

  • When the salaries and payables come due
  • When digital payments is the only sales channel (most digital payment instrument follow the T+3 cycle) Holidays and long weekends

Surviving the Cash Crunch

Credit lines from banks are inaccessible to small businesses. For a bank it’s not profitable to focus on small customers. Business owners are also not keen on the lengthy paperwork that a bank requires; they’d rather focus on their business.

Our customers were not asking for faster payouts, they were asking us for a short term credit line to fund their business.

Solving the puzzle

Why can’t the money come faster?

Instamojo gets settled in cycles up to T+3 business days. We couldn’t transfer the money if it wasn’t there. Banking infrastructure and regulations are often the bottleneck of innovation in our industry.

Where will the money come from?

Our partners (banks & gateways) take up to T+3 days to settle the money to us and sometimes it can take even longer. We cannot send someone the money that doesn’t exist!

How much should we lend?

These products were targeted towards businesses with cash-flow problems. The cash-flow problems make them a good customer for a credit-line but also deters their ability to pay.

When and how will the the repayment happen?

The loan is considered repaid when the T+3 cycle is completed. Instamojo receives the money from the upstream partners and settles it to the lender.

How much will it cost?

When we spoke to our customers they were clear -the price should be predictable. It makes the decision making easier.

Next Day Payout is as simple as flipping a switch:

How will we send the money on bank holidays?

The standard way to send money to banks is NEFT/RTGS. NEFT doesn’t work on holidays 🤷‍♂️😭.

We turned this design challenge into user delight.

Money at the click of a button

We explored the idea of scheduled payouts. Eg: payout all the payments 6 times a day.

  1. Check charges & fee
  2. Click a button…

…and the money hits your bank account! Nothing is more delightful than money coming in.

  1. We can limit each payout to Rs. 2,00,000 (solving the IMPS problem!)
  2. Our risk analysis system gets more time to flag risky transactions

The Habit Loop

Habit loop is based on Pavlovian conditioning: A cue that triggers you to take an action and the action has a predictable reward.

Simple representation of a habit loop. The habit loop is based on Pavlovian conditioning.
Instant Payouts makes a habit loop: customers get a cue when they receive a payment, click a button and receive money in their banks instantly.

Results

Customers love Instant Payout and Next Day Payout.

“I love Instant Payout, it’s the icing on the cake.”

- A baker who uses Instamojo

Within 60 days of launch we disbursed ₹10+ Cr in loan to our customers. This number has grown over 150% since then.

Credits

Product, Design and UX at @Headout. ✍️ about Design, Products, and Teams. For more: www.kingsidharth.com

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