Gharpay.in: Sequoia-funded startup helping e-commerce players collect cash payments across India

What is India’s favourite payment method? Cash, of course. The fact that 80% of Indian e-commerce is driven by the cash-on-delivery (COD) model bears testimony to our nation’s cushy comfort with hard cash, as opposed to plastic money. So, it doesn’t take rocket science to deduce that a cash payment network would do well in a market where e-commerce has been seeing wind at its back, sun on its face and lots of money in its hands. But apart from a motley crew of logistics companies and insurance firms providing ad hoc solutions, the market hasn’t seen a focussed player in this domain yet. Gharpay, a Hyderabad-based startup, promises to change all of that, with their cash collection solution poised at the intersection of technology and logistics.We at YourStory.in caught up with entrepreneurs Abhishek Nayak and Arpit Mohan, the co-founders of Gharpay to know more about the business idea behind their venture, which has received seed funding from VC firm Sequoia Capital India and angel investor Raju Reddy. This begins to get interesting once you learn that both Abhishek and Arpit graduated from BITS Pilani as recently as one and two years ago respectively and started working on the idea in January 2011. They won’t divulge the volume of funds received, stating that it’s a “small seed round”. But with 63 employees and 17 paying customers including big names like RedBus, Cleartrip, Dealsandyou.com and Ferns ‘N Petals, it’s clear that the money was enough to get them off to a flying start.

But it would be myopic to attribute their momentum to funding alone. Gharpay collects cash from customers at their doorstep in 550 postal codes across 7 cities inIndiaand they’re practically the only organized player in the fray servicing cash payments, in a Rs.50000 crore e-commerce market that’s struggling to get people to pay online. In addition, they’re also eying the offline market, which includes attractive segments like cash payments for classifieds (QuackQuack, a matrimonial classifieds player, is a Gharpay customer), insurance, magazine subscriptions, educational material, etc. In the long term, they believe that this segment is likely to be larger while conceding that the online market is growing much faster.

Gharpay has also partnered with event aggregators and ticketing platforms like MeraEvents and Ayojak. There’s also a tie-up with Snapdeal on the cards. “In fact, when we launched Gharpay, the demand for our service exceeded the bandwidth that we had. We started running pilots with a few clients and continued scaling. Now, we’re closing deals with all those who wanted to partner with us when we started out”, reveals Abhishek. He admits that the sales cycle has been fairly lengthy, with the time span from initial contact to going live post implementation taking about 3 months. But in two weeks, they are introducing a self-service model, using which an e-commerce platform can integrate the Gharpay API into their scheme of things and start accepting cash payments in a day’s time.

This isn’t a one-off instance. A key driver of Gharpay’s growth has been their focus on technology. Working with e-commerce platforms has illustrated the importance of seamlessness to them and their backend is designed to ensure that there are no gaps in information, with tracking being made possible at all stages right from when the order is placed to when the cash is collected from the end consumer. They’re also scoring over other cash collection alternatives by increasing the productivity of their cash collectors through the use of proprietary mobile software, which, Abhishek reveals, is a mix of an SMS gateway and a mobile app. Delving into this leads to a dead end, as Abhishek gently informs us of the patent process being underway and excuses himself saying that he won’t be able to divulge more at this stage. However, it does remind one of RedBus’ BOSS (Bus Operator Software System), a SaaS product used by bus operators to get a picture of the seats availability across different routes. Abhishek is quick to dismiss this analogy, saying that they’re building the mobile software to improve their own efficiency currently and other use cases would be explored as and when things get off the ground.

Arpit, with a background in Electronics, leads on the technology front at Gharpay, having put in a stint at mobile app startup KONY Labs. Abhishek, who studied Biological Sciences, has interned with microfinance companies and he acknowledges that those experiences helped him understand how to de-risk cash and gave him access to some great advisors on the topic. When Gharpay was founded, Abhishek and Arpit spent five months on the road, handling cash payments and understanding the logistics of collecting, keeping and transferring cash. It was during these pilots that they realised the cornerstones of the cash collection game – speed and safety. Today, Gharpay promises to reach the person who has to make the payment within 24 hours and ensures that the cash reaches the merchant within 48 hours. All the cash handled by them is insured for fidelity and burglary and they claim that they perform extensive antecedent checks on their collection agents, employing only those with cash collection backgrounds. The money collected by the agent is deposited either at the bank or at the office by the end of the business day.

Being an exclusive cash payment collection network has rendered Gharpay with some clear advantages over courier companies which dabble in this space. “Once the courier guy leaves the office at a particular time, he can’t execute any more orders than those for which he has the invoices. But we can print invoices at the doorstep of the customer, thereby giving us more flexibility and the drive to execute more collections in case there’s been saving of time at one place”, reasons Abhishek.

With there being no legal limit on how much cash can be collected, Gharpay’s cash collectors often find themselves ferrying large amounts of money. “We once had an NRI buying a tour package for Rs.1.8 lakhs and preferring to pay by cash. For sums larger than Rs.25000, we ensure that we collect a copy of the person’s PAN card. We handle at least one such transaction every day”, says Arpit.

Currently, Gharpay’s services are available in Delhi NCR,Bangalore,Hyderabad, Chennai, Mumbai, Pune and Vishakapatnam. They’re gunning for a presence in 15 cities by March 2012, with services set to roll out in Kolkata, Ahmedabad andChandigarhnext month.

Gharpay’s fee structure is similar to that of a payment gateway, i.e. they charge a percentage of the transaction as commission. “It ranges between 2% - 7% depending on the client. Typically, it is Rs.35 plus 2% of the transaction”, says Arpit.

The young founders admit to having faced classic startup problems with respect to hiring during the initial days. The people they wanted had high-paying jobs and it wasn’t always easy to convince them of the opportunity. Here, they mention that their investors’ respectability and brand value helped them a great deal. “Both Shailesh (Lakhani) of Sequoia and Raju (Reddy) have spoken not only to the candidates, but also the candidate’s parents in some cases. Our choosiness when it comes to hiring people is almost fanatical. But so far, it’s worked because we have some absolutely brilliant people on board”, states Abhishek.

The entrepreneurial duo also appreciates the value added by their investors’ inputs in helping them sharpen the focus of the business. “We were always very clear about the cash payments bit. But initially, we were going after everyone we could think of. But our investors have helped us focus on specific industries and verticals. Thanks to them, we’re managing our affairs better and moving faster”, they chime in unison.

Broach the topic of ambition and their self-assuredness wafts like a breath of fresh air. “We want to be the largest player in the payments market and today, cash is the biggest thing. Tomorrow, if cards become larger, we’ll probably go after that in some way. But right now, cash it is”, says Abhishek. He draws an interesting parallel withChina. “Chinahas over 2.2 billion plastic cards for payment whileIndiahas about 100 million which work online. But even inChina, 50-60% of them are still paying offline. The truth is, buying online is still very convoluted. It’s still a pain for someone who’s buying a couple of times a year and that’s the majority.”

In a market where the confidence that goods bought online will be delivered is increasing rapidly, cash transactions are seen as the bridge to the next level of trust. In transaction of smaller ticket size, cash gives people a cloak of anonymity and is likely to remain the ‘safest’ choice for years to come, given our cultural affinity for the same. Under such circumstances, Gharpay is a startup to watch out for. The opportunity is large, the team is strong, the problem is interesting and the execution seems to have taken off. Gharpay’s future will tell us a great deal aboutIndia’s shining e-commerce story and that’s enough reason to keep an eye out for them.

If you are enamoured by the riveting tale of Indian e-commerce, then do register now to attend e-Sparks 2011 – India’s premier e-commerce startup showcase on 17th December 2011 at IIM Bangalore. If you are an Indian e-commerce startup, then please do register now to be the e-Sparks of 2011.

Sriram Mohan | YourStory.in | Bangalore| 23^rd November 2011