Unsung hero: the bootstrapped startup that forearmed its users against a cash famine

Some 200 households in the residential societies along the Baner-Pashan link road in Pune, near Mumbai, have been spared the pain of the sudden cash famine in India.

Demonetization has left all of India gasping. Hundreds of millions of people have been standing for hours at ATMs to withdraw small amounts of cash. They have been struggling with payments for everyday things like grocery which mostly depend on petty cash.

But for the 200 households in a quiet corner of Pune, a solution was already in the making. They signed up back in June for a pilot project with Paylatr, a fintech startup enabling recurring offline grocery payments at neighborhood stores without cash or cards.

Here’s how it works: Paylatr extends a monthly credit of INR 5,000-8,000 (US$74-118) to those who sign up with it. When they go shopping in neighborhood stores that are also on Paylatr, the customers literally pay later for the things they buy.

As CEO, he took one company to an IPO on NASDAQ and another one to an M&A.

The merchant’s invoice goes to Paylatr and it sends a mail to the customer for confirmation. On confirmation, Paylatr releases the payment to the merchant. As for the customers, the credit balance keeps getting deducted with each transaction. At month-end, they can top up the credit with a payment to Paylatr through net banking.

This is a useful mode for digitizing the recurrent grocery shopping scene in India, where credit card usage is scarce and most mom-and-pop stores don’t have card-swiping machines. It has become even more useful since November 8 when India withdrew high denomination notes and imposed a low cap on the withdrawal of cash.

Digital wallet use has risen as a result of the cash crunch, but it requires both customers and merchants to have the app. Also, it involves a transaction with every purchase, unlike the monthly payment on Paylatr.

CEO and co-founder Rohit Bhatia likens Paylatr to Kenya’s Mpesa which started by digitizing money transfer to family members in villages, which was one of the most common transactions that happened periodically. “Paylatr is digitizing transactions between users and kirana stores (India’s version of mom-and-pop stores) which happens multiple times a month; so we’re going after a fundamental need.”

The fulfilment of that need, according to him, can be simpler and safer than with multiple transactions through wallets, QR codes, or cards. Interactions with users have also revealed unforeseen effects, such as financial prudence because of the immediate update on the credit balance after each purchase.

See: India takes a leaf out of China’s book: QR codes everywhere for mobile payments

The milkman growth hack

After a successful pilot in the Baner-Pashan area, Paylatr is expanding to Koregaon Park in Pune, famous for its Osho ashram. But Rohit is cautious about onboarding users. He doesn’t want the headache of having to deal with defaulters who don’t do the monthly top-up.

His initial due diligence process was simple. He went to housing societies and offered Paylatr to family members of home-owners.

Village Capital incubation

Slow and steady

Rohit is an electronics engineer who headed value-added services for Bharti Airtel and was an evangelist for the mobile internet at Ericsson. Then he became the CEO of Swedish mobile payments company Seamless, which expanded across Europe, Africa, and the Middle East, and got listed on the NASDAQ OMX.