InstamojoUpdate: Besides reducing the transaction charges, Instamojo has also launched new payment checkout system. It now allows one to make a payment right on the offer page in a popup maintaining user’s offer page UI.

July 16, 2013: Online retailing upstart Instamojo has reduced its transaction charges to 5% for the Indian market, and 5% plus 30 cents for the rest of the world. (hat tip:@imayavi)

It had to, given the competition it faced from regular payment gateways and competitors, which made its flat 10% pricing unattractive. As we’ve explained earlier, what we like about Instamojo is the ease of use: users can sign up and retail digital goods, or, online tickets. It’s like a payment gateway with webfront and a user experience that enables retailers to upload digital goods to sell, in the Gumroad mould.  the The value that these platforms bring is in the ease of setting up a storefront and integrating automated digital delivery of goods.

We (at MediaNama) were evaluating Instamojo for a couple of things: for ticketing for #NAMA, and for retailing reports (which we’re working on). In both cases, we felt that a 10% cut to allow us to manage sale of goods was much too high, and it would probably save us a lot more money if we used competitors like Explara or Doattend for ticketing, and in case of reports, got a script written for integrating downloads enabled by payment gateways like CC Avenue (with its social media payment tool SNIP), or PayU (with its tool PayU Paisa). For a zero setup fee, CC Avenue charges 5.5% on Mastercard and Visa transactions, while PayU Paisa appears to be free to set up and transact for now (which is odd because that means it will lose money per transaction), and planning to charge 3.2% plus Rs 3 per transaction after September 30th, 2013.

Why Can’t Payment Gateways Do This?

However, if you think about it, given the scale at which a CC Avenue operates, digital goods is a market that they can address by building an Instamojo-like platform on top of their payment gateway, but more importantly, addressing the key issue of automated delivery of goods with Instamojo addresses. They’ve done it in the ticketing space by building their own events platform like EventAvenue (which competes with Explara and Doattend), and a digital goods marketplace could be next. The interesting thing about this development for Instamojo is that when it began, it was playing on convenience and ease of use. Now, it’s added price competition to that mix.

Given the competition in the market over payment products (Flipkart recently launched PayZippy), price is going to find an equillibrium (unless someone sells at a loss). Then it just boils down to a couple of things – firstly, user experience, and secondly, the ability of the platform to help merchants market their goods. This is why a marketplace has to be on the product-roadmap for  Instamojo.

There’s an interesting discussion going on about this on Twitter, and I’m wondering if it will have to get into a payments gateway business to be even more competitive. Read the discussion here.

Disclosure: CC Avenue is an advertiser with MediaNama