Zaakpay, a digital payments startup has launched an ePayments service, which, at the moment, is more or less like an online money transfer, supporting only inter-bank payments. However, the company plans to extend it further and release an API, around June-end, so that e-commerce merchants can integrate it as a payment option. It also intends to launch a payment gateway product by the name of ‘Webpay’, by August, which will integrate credit and debit cards. In addition to this, it also plans to introduce payments by SMS and IVR.

Inter-bank Payments

The company has tied-up with around 90 Indian banks, to enable individuals and businesses to send and receive payments from various banks through the service. After registering for a Zaakpay account, users need to link their bank account with it. The service moves money from the sender’s bank account to the receiver’s Zaakpay account. It sets a 3 day default limit, for users to retain money in Zaakpay, after which it is automatically sent to their bank accounts. This limit exits because RBI Regulations, instituted a little over a year ago, allow retention of cash for a maximum of 7 days.

Why A Physical Verification?

Presently, the process of linking one’s bank account to Zaakpay involves downloading a verification form from the site, filling it up, going to the bank, get signatures and stamps from bank officials and upload it to the site, where it is manually verified, before being approved.

Although the process tries to make the service secure and prevent misuse, it makes it a little cumbersome, and reminds us of some banks that need offline consents to activate services like fund transfer. One more reason for this verification, is to make the service independent of Net Banking, since a lot of customers might not have registered for their bank’s Net Banking services. We recommend that the site should allow online verification for customers who can access their bank accounts online.

Also, the forms where, bank data needs to be entered need to be more intuitive, with drop down boxes for fields like name of the bank, instead of the user being made to type out everything manually.

Pricing & Competition

The company does not charge a sign-up fee. It also does not charge senders any fee, however, receivers are charged Rs 10 per transaction as transaction fee, and they also need to pay a monthly subscription fee, if the total amount of monthly transactions exceed Rs 10,000. There are various slabs for the same. For example, if the amount received is in the range of Rs 10,001 to Rs 25,000, a monthly fee of Rs 300 is charged. Also, unlike other payment gateways which, charge a minimum of more than 3% of the transaction as a fee,  Zaakpay does not charge a transaction fee beyond Rs 10. It appears that Zaakpay is using pricing as a means of attracting clients, and this might result in competition in the payment gateway pricing.

Note that PayPal has put a limit on receiving payments at $500, and crippling the service’s online wallet functionality for Indian users, and making it mandatory for its users in India to furnish additional information, such as a purpose code, permanent account number and bank account details. Zaakpay says it plans to add support for International banks and cards soon, which might help it attract freelancers and businesses which receive payments from overseas.

Nikhil adds: The payment gateway business is ripe for disruption in India: merchants often complain of having to sign up with multiple payment gateways, and switch between them since transactions often do not complete. Having a reliable payment gateway service does serve as an impediment to growth in transactions in the country, and there isn’t a quality plug-and-play alternative yet. Note that we’re not in a position to ascertain ZaakPay’s reliability. A plug and play model is appealing: we would like to be able to retail, say, a report, without having to spend hours trying to figure out integration and paperwork. Zaakpay, and other payment gateway service providers like TimesofMoney, CCAvenue, EBS, among others, need to look at helping scale the merchant ecosystem in India.

Note: CCAvenue, the largest payment gateway service in India, was believed to have been hacked recently. More on there here and a Q&A With CCAvenue CEO Vishwas Patel here.