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RBI gives a wallet licence to a company which only allows you to pay for booze

Well, it is high times for digital payments. So, the Reserve Bank of India (RBI) has granted wallet licence to a Chennai-based company called HipBar which is looking to sell only booze online. Just booze, nothing else. But HipBar is taking the drinking very seriously and believes it can make a dent by using the wallet function to pay for alcohol online.

Currently, the venture has an Android and iOS app which allows users to reserve a bottle of alcohol at a drinking establishment and pay for it online. Users will have to pick up the bottle at the nearest store, however, Prasanna Natarajan, founder of HipBar explained. Drinking laws in India currently don’t permit delivery of alcohol from retail stores.

HipBar started as an internal project to help market the brands of Sipping Spirits (SS), a company Natarajan founded back in 2007. “SS is a craft spirits company that manufactures and markets several niche brands out of its Goa-based facility. Eventually, in 2015, HipBar turned from a raw idea to a business, when it was formally incorporated,” Natarajan explained.

There have been some efforts though to start online delivery of alcohol in India but it doesn’t seem to have panned out well. There was LetsBuyDrink.com which operated as a marketplace in Delhi, Gurgaon, Faridabad and Mumbai but it shut down. Similar efforts by WineBazaar.in or Bozzr.com eventually led them to close down. There is, however, Bangalore-based Madhuloka, a retailer which has 17 stores in the city. (We still don’t know under what laws the website operates under, do let us know if you have an idea?)

Still, HipBar is undeterred and has onboarded 100 merchants, both bars and retail, in Bangalore. “That should grow to about 250 in the next couple of months. We work with goals in mind, not just targets. It’s been just a month since we went live. We have a lot to learn from this experience, and we need to take care of our customers and keep them happy, which is our primary goal,” Natarajan told MediaNama in an email.

Business model

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HipBar says that the semi-closed payment system will act as a value transfer network for transactions between stakeholders. It will also offer discounts on drinks but all promotions, including cashbacks and preferential pricing, will be jointly funded by one or more stakeholders. HipBar works on a merchant discount rate (MDR) and commissions model.

When asked if it would be easier for HipBar to partner with an existing wallet and payment players (there are a few bars in my neighbourhood which accept Paytm on delivery), Natarajan replied defensively and said:

Everything is easy when its a hypothesis ! Our vision for the category and the business model warranted us to be the Wallet. Even Amazon recently acquired their own wallet despite already having one under its control. Being a wallet has certain advantages, and some drawbacks. We contemplated all options before making the choice.

On RBI’s draft guidelines for wallets

The RBI in its draft guidelines for wallets had prescribed tougher norms including a minimum net worth of Rs 25 crore. Natarajan said that the company is confident of increasing the capital by 2020 to meet the requirements. “We welcome the move to increase the minimum net worth to Rs. 25 Crores. Anyone who operates a RBI authorized PPI, will know that the extent of systems, controls, oversight and service delivery required would demand that kind of capital,” he said.

However, he was more critical of the other requirements in the circular. “The common view is that the changes proposed in the draft Master Circular will not only increase the burden of operating costs but also not offer any significant incremental value to the PPI business. Hence we do not see it getting implemented as is,” he added.

Correction: It was pointed out that HipBar also has an iOS app. An earlier copy said that the company is looking to sell alcohol online. HipBar can only be used to pay for alcohol online. This has been reflected in the copy.

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