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Nityanand Sharma

CEO & Co-founder, Simpl Technologies Private Limited

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Experiencing The Trustworthy 'Khaata' Days With Digital Payments

With customers having the flexibility to make instant payments on every transaction, digital ledger platforms or pay later facilities are moving towards ushering in the next step

While reminiscing the good old days, can you recall the last time your parents brought groceries from the neighbourhood kirana store and paid the entire bill in one go by the end of the month? Or, let’s take the classic example of the dhaba near your office campus where you have your breakfast and tea every day and ask the owner to make note of it so that you can pay the consolidated amount later.

Almost every baby boomer or a millennial at some point in time may have taken credit for making purchases. Be it maintaining a Khaata or an offline wallet system, it is the trust factor that has been the common link behind these purchases. Preferred by merchants and consumers alike, khaata has been the most preferred mode of transactions in India as it was intended towards frictionless and uninterrupted commerce.

As the world became far more impersonal and money became a mode of defining the structure of social relations, people became dependent on it or point of sale exchange to transact. The trust factor took a back seat and the khaata system turned sporadic. Until the dawn of smartphones….

The point of sale is now back with the consumers as a handful of new-age credit platforms are striving to redefine payments from the ground up. Built with trust, relationship and loyalty between merchants and consumers as its cornerstones, such platforms leverage modern technologies to digitalise the ledger system, reviving the same foundation - trust. Their credit services essentially allow users to pay for services and products online without spending their own money. They aggregate all the expenses a user has made and send a combined bill at a prescribed date.

So, how does a digital Khaata ensures frictionless commerce in retail?

For the merchants operating in consumer retail, having a digital Khaata system enables them to build a relationship based on trust, with their consumer. Meanwhile, consumers can enjoy a convenient buying experience without revealing their sensitive bank details or carrying odd amounts of cash in hand. This creates a win-win situation for both parties, ensuring trust and loyalty among the consumers, indicating more business and a stronger relationship. The digital tab system can also create a remarkable level of trust between unknown buyers and sellers on the back of distributed data, behavioural science, machine learning, robust analytics, and proprietary financing models and underwriting algorithms.

While the digital Khaata systems may resemble the humble plastic money in some ways, they are the virtual edition of credit cards that eliminates the requirement of any 16-digit pin number or multiple authentications. Yet, these pay later platforms are more secure for consumers and merchants. They offer risk-free one-click check-out and requires no CIBIL score, intrusive personal data, or fine print of the buyers. This makes it accessible for more customers with a wider variety of profiles.

Each year, more than $100 billion is extracted from businesses and consumers by payment companies and credit card issuers in the form of various fees. Intermediates, credit card companies, wallets, and payment gateways use information asymmetry to monopolize the relationships between merchants and consumers, to the disadvantage of both. Virtual Khaata platforms are merchant-first and consumer-centric as they don’t charge interest to customers and have lower merchant fees.

Keeping Tab of the future

The practice of keeping a ‘tab’ is a longstanding tradition in India and pervades from large cities to small towns and villages. Since the society continues to operate on high levels of trust even today, the advantage of a pay-later or credit system can provide maximum value to the people. With customers having the flexibility to make instant payments on every transaction, digital ledger platforms or pay later facilities are moving towards ushering in the next step in digital payments in the country.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house



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