A new kind of payment gateway

A new kind of payment gateway

GharPay is working on building a payment gateway with a business model around cash booking, a concept that could potentially disrupt the e-commerce world


Today, several entrepreneurial ideas are born out of the service-level holdups customers are confronted with in their daily lives. The story of two-year old start-up, GharPay, the cash booking payment gateway for online transactions, is no different.  “As a student, interacting with tech-savvy friends and family made me realise that card payments were still a nuisance to many online shoppers in India and 95 per cent of them still relied on the cash-on-delivery option,” says Abhishek Nayak, co-founder, GharPay. This encouraged Nayak and his founding team to research the feasibility of a venture such as GharPay. In January 2011, Nayak and a fellow BITS Pilani graduate, Arpit Mohan, got onboard the e-commerce bandwagon to directly address the cause of online payments in the country, by establishing GharPay.

Today, GharPay operates with 90 employees who reach out to over 900 pin codes in 13 cities, including Hyderabad, Chennai, Mumbai, New Delhi, Pune and Ahmedabad. Its clientele comprises Jet Airways, RedBus, Cleartrip, dealsandyou and ferns N’ petals, to name a few.

In its inception stage, the company got up and running with an investment of Rs. 5 lakh from the founders’ family members. A short while later, it raised US $300,000 from Sequoia Capital and Raju Reddy, an angel investor. The funds were used towards establishing smooth operations in Hyderabad and Chennai and increasing manpower. (In Q4, CY2012, the company raised another round of funding from Blume Ventures, Kae Capital and Sequoia Capital).

“Though we were college graduates with just a year-and-a-half of work experience when we started this venture, the support from BITS Pilani alumni helped us build our credibility. Moreover, we did not have a mentor to guide us through finding the right investors. We solely relied on online research and in-depth discussions with the investors to identify the ones who would add value as well as be a trust-worthy investment source,” says Nayak.

How it works

GharPay operates a cash booking or cash payment system that varies depending on the platform it is being made available at. For instance, when as a customer makes a purchase on an e-commerce site, the GharPay option is made available to him/her (through an API software) at the payment gateway stage. The software, then, also intimates GharPay about customer details (if the GharPay option is selected). Following this, a payment collection executive collects money from the customer within 24 hours, shares a receipt of payment confirmation on behalf of GharPay and the e-commerce site and the customer receives the product within the specified period. Whereas, in the case of online ticket booking, the customer receives the e-ticket immediately, following which, a GharPay executive collects payments from the customer within 24 hours and deposits the payment with the client, within 48 hours.

These models offers a twin advantage to the customer as well as the e-retailer. Here’s how. In 2011, while cash-on-delivery made online shopping a secure process for Indians, it burnt a deep hole in the e-retailers’ pockets due to concerns such as 35 per cent returns in goods (which doubled the shipping charges to be paid by the company), delay in receiving payments from courier companies (which affected capital requirements and cash flow) and mishandling of goods by intermediaries.

Addressing these concerns, GharPay developed a last mile payment operation model, where, the transition period between receiving the payment from a customer and transferring it to the e-retailer is fixed at 48 hours, which ensures that the capital requirement and cash flow of the client company is not at stake. Moreover, depending on the customer’s availability, the GharPay payment executive fixes a timing to collect the payment from the customer’s residence, to avoid delays in completing the transaction. However, just as any other payment gateway service company does, GharPay still has to tackle the problem of failed transactions, either as a result of service-lag from the courier company’s end or the inability of the payment executives to collect money from the customer, despite pre-fixing the cash collection time.

Facing operational challenges

For GharPay, challenges exist largely on the operational front. Firstly, dealing with cash transactions is tough and requires extensive security and safety. Keeping this in mind, GharPay ensures that all the cash handled by the executives is insured for reliability and burglary. Moreover, GharPay targets executives who have earlier been cash or debt collectors and conducts extensive background checks on their credibility before hiring them. Once employed, each executive is trained in customer relationship etiquette and standard payment collection procedures. For instance, once the payment executive receives cash from the customer, he has to share a GharPay receipt and inform the payment status to his company, from the customer’s doorstep. The money collected is then deposited at the bank or at the office by the end of the business day.

Secondly, in every city, on the basis of an initial scan of the logistics requirements and existing and potential client’s customer segmentation, GharPay employs a set of payment executives and a team lead to deploy its services. Owing to its USP of collecting payments from the customers within 24 hours, sometimes, during the festive season or on weekends, the company faces an overload of transactions. To address this, GharPay hires additional temporary payment executives, who are guided by the existing ones, on standard operating procedures.

Finally, the company believes India still has a long way to go before eliminating cash-on-delivery and becoming reliant on plastic money. “We believe that cash will be the preferred payment instrument for the next 100 million Indians who will shop online. Today, more than 90 per cent of retail purchases are still in cash,” states Abhishek. He draws attention to China where, though 30 per cent of the households have at least one credit card, a predominant share of them still prefer online transactions through cash.

GharPay’s revenue model is similar to that of any other payment gateway, where a percentage of the transaction amount is taken as commission. The company charges Rs. 40 plus two per cent of the amount higher than Rs. 1, 000. If the purchase value is higher than Rs. 25, 000, the customer is expected to share a photocopy of his or her pan card with the payment executive.

So far, the company has focussed primarily on building smooth operations than on leveraging its marketing activities. “Until now, we have relied on word-of-mouth and the feedback of our existing clients to tap new ones.  But I am sure the scope is much wider for us to market our services.  In the near future, we are looking to participate in a lot more industry conferences to connect with prospective clients and expand our base,” says Nayak.

Future roadmap

In the next five years, GharPay is focussed on improving its geographic reach and increasing the number of online transactions through its gateway. “We would like to achieve at least 20 per cent to 30 per cent of e-commerce transactions through GharPay within the next few years,” shares Abhishek.

The company plans to expand its client base by participating in industry conferences and is also keen on leveraging its presence across all Metropolitan cities, particularly in the north of India.  Moreover, having observed that sizable chunk of online transactions is taking place in tier-II cities; GharPay is planning to expand into these regions too.

It has recently raised another round of funding from Sequoia Capital, Blume Ventures and Kae Capital to further expand its product base alongside operations.

With market indicators suggesting that the e-commerce market is likely to grow the fastest in the Asia-Pacific region between 2012 and 2016, there is no time for the young founding duo to rest on what has been achieved. Every day is going to present a new challenge and a new opportunity for them to fulfil their dream of making GharPay the largest online payment gateway in India.



Founders: Abhishek Nayak and Arpit Mohan

Year: 2011

City: Hyderabad

Investors: Sequoia Capital, Raju Reddy, Kae Capital and Blume Ventures

Concept in brief:

In January 2011, two BITS-Pilani graduates, Abhishek Nayak and Arpit Mohan, launched GharPay, to serve e-commerce companies by developing a payment gateway model around cash booking.

As of December 2012, GharPay employed over 90 people and serviced over 900 pin codes in 13 cities, including Hyderabad, Chennai, Mumbai, New Delhi, Pune and Ahmedabad. Its clientele comprises Jet Airways, RedBus, Cleartrip, dealsandyou and ferns N’ petals, to name a few. In the next five years, the company is looking at expanding its geographic presence within the country to include tier-II cities and enhance the efficiency of its operations. 

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