PayLatr is a recurring micro-credit mobile platform offering interest-free monthly credits to low-income households in India to easily pay for retail transactions without cash, credit cards or other pre-paid means.
On average, a middle-income household in India spends about 7,000 – 9,000 rupees at any neighborhood store. More than 95 percent of transactions are in cash because most stores do not accept cards and/or users do not have credit cards. Often, households experience cash crunch issues by using up most of their cash for grocery shopping. PayLatr offers monthly credit to improve their household cash flow by providing recurring monthly credit lines at various merchants, via mobile money.
THE Problem and Solution
Mid-income households in India with monthly incomes of around USD 800-1000, typically run out cash at the end of month and therefore have to cut down on purchases. This situations repeats itself every month but housewives who are responsible for the household have no way to easily access credit, despite their willingness to settle as soon as the next salary is received. Today the only solution for the housewives is to get a credit card, but housewives are unlikely to be eligible for it.
PayLatr solves the housewives problem by offering credit to them exclusively for purchases of daily needs like groceries, milk, vegetables and fruits. Housewives can join PayLatr with one referral and an Aadhaar Card for basic documentation. Housewives can utilize the credit received to shop at the neighborhood stores they most frequent. For example, vegetable and fruit marts and Kirana (a small neighborhood retail store in India. Users (Housewives) and Merchants (Daily Needs Stores) transact cashlessly via the PayLatr platform, thereby eliminating cash, or credit cards or e-wallets. Merchants are charged a percentage commission on sales. Users pay the credit availed to them by PayLatr between the first and third of the upcoming month after which their credit limit is replenished.
Thus PayLatr provides housewives seamless access to monthly recurring credit and enables them to better manage their home cash-flow. Their purchasing power is enhanced and they do not need to cut down on the shopping for their daily needs.
PayLatr merchants benefit from the sales and from new customers shopping with the PayLatr credit. Also, old customers shop more due to their enhanced purchasing power during month end. Merchants are also pleased with the home-delivery use-case because they no longer have to collect cash from the customer, who now pays using PayLatr.
PayLatr uses a credit risk model and credit scoring algorithms to determine user’s opening credit limit.
Leverages Aadhar API verification (one user per household) and other checks (one referral) for basic users' identity verification.
Revenue streams include transaction fees as a percentage of total purchase from merchants, analytics platform rental fee for merchants, and convenience fee for offering users a credit collection service at their homes.
Credit payments can be made online or collected in cash at home, but there are incentives to repay digitally. If users pay credit online, they may be able to increase their credit limit.
The Value Proposition
- PayLatr offers incentives for both users and small merchants to go cashless.
- Households have access to hassle-free credit lines to improve home cash flow and are thus able to purchase more necessary goods, without the need for an e-wallet.
- Merchants are able to understand and attract more customers, offering low-cost credit without credit/debit cards.
- Improved user experience thanks to faster checkout and cashless transactions.
THE LEARNING AGENDA
PayLatr is aligned with the Catalyst Fund learning agenda and core mission. Their challenges, as we know them, could help answer such questions within the learning pillars of:
- 10x better value propositions: How can PayLatr digital credit lines be better than traditional offerings and reach more people?
- Limiting factors: How can PayLatr value proposition engender sufficient trust with merchants and users? What barriers need to be overcome in the Indian market?