Startups digitising micro-businesses sense new opportunity as COVID-19 makes door-to-door collections risky

Just like monthly credit card bills, telephone bills and electricity bills come directly to the consumers’ inbox as mails or messages, would it not be better if the monthly newspaper bill, milkman’s bill or the kids’ school bus dues also come as an alert on the phone? Perhaps in a post-COVID world where humans will be wary of the door-to-door payment collection system, this will become the norm.

Two early-stage startups, SpiderG and Paperking, are working to digitise collections for these micro-merchants like milkman, newspaper delivery agency, coaching centres, school bus operators, small gym owners and so many others. Parallelly, they are also trying to take the small notebook these people always carry to keep track of their customers' dues and digitise their bookkeeping.

“There could be almost 3 million such micro-merchants. They need to generate bills in the end of every month. But manual tabulation takes 14 to 15 days, hence they lose out on cash flow for so many days without even realising that it is a business loss,” said Neeraj Tiwari, co-founder, Paperking. “We can automate their bookkeeping and digitise their payments.”

Mumbai-based Paperking is working with newspaper vendors, distributors and even milk supply agents. Having integrated with payment gateway companies like Paytm, Razorpay and Freecharge they can process payments from their customers digitally. There are 5600 vendors processing Rs 5.5 crore worth of bills per month and catering to 5.5 lakh households. Their target is to scale it up to 40 lakh households and eventually digitise every micro recurring payments a household has to do.

“Our service is a paid product which is used by the vendors, dealers and even publishers of newspapers,” said Tiwari. He has raised Rs 1.8 crore from the Birla family office and a network of friends and family.

The company, which was started in 2015, is targeting newspaper vendors, milk delivery, cable operators and kirana shops. It is available in six languages for the ease of operations for the owners of these businesses.

Pune-based SpiderG is also trying to digitise collections for cable operators, small gymnasiums, milk delivery boys and school bus operators. It sends a recurring payments link to the customer. They can either pay at that point or raise a dispute if there is a problem in the calculation.

“We have 15,000 small merchants, generating 7.3 lakh invoices per month,” said Ashwani Rathore, co-founder, SpiderG. “We have digitised more than 80 percent of the collections that are processed through us.”

SpiderG had raised seed funding from Rahul Kirloskar, executive chairman of Kirloskar Pneumatic, and Adi Sarvanan, founder of Allsec Technologies.

SpiderG does not charge any subscription to the businesses, but takes 1 percent as a merchant discount rate for every transaction that flows through their system. They have an average transaction size between Rs 500 and 600. Further, the company also offers invoice tracking, payouts for salaries for these merchants and generates electronic invoices.

Industry insiders pointed out that digitising micro-businesses is an interesting business proposition especially at a time when people are being advised to maintain social distancing and digital payments is being pushed as an alternative. But there could be challenges in scaling up such a product and the costs could be prohibitive. Further, with many of the small merchants already using WhatsApp to interact with customers and Unified Payments Interface for transactions, adoption at a wide scale might be tough.

“We are relying on influencer marketing, community spread of the word about us; since these small businesses have many industry groups, we are reaching out to unions and communities as well,” said Rathore of SpiderG.

Paperking is trying the other route for acquisition and is talking to publications to onboard their vendors on to the app. For the milk business, they are trying to enter the market through manufacturers like Amul and Mother Dairy.

“If we can digitise the entire supply chain there will be quicker adoption of our product,” said Tiwari.

Eventually, these players will have to monetise by emerging as an accounting and business management software for these micro-businesses and eventually foray into lending. Paperking is already helping their vendors get loans from banks which are using their e-invoices as a reflection of their earnings. If that happens successfully maybe there is a strong use case which can drive adoption.

This is also what Khatabook and OkCredit are trying to do for roadside kiranas. Now where do these businesses eventually meet is the main question, or perhaps these small innovators will eventually get gobbled up by tech giants trying to digitise India’s street corner merchants.