As e-commerce in India ramps up, the question of how to have the masses pay for their goodies is something that has not just been a thorny problem, but also a potential windfall opportunity to anyone who can crack it.
As this article explains, leading e-commerce site Flipkart pioneered cash on delivery (COD), which is one of the big drivers of e-commerce in India, considering so few people have credit or debit cards. COD comprises 50 to 80 percent of online transactions here.
However, as the piece goes on to reveal, COD has its own challenges, namely paying for return courier service if the buyer sends something back (40 percent of all transactions, apparently), working capital dilemmas (cash lying idle instead of going towards instant settlement), and pilferage.
In other words, e-commerce here has been begging for another, more efficient, system.
Enter Ezetap, a Bangalore-based startup that many have likened to Square, with a gizmo that attaches to a smartphone via Bluetooth or USB and allows retailers and merchants to process credit card transactions on their phones. In essence, the device transforms anyone with a smartphone into a point-of-sale device.
Apparently, the device, including a card reader and chip, costs around $50. Ezetap has been able to sell around 12,000 of them to date, with a goal of installing around 100,000 such devices across Asia-Pacific, Africa, and the Middle East within a year.
The company couldn't have timed it better, since there are over 300 million credit and debit card holders in India, with many more to come. This is why the device maker was able to raise $8 million in a Series B funding round led by Helion Advisors, with Silicon Valley-based Social+Capital Partnership and Berggruen Holdings also participating.
Social+Capital, along with individual investors Peter Thiel (PayPal co-founder and early Facebook investor), David Sacks (Yammer's founder) and Nicolas Berggruen of Berggruen Holdings, also previously pumped $3.5 million into Ezetap in November 2012 in a Series A round.
Ezetap hasn't done too shabbily so far. This TechCrunch article says that the startup has successfully wooed many banks, e-commerce companies such as Flipkart, and online grocery retailer BigBasket as customers while partnering with MasterCard and Equity Bank in Kenya.
With influential backers and a growing customer base, Ezetap is poised to do well in an under-tapped market such as India, but it may need to constantly check its rear-view mirror for fast-moving competitors.
TechCrunch mentions that MobiKwik has 2 million customers, and is hoping to lure 98 million more with its mobile wallet. And apparently a dozen or so other startups such as Mswipe are also eyeing the market with serious intent.
It should be an exciting space to watch in the months and years ahead.