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(39434, 20, '2018-11-20 09:14:03', '2018-11-20 09:14:03', '[vc_row equal_height=\"yes\" content_placement=\"middle\" type=\"image\" enable_parallax=\"false\" parallax_speed=\"0.4\" padding_top=\"110\" padding_bottom=\"0\" bg_image=\"39430\"][vc_column][kleo_gap size=\"100px\"][vc_row_inner][vc_column_inner width=\"1/6\"][/vc_column_inner][vc_column_inner width=\"2/3\"][vc_custom_heading text=\"DIGITAL LENDING FOR SMALL MERCHANTS: THE MISSING ROAD TO THE LAST MILE\" font_container=\"tag:h2|font_size:48px|text_align:center|color:%23ffffff|line_height:54px\" google_fonts=\"font_family:Roboto%20Condensed%3A300%2C300italic%2Cregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal\" letter_spacing=\"\"][/vc_column_inner][vc_column_inner width=\"1/6\"][/vc_column_inner][/vc_row_inner][kleo_gap size=\"140px\"][kleo_gap size=\"50px\"][/vc_column][/vc_row][vc_row equal_height=\"yes\" content_placement=\"middle\" padding_bottom=\"0\"][vc_column width=\"1/2\"][/vc_column][vc_column width=\"1/2\"][vc_row_inner equal_height=\"yes\" content_placement=\"middle\"][vc_column_inner width=\"5/12\"][/vc_column_inner][vc_column_inner width=\"1/3\" css=\".vc_custom_1488531456733{padding-right: 0px !important;}\"][vc_column_text letter_spacing=\"\"][addtoany][/vc_column_text][/vc_column_inner][vc_column_inner width=\"1/4\" css=\".vc_custom_1488531444909{padding-left: 0px !important;}\"][kleo_button title=\"Print this page\" href=\"https://cashlesscatalyst.org/wp-content/uploads/2018/11/BB-Learning-Note.pdf\" target=\"_blank\" style=\"custom\" position=\"left\" size=\"lg\" special=\"no\" border=\"no\" icon=\"print\" font_size=\"16px\" letter_spacing=\"\" el_class=\"grey-icon\" custom_text=\"#d11e3c\"][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#ffffff\"][vc_column][vc_custom_heading text=\"BACKGROUND\" font_container=\"tag:h2|font_size:26px|text_align:left|color:%23383b3b|line_height:32px\" google_fonts=\"font_family:Roboto%20Condensed%3A300%2C300italic%2Cregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal\" letter_spacing=\"\"][vc_row_inner css=\".vc_custom_1537456868816{margin-bottom: 35px !important;}\"][vc_column_inner][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]Ninety-three percent of India’s US$670 billion retail market continues to be unorganized, operating through mom-and-pop, kirana or standalone stores.<sup>1</sup> According to a recent Boston Consulting GroupConfederation of Indian Industry (BCG-CII) report, this sector is projected to double from a US$1.1-1.2 trillion market by 2020, driven by a 70 percent rise in income levels and a 100 million addition in the number of youth entering the labor force.<sup>2</sup> However, despite growth projections, there are several factors that hinder the growth of these informal enterprises which provide livelihood options to nearly 111 million workers,<sup>3</sup> thus forming an important engine for India’s economic growth.\r\n\r\nThe lack of proper infrastructure and technical skills notwithstanding, a pressing factor hindering attainment of scale by informal enterprises is the lack of credit from formal sources at affordable rates of interest. According to an International Finance Corporation (IFC) report, the credit gap for informal enterprises within the Micro, Small and Medium Enterprises (MSME) sector in India was estimated at US$418 billion in 2012-13.<sup>4</sup> Underlying the gap in accessing formal credit is the story of missing applicant credit histories or other parameters of credit worthiness used in traditional appraisal processes by lenders.<sup>5</sup> Under such circumstances, most enterprises resort to informal lenders, despite the high interest rates charged. Reluctance to adopt digital payments further exacerbates this situation, since it is near impossible to convince lenders of credit worthiness in the face of missing information on credit and other transactional histories. Lack of awareness, low capability and unwillingness to try new technologies for fear of failure are some reasons that contribute to this wariness and create a vicious cycle that has been hard to break.\r\n\r\nCATALYST, in its drive to explore the digital readiness of this segment, hypothesized that providing access to a small amount of credit at lower rates could act as a hook for digital payment adoption and usage, which in turn could trigger a positive spiral to access higher amounts of credit. In a preliminary study to understand the financial behavior and borrowing pattern of small businesses, CATALYST conducted a Credit Needs Assessment Survey (CNAS) where 1,140 small fixed store merchants in Jaipur were interviewed in September 2017. The survey showed that 69 percent of the merchants sourced their credit from informal sources such as friends, family and local moneylenders. Merchants expressed dissatisfaction with local moneylenders because they charged an interest rate of over 30 percent per month. But they still tend to prefer informal lenders over formal ones because of ease of access, no requirement of lengthy documentation, and speedy processes[/vc_column_text][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]Armed with these insights, CATALYST launched the Credit as a Hook pilot in Jaipur in June 2018 for a select set of merchants. The pilot aimed to provide incremental loans through a starter-builder model starting with a small loan that would increase based on usage of digital payments, where the payment footprint would help merchants build their formal credit history. CATALYST hypothesized that, for the  merchants, this would result in larger loans over a period of time at better rates of interest. For lenders, the presence of a digital footprint would provide the means to underwrite loans better and allow them to acquire new customers (i.e., a set of small merchants that was hitherto unserved by formal financial institutions). The initial pre-assessment survey carried out prior to the product launch, CATALYST’s CNAS report, revealed that 92 percent merchants contacted during the survey was aware of digital payment solutions. Of these, 53.5 percent was interested in availing credit through a digital platform with an expectation of quick processing time.\r\n\r\nThe first challenge that CATALYST faced was to convince lenders to provide an initial loan, albeit small, in the absence of a digital payment history. Traditionally, the route to access credit has been via an established digital payment footprint because of the inherent difference in the way payment and credit operates. Payment systems work better when more people use them, and therefore are designed to be more inclusive in nature. Credit, on the other hand, is designed to hedge excessive risks, and therefore is harder to establish as the first step to financial inclusion of the underserved market segment with no credit history.\r\n\r\nA lending model is predicated on profits from taking calculated risks. So, lenders seek to build strong relationships with their customers and get a broad base of information to calculate the exact underlying risk. On the other hand, payment companies are inherently less dependent on understanding customer risk. Payment businesses therefore tend to be more transactional and less relationship-based than lending ones. The quality or depth of individual customer relationships matters less. Instead, the number and breadth of customers and their networks matter more.<sup>6</sup>\r\n\r\nUnderstanding these basic functions of payments and credit is critical to exploring how the two can be linked. Technology and access to customer data play a huge role in leveraging the payment and credit lens to achieve financial inclusion.\r\n\r\nThe CATALYST pilot aimed at precisely this understanding. How can we urge merchants to start using digital solutions, which in turn can help them access credit at better terms?\r\n\r\nWhile the merits of credit are known, research is beginning to show the advantages of digital credit as well. Early evidence from studying M-Shawri<sup>7</sup> in Kenya has shown that uptake of digital loans has helped improve household resilience against shocks and increased the propensity of families to spend on welfare activities such as health and education.<sup>8</sup> While we have little evidence available from similar experiments in India, we expect the positive benefits would be similar.\r\n\r\nWe hope that the following results of CATALYST’s Credit as a Hook pilot reveal the opportunities and challenges of launching a digital payment and loan product bundle for underserved informal sector merchants in India.[/vc_column_text][vc_column_text text_color=\"#757c74\" font_size=\"14px\" letter_spacing=\"\"]<em><sup>1</sup>India’s $670 billion retail market is heading for a dream run, April 16, 2018, Quartz.</em>\r\n\r\n<em><sup>2</sup>Retail Transformation: Changing Your Performance Trajectory, BCG-CII National Retail Summit Report, 2016.</em>\r\n\r\n<em><sup>3</sup>Found: 111 million MSME workers in India as data rules changes, Livemint, November 22, 2017.</em>\r\n\r\n<em><sup>4</sup>MSME Finance Gap, Assessment of the shortfalls and opportunities in financing micro, small and medium enterprises in emerging markets, IFC, 2017.</em>\r\n\r\n<em><sup>5</sup>Research by Entrepreneurial Finance Lab, retrieved from The Hindu Business Line, ‘There is a credit gap of 56% in the MSME sector’, July 2, 2014</em>\r\n\r\n<em><sup>6</sup>Buckley, R. and I..Mas. The coming of age of digital payment as a field of expertise, Journal of Law Technology and Policy, June 2016, Vol.2016.</em>\r\n\r\n<em><sup>7</sup>M-Shwari is a paperless banking service offered through M-Pesa. M-Shwari bank accounts are opened and maintained through mobile phones.</em>\r\n\r\n<em><sup>8</sup>Bharadwaj, P., W. Jack and T. Suri. Can Digital Loans Deliver: Take Up and Impact of Digital Loans in Kenya, 2018 (Working Paper, draft received on special request from T. Suri).</em>[/vc_column_text][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"image\" bg_position_horizontal=\"center\" enable_parallax=\"false\" parallax_speed=\"0.4\" padding_top=\"150\" padding_bottom=\"150\" bg_image=\"39431\"][vc_column][vc_custom_heading text=\"INSIGHTS FROM THE PILOT\" font_container=\"tag:h2|font_size:26px|text_align:center|color:%23ffffff|line_height:32px\" google_fonts=\"font_family:Roboto%20Condensed%3A300%2C300italic%2Cregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal\" letter_spacing=\"\"][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#ffffff\"][vc_column][vc_row_inner][vc_column_inner][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]Testing the hypothesis involved bringing together a payment provider and a lender — a role that was played by CATALYST. For the pilot, CATALYST partnered with Nupay, a Point of Sale (PoS) device or card swipe machine provider and an early stage startup, and Capital First, a Non Banking Financial Company (NBFC), which agreed to provide term loans to fixed store merchants in Jaipur. The combination of a payment device and loan was offered as a bundle, with the intention of testing the extent to which credit can act as a ‘hook’ to adopt and use digital payments. This combination was created for the purpose of the pilot alone since lenders are unclear of the risks involved in offering a small amount of credit, no matter how small, before they can establish credit history based on transactions on the device provided. Since the combination of partners was arranged by CATALYST for the pilot, CATALYST also had to provide a set of Feet on Street (FoS) for on-the-ground support to roll out the services. The FoS team, trained by CATALYST, provided support in marketing and customer acquisition.\r\n\r\n<strong>Product bundle: Capital First and Nupay, a term loan with a card swipe machine</strong>\r\n\r\nProduct bundle details: Capital First (the lender) agreed to provide loans of a ticket size of INR 25,000 to INR 5 lakh at an interest rate of 18 percent to 24 percent annually for a tenure of nine months to 36 months, depending on the ticket size and repayment capacity.\r\n\r\nNupay’s card swipe machine had a monthly rental of INR 350 (~ US$5) plus 18 percent Goods and Service Tax (GST), which was also to be paid by merchants. The lender agreed that merchants would be considered for an incremental loan based on their repayment history observed in the first tranche of the loan, and their digital transaction footprint.\r\n\r\n&nbsp;\r\n\r\n<strong>Project roll-out and findings: digital payment adoption vs. non-adoption</strong>\r\n\r\nDuring the pilot, CATALYST reached out to 409 fixed store merchants across six major markets in Jaipur (Shastri Nagar, Sodala, Durgapura, Khatirpura, Jhotwara and Bani Park).9 These stores have been in business for an average of 10 years and had a median monthly revenue of INR 45,000. Most stores (99 percent) were owned by men; 87 percent was sole proprietorships while a smaller group (13 percent) was managed jointly with other family members. Sixty-five of them were already using a PoS or a card swipe machine and the remaining 344 merchants were given a demo on using a new PoS machine with the help of CATALYST’s FoS team.[/vc_column_text][vc_single_image image=\"39426\" img_size=\"full\" alignment=\"center\"][vc_column_text text_color=\"#757c74\" font_size=\"14px\" letter_spacing=\"\"]<em><sup>9</sup>This data set is separate from the earlier CNAS data. With a time lag of eight months, it is often difficult to work with earlier data sets. So, 490 new fixed stores were chosen from six new markets in Jaipur</em>[/vc_column_text][/vc_column_inner][/vc_row_inner][vc_row_inner css=\".vc_custom_1537937440359{padding-top: 30px !important;}\"][vc_column_inner][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]<strong>Key results from the experiment were:</strong>\r\n<ul>\r\n 	<li>There were eight fixed store merchants who had never used a card swipe machine but eventually adopted digital payment solutions after being trained on card swipe usage by the CATALYST FoS team.</li>\r\n 	<li>The primary reason for adoption was that it would allow them to service a broader customer segment that used (debit/credit) cards to make payments. In other words, the ability to serve a specific customer segment that was familiar with digital solutions was a key driver. This would also result in new customer acquisition over a period of time.</li>\r\n 	<li>Among the merchants who refused to use or adopt a PoS machine, the dominant reason for nonadoption was the absence of customer demand (62 percent, Figure 1). These merchants were unwilling to act as enablers to train customers in using a new digital solution. If the customers asked for the service, they were happy to provide it.</li>\r\n 	<li>The remaining 10 percent (Figure 1) reported the inherent cash stickiness of their business as a major deterrent. Another 2 percent (Figure 1) cited the cost of the machine as a major barrier to accepting digital payments.</li>\r\n</ul>\r\n[/vc_column_text][vc_single_image image=\"39433\" img_size=\"full\" alignment=\"center\"][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]<em>Note: From top right: existing loan usage, source of loan, purpose of loans and awareness about CIBIL scores of 18 merchants who agreed to reveal information about a prior loan.</em>[/vc_column_text][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]While most merchants who were part of the pilot preferred not to share their current loan practices, those who revealed that they had availed a loan (18 out of 409) had done so from a formal source. Fourteen of the 18 were also aware of their credit score (CIBIL) and its related impact on their credit eligibility.\r\n<ul>\r\n 	<li>Only 18 fixed store merchants (4 percent) with an average monthly revenue of INR 90,000 (double the population median of INR 45,000) reported that they had availed of a loan in the past.</li>\r\n 	<li>The average tenure of the loans was two to three years; 17 merchants sourced the loan from banks and one from a Micro Finance Institution (MFI);</li>\r\n 	<li>The purpose for which loans were taken varied from business expansion (10 merchants), household requirements (four merchants) to health emergencies (one merchant). Utility loans such as for two wheelers (three merchants) formed another major category of reasons for taking loans; and</li>\r\n 	<li>The ticket size of the loans taken by the merchants varied from INR 40,000 to INR 9 lakhs.</li>\r\n</ul>\r\n[/vc_column_text][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#c9213b\" padding_top=\"75\" padding_bottom=\"75\" inline_style=\"font-style: normal;\"][vc_column][vc_row_inner][vc_column_inner][vc_custom_heading text=\"MERCHANTS’ PERCEPTION ON THE BUNDLED PRODUCT\r\n\" font_container=\"tag:h2|font_size:26px|text_align:center|color:%23ffffff|line_height:32px\" google_fonts=\"font_family:Roboto%20Condensed%3A300%2C300italic%2Cregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal\" letter_spacing=\"\" el_class=\"normal-style \"][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#ffffff\" inline_style=\"font-style: normal;\"][vc_column][vc_row_inner][vc_column_inner el_class=\"normal-style \"][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]Perceived vs. real interest in loan: When offered the bundled product of payment device and credit, 25 merchants showed initial interest solely in accessing the loan during their first interaction with the CATALYST FoS team. However, 24 had changed their minds when the lender’s agent approached them after a week, perhaps because merchants are always interested in understanding options for credit but may not avail of it even if they express an interest initially.\r\n\r\nOne merchant who agreed to try the combination of a PoS device and loan had a fixed cloth store in Shastri Nagar market. He wanted a loan of INR 1-2 lakhs. Unfortunately, the request was denied since his residence was located outside the serviceable area set by the lender. This fact was discovered after the processing was done, and resulted in a poor customer experience for the merchant.\r\n\r\n<strong>Why was there a low uptake? </strong>\r\n\r\nThe experiment shows that while there was individual adoption of the card swipe machines, there was little uptake of the bundled product. Technology did seamlessly bind the products together but the communication to merchants was often unclear and did not explain how payment device usage would help them get a loan of higher amount in the future. The reasons this product could not cater to customer expectations or improve customer experience as expected are:\r\n\r\n<strong>Loan structure:</strong> While the lender assured the merchants of a credit-build-up model, the merchants were keen to understand the exact qualifiers for the build-up process, i.e., number and/or value of transactions required to qualify for the next tranche of loans. Additionally, they wanted to know by what percentage the loan amount could grow through increased usage of digital transactions. None of this information was provided to merchants since the lender had not yet thought it through. The product’s value proposition stated in one line by the lender as ‘enhanced loan size for incremental usage of digital payments’ failed to gain the merchants’ trust.\r\n\r\n<strong>Single interface for credit and digital payments:</strong> During the CATALYST pilot, the lending company and the digital payment solution company used two separate applications to onboard customers. For the merchants who saw the two as a single product, it was important for the digital payment solution provider and the lending partner to integrate their solution into one single application for simplicity and usage. The existing process offered poor customer experience because filling out two applications is a time-consuming process.\r\n\r\n<strong>Large time lags:</strong> Loan disbursal followed a lengthy process, i.e., lead generation by field agents (CATALYST FoS team) from an initial interaction, followed by a calling exercise by the credit assessor and then a site verification. This long time period between initial contact and disbursement was a pain point. Additionally, there were delays in disbursing the card swipe machine. Partnering with an early stage startup for PoS machines led to a resource crunch, which resulted in operational delays. The time lag between initial lead generation and delivery of the machine ranged from 15-20 days which was too long a time to retain interest.\r\n\r\n<strong>High cost of on boarding:</strong> The loan offer had a customer onboarding cost plus GST that hiked up the existing rates of interest by 3 to 4 percent so the lending interest rate worked out to be around 30 percent annually. These nuanced details deterred many of the merchants to finally take up the loan despite having shown an initial interest in the loan product.\r\n\r\n<strong>Short tenure of the pilot:</strong> Lastly, one must note that three or four months is too short a time to launch and iterate on a product bundle that includes a loan repayment timeline of nine to 36 months. To understand access and usage of repeat loans, the pilot experiment should essentially be of a much longer tenure.[/vc_column_text][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#373b3c\" padding_top=\"75\" padding_bottom=\"75\" inline_style=\"font-style: normal;\"][vc_column][vc_row_inner][vc_column_inner][vc_custom_heading text=\"RECOMMENDATIONS\" font_container=\"tag:h2|font_size:26px|text_align:center|color:%23ffffff|line_height:32px\" google_fonts=\"font_family:Roboto%20Condensed%3A300%2C300italic%2Cregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal\" letter_spacing=\"\" el_class=\"normal-style \"][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#ffffff\"][vc_column][vc_row_inner equal_height=\"yes\"][vc_column_inner el_class=\"normal-style\"][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]<strong>Need for a local presence: </strong>An implementation challenge that needs to be addressed in order to iterate on the pilot experiment and help it succeed is decreasing the time lags between the first point of contact to in-person onboarding with the card swipe machine and the loan. To avoid such operational delays, it is advisable to work with a local company with a greater field presence than with a well-known company based out of another metropolis but with little field support, as was the case during this pilot. Otherwise, the card swipe company/loan company should partner with a channel partner that should be assigned locally to cover the high customer acquisition cost which must be incurred (by default) for wider reach and larger impact among the segment of merchants who are new to digital payment usage.\r\n\r\n<strong>Lower cost of product:</strong> If such loans could get priority sector lending status, obtaining funds would be easier for an NBFC, making access to credit easier and cheaper.\r\n\r\n<strong>Alternate digital payment solutions:</strong> Current credit products are more inclined towards PoS machine uptake and usage. However, given the rise in use of other digital payment modes such as Unified Payments Interface (UPI), e-wallets and other Aadhaar-based solutions could lead to faster and cheaper adoption among merchants.\r\n\r\n<strong>Simple product structure:</strong> As the pilot results suggest, clearly informing the merchants of the exact qualifying factors for incremental loans will help develop higher trust and better customer relationships for a credit-builder model.\r\n\r\n<strong>Provide digital training and awareness:</strong> Multiple field visits and available data on awareness of credit history or usage of digital payments suggest that small fixed store merchants need substantial handholding, training and awareness to understand fundamental financial concepts, the importance of formal loans, and use of credit history. The experiment results suggest that the small merchants would be better off with expert handholding support and training from their first point of contact, as they would be without operational delays. Further, digital training and awareness building must extend to consumers who shop at these merchant locations, since customer demand is a huge driver in merchant acceptance of digital solutions.[/vc_column_text][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#c9213b\" padding_top=\"75\" padding_bottom=\"75\" inline_style=\"font-style: normal;\"][vc_column][vc_row_inner][vc_column_inner][vc_custom_heading text=\"CONCLUSION\" font_container=\"tag:h2|font_size:26px|text_align:center|color:%23ffffff|line_height:32px\" google_fonts=\"font_family:Roboto%20Condensed%3A300%2C300italic%2Cregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal\" letter_spacing=\"\" el_class=\"normal-style \"][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#ffffff\"][vc_column][vc_row_inner equal_height=\"yes\"][vc_column_inner el_class=\"normal-style\"][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]Credit can potentially act as a hook for usage of digital solutions, provided the effective costs are lower compared to credit from informal sources, and access is speedier. Merchants also need to be provided information on the clear pathway on increase in credit as they continue using the digital facilities. Lenders and payment service providers must present a unified front and offer a superior customer experience to the merchants. Lastly, acceptance of new payment solutions requires end customers to be sensitized equally[/vc_column_text][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#ffffff\"][vc_column][vc_column_text letter_spacing=\"\"]\r\n<p style=\"text-align: left;\"><span style=\"color: #da092b;\">TECHNICAL WRITERS:</span> John Arun and Shubhranka Mondal</p>\r\n<p style=\"text-align: left;\"><span style=\"color: #da092b;\">ACKNOWLEDGEMENTS:</span> The authors would like to thank Jayshree Venkatesan for her expert advice, and CATALYST’s Feet on Street team, for their ground support</p>\r\n[/vc_column_text][kleo_button title=\"Download full report\" href=\"https://cashlesscatalyst.org/wp-content/uploads/2018/11/BB-Learning-Note.pdf\" target=\"_blank\" position=\"center\" size=\"lg\" type=\"boxed-icon\" special=\"no\" icon=\"download\" font_size=\"14px\" letter_spacing=\"\" el_class=\"pkirbtn\" icon_custom_background=\"#d11e3c\" icon_custom_text=\"#ffffff\"][/vc_column][/vc_row][vc_row el_id=\"footer_area\" text_align=\"center\" type=\"image\" bg_position_horizontal=\"center\" enable_parallax=\"false\" padding_top=\"50px\" padding_bottom=\"50px\" bg_image=\"7886\"][vc_column width=\"1/4\"][/vc_column][vc_column width=\"1/2\" offset=\"vc_col-lg-offset-0 vc_col-md-offset-0 vc_col-sm-offset-0\"][vc_single_image image=\"7888\" img_size=\"full\" alignment=\"center\"][vc_column_text text_color=\"#ffffff\" font_size=\"14px\" letter_spacing=\"\" css=\".vc_custom_1484826151396{margin-top: 35px !important;margin-bottom: 5px !important;padding-right: 20px !important;}\"]\r\n<p style=\"text-align: center;\">CATALYST is an initiative seeded by an alliance between the Government of India &amp; USAID, to expand digital payments and financial inclusion in India, especially for small merchants and low-income consumers.</p>\r\n[/vc_column_text][kleo_gap][vc_column_text letter_spacing=\"\" css=\".vc_custom_1484051069491{margin-bottom: 0px !important;}\"]\r\n<p style=\"text-align: center;\">[email-newsletter-plugin]</p>\r\n[/vc_column_text][kleo_icon icon=\"facebook\" href=\"https://www.facebook.com/CashlessCatalyst/\" target=\"_blank\" padding=\"15px\" icon_color=\"#ffffff\"][kleo_icon icon=\"linkedin\" href=\"https://www.linkedin.com/company/13221050?trk=tyah&amp;trkInfo=clickedVertical%3Acompany%2CclickedEntityId%3A13221050%2Cidx%3A2-1-2%2CtarId%3A1476420479247%2Ctas%3Acashless%20catalyst\" target=\"_blank\" padding=\"15px\" icon_color=\"#ffffff\"][kleo_icon icon=\"twitter\" href=\"https://twitter.com/cashlesscatalys\" target=\"_blank\" padding=\"15px\" icon_color=\"#ffffff\"][kleo_icon icon=\"youtube-play\" href=\"https://www.youtube.com/channel/UChuc38_PfawDOu44IfYS4lw\" target=\"_blank\" padding=\"15px\" icon_color=\"#ffffff\"][/vc_column][vc_column width=\"1/4\"][/vc_column][/vc_row]', 'DIGITAL LENDING FOR SMALL MERCHANTS: THE MISSING ROAD TO THE LAST MILE', '', 'inherit', 'closed', 'closed', '', '39421-revision-v1', '', '', '2018-11-20 09:14:03', '2018-11-20 09:14:03', '', 39421, 'https://cashlesscatalyst.org/media/39421-revision-v1/', 0, 'revision', '', 0),
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(39436, 20, '2018-11-20 09:15:16', '2018-11-20 09:15:16', '[vc_row equal_height=\"yes\" content_placement=\"middle\" type=\"image\" enable_parallax=\"false\" parallax_speed=\"0.4\" padding_top=\"110\" padding_bottom=\"0\" bg_image=\"39430\"][vc_column][kleo_gap size=\"100px\"][vc_row_inner][vc_column_inner width=\"1/6\"][/vc_column_inner][vc_column_inner width=\"2/3\"][vc_custom_heading text=\"DIGITAL LENDING FOR SMALL MERCHANTS: THE MISSING ROAD TO THE LAST MILE\" font_container=\"tag:h2|font_size:48px|text_align:center|color:%23ffffff|line_height:54px\" google_fonts=\"font_family:Roboto%20Condensed%3A300%2C300italic%2Cregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal\" letter_spacing=\"\"][/vc_column_inner][vc_column_inner width=\"1/6\"][/vc_column_inner][/vc_row_inner][kleo_gap size=\"140px\"][kleo_gap size=\"50px\"][/vc_column][/vc_row][vc_row equal_height=\"yes\" content_placement=\"middle\" padding_bottom=\"0\"][vc_column width=\"1/2\"][/vc_column][vc_column width=\"1/2\"][vc_row_inner equal_height=\"yes\" content_placement=\"middle\"][vc_column_inner width=\"5/12\"][/vc_column_inner][vc_column_inner width=\"1/3\" css=\".vc_custom_1488531456733{padding-right: 0px !important;}\"][vc_column_text letter_spacing=\"\"][addtoany][/vc_column_text][/vc_column_inner][vc_column_inner width=\"1/4\" css=\".vc_custom_1488531444909{padding-left: 0px !important;}\"][kleo_button title=\"Print this page\" href=\"https://cashlesscatalyst.org/wp-content/uploads/2018/11/CH-Learning-Note.pdf\" target=\"_blank\" style=\"custom\" position=\"left\" size=\"lg\" special=\"no\" border=\"no\" icon=\"print\" font_size=\"16px\" letter_spacing=\"\" el_class=\"grey-icon\" custom_text=\"#d11e3c\"][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#ffffff\"][vc_column][vc_custom_heading text=\"BACKGROUND\" font_container=\"tag:h2|font_size:26px|text_align:left|color:%23383b3b|line_height:32px\" google_fonts=\"font_family:Roboto%20Condensed%3A300%2C300italic%2Cregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal\" letter_spacing=\"\"][vc_row_inner css=\".vc_custom_1537456868816{margin-bottom: 35px !important;}\"][vc_column_inner][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]Ninety-three percent of India’s US$670 billion retail market continues to be unorganized, operating through mom-and-pop, kirana or standalone stores.<sup>1</sup> According to a recent Boston Consulting GroupConfederation of Indian Industry (BCG-CII) report, this sector is projected to double from a US$1.1-1.2 trillion market by 2020, driven by a 70 percent rise in income levels and a 100 million addition in the number of youth entering the labor force.<sup>2</sup> However, despite growth projections, there are several factors that hinder the growth of these informal enterprises which provide livelihood options to nearly 111 million workers,<sup>3</sup> thus forming an important engine for India’s economic growth.\r\n\r\nThe lack of proper infrastructure and technical skills notwithstanding, a pressing factor hindering attainment of scale by informal enterprises is the lack of credit from formal sources at affordable rates of interest. According to an International Finance Corporation (IFC) report, the credit gap for informal enterprises within the Micro, Small and Medium Enterprises (MSME) sector in India was estimated at US$418 billion in 2012-13.<sup>4</sup> Underlying the gap in accessing formal credit is the story of missing applicant credit histories or other parameters of credit worthiness used in traditional appraisal processes by lenders.<sup>5</sup> Under such circumstances, most enterprises resort to informal lenders, despite the high interest rates charged. Reluctance to adopt digital payments further exacerbates this situation, since it is near impossible to convince lenders of credit worthiness in the face of missing information on credit and other transactional histories. Lack of awareness, low capability and unwillingness to try new technologies for fear of failure are some reasons that contribute to this wariness and create a vicious cycle that has been hard to break.\r\n\r\nCATALYST, in its drive to explore the digital readiness of this segment, hypothesized that providing access to a small amount of credit at lower rates could act as a hook for digital payment adoption and usage, which in turn could trigger a positive spiral to access higher amounts of credit. In a preliminary study to understand the financial behavior and borrowing pattern of small businesses, CATALYST conducted a Credit Needs Assessment Survey (CNAS) where 1,140 small fixed store merchants in Jaipur were interviewed in September 2017. The survey showed that 69 percent of the merchants sourced their credit from informal sources such as friends, family and local moneylenders. Merchants expressed dissatisfaction with local moneylenders because they charged an interest rate of over 30 percent per month. But they still tend to prefer informal lenders over formal ones because of ease of access, no requirement of lengthy documentation, and speedy processes[/vc_column_text][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]Armed with these insights, CATALYST launched the Credit as a Hook pilot in Jaipur in June 2018 for a select set of merchants. The pilot aimed to provide incremental loans through a starter-builder model starting with a small loan that would increase based on usage of digital payments, where the payment footprint would help merchants build their formal credit history. CATALYST hypothesized that, for the  merchants, this would result in larger loans over a period of time at better rates of interest. For lenders, the presence of a digital footprint would provide the means to underwrite loans better and allow them to acquire new customers (i.e., a set of small merchants that was hitherto unserved by formal financial institutions). The initial pre-assessment survey carried out prior to the product launch, CATALYST’s CNAS report, revealed that 92 percent merchants contacted during the survey was aware of digital payment solutions. Of these, 53.5 percent was interested in availing credit through a digital platform with an expectation of quick processing time.\r\n\r\nThe first challenge that CATALYST faced was to convince lenders to provide an initial loan, albeit small, in the absence of a digital payment history. Traditionally, the route to access credit has been via an established digital payment footprint because of the inherent difference in the way payment and credit operates. Payment systems work better when more people use them, and therefore are designed to be more inclusive in nature. Credit, on the other hand, is designed to hedge excessive risks, and therefore is harder to establish as the first step to financial inclusion of the underserved market segment with no credit history.\r\n\r\nA lending model is predicated on profits from taking calculated risks. So, lenders seek to build strong relationships with their customers and get a broad base of information to calculate the exact underlying risk. On the other hand, payment companies are inherently less dependent on understanding customer risk. Payment businesses therefore tend to be more transactional and less relationship-based than lending ones. The quality or depth of individual customer relationships matters less. Instead, the number and breadth of customers and their networks matter more.<sup>6</sup>\r\n\r\nUnderstanding these basic functions of payments and credit is critical to exploring how the two can be linked. Technology and access to customer data play a huge role in leveraging the payment and credit lens to achieve financial inclusion.\r\n\r\nThe CATALYST pilot aimed at precisely this understanding. How can we urge merchants to start using digital solutions, which in turn can help them access credit at better terms?\r\n\r\nWhile the merits of credit are known, research is beginning to show the advantages of digital credit as well. Early evidence from studying M-Shawri<sup>7</sup> in Kenya has shown that uptake of digital loans has helped improve household resilience against shocks and increased the propensity of families to spend on welfare activities such as health and education.<sup>8</sup> While we have little evidence available from similar experiments in India, we expect the positive benefits would be similar.\r\n\r\nWe hope that the following results of CATALYST’s Credit as a Hook pilot reveal the opportunities and challenges of launching a digital payment and loan product bundle for underserved informal sector merchants in India.[/vc_column_text][vc_column_text text_color=\"#757c74\" font_size=\"14px\" letter_spacing=\"\"]<em><sup>1</sup>India’s $670 billion retail market is heading for a dream run, April 16, 2018, Quartz.</em>\r\n\r\n<em><sup>2</sup>Retail Transformation: Changing Your Performance Trajectory, BCG-CII National Retail Summit Report, 2016.</em>\r\n\r\n<em><sup>3</sup>Found: 111 million MSME workers in India as data rules changes, Livemint, November 22, 2017.</em>\r\n\r\n<em><sup>4</sup>MSME Finance Gap, Assessment of the shortfalls and opportunities in financing micro, small and medium enterprises in emerging markets, IFC, 2017.</em>\r\n\r\n<em><sup>5</sup>Research by Entrepreneurial Finance Lab, retrieved from The Hindu Business Line, ‘There is a credit gap of 56% in the MSME sector’, July 2, 2014</em>\r\n\r\n<em><sup>6</sup>Buckley, R. and I..Mas. The coming of age of digital payment as a field of expertise, Journal of Law Technology and Policy, June 2016, Vol.2016.</em>\r\n\r\n<em><sup>7</sup>M-Shwari is a paperless banking service offered through M-Pesa. M-Shwari bank accounts are opened and maintained through mobile phones.</em>\r\n\r\n<em><sup>8</sup>Bharadwaj, P., W. Jack and T. Suri. Can Digital Loans Deliver: Take Up and Impact of Digital Loans in Kenya, 2018 (Working Paper, draft received on special request from T. Suri).</em>[/vc_column_text][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"image\" bg_position_horizontal=\"center\" enable_parallax=\"false\" parallax_speed=\"0.4\" padding_top=\"150\" padding_bottom=\"150\" bg_image=\"39431\"][vc_column][vc_custom_heading text=\"INSIGHTS FROM THE PILOT\" font_container=\"tag:h2|font_size:26px|text_align:center|color:%23ffffff|line_height:32px\" google_fonts=\"font_family:Roboto%20Condensed%3A300%2C300italic%2Cregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal\" letter_spacing=\"\"][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#ffffff\"][vc_column][vc_row_inner][vc_column_inner][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]Testing the hypothesis involved bringing together a payment provider and a lender — a role that was played by CATALYST. For the pilot, CATALYST partnered with Nupay, a Point of Sale (PoS) device or card swipe machine provider and an early stage startup, and Capital First, a Non Banking Financial Company (NBFC), which agreed to provide term loans to fixed store merchants in Jaipur. The combination of a payment device and loan was offered as a bundle, with the intention of testing the extent to which credit can act as a ‘hook’ to adopt and use digital payments. This combination was created for the purpose of the pilot alone since lenders are unclear of the risks involved in offering a small amount of credit, no matter how small, before they can establish credit history based on transactions on the device provided. Since the combination of partners was arranged by CATALYST for the pilot, CATALYST also had to provide a set of Feet on Street (FoS) for on-the-ground support to roll out the services. The FoS team, trained by CATALYST, provided support in marketing and customer acquisition.\r\n\r\n<strong>Product bundle: Capital First and Nupay, a term loan with a card swipe machine</strong>\r\n\r\nProduct bundle details: Capital First (the lender) agreed to provide loans of a ticket size of INR 25,000 to INR 5 lakh at an interest rate of 18 percent to 24 percent annually for a tenure of nine months to 36 months, depending on the ticket size and repayment capacity.\r\n\r\nNupay’s card swipe machine had a monthly rental of INR 350 (~ US$5) plus 18 percent Goods and Service Tax (GST), which was also to be paid by merchants. The lender agreed that merchants would be considered for an incremental loan based on their repayment history observed in the first tranche of the loan, and their digital transaction footprint.\r\n\r\n&nbsp;\r\n\r\n<strong>Project roll-out and findings: digital payment adoption vs. non-adoption</strong>\r\n\r\nDuring the pilot, CATALYST reached out to 409 fixed store merchants across six major markets in Jaipur (Shastri Nagar, Sodala, Durgapura, Khatirpura, Jhotwara and Bani Park).9 These stores have been in business for an average of 10 years and had a median monthly revenue of INR 45,000. Most stores (99 percent) were owned by men; 87 percent was sole proprietorships while a smaller group (13 percent) was managed jointly with other family members. Sixty-five of them were already using a PoS or a card swipe machine and the remaining 344 merchants were given a demo on using a new PoS machine with the help of CATALYST’s FoS team.[/vc_column_text][vc_single_image image=\"39426\" img_size=\"full\" alignment=\"center\"][vc_column_text text_color=\"#757c74\" font_size=\"14px\" letter_spacing=\"\"]<em><sup>9</sup>This data set is separate from the earlier CNAS data. With a time lag of eight months, it is often difficult to work with earlier data sets. So, 490 new fixed stores were chosen from six new markets in Jaipur</em>[/vc_column_text][/vc_column_inner][/vc_row_inner][vc_row_inner css=\".vc_custom_1537937440359{padding-top: 30px !important;}\"][vc_column_inner][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]<strong>Key results from the experiment were:</strong>\r\n<ul>\r\n 	<li>There were eight fixed store merchants who had never used a card swipe machine but eventually adopted digital payment solutions after being trained on card swipe usage by the CATALYST FoS team.</li>\r\n 	<li>The primary reason for adoption was that it would allow them to service a broader customer segment that used (debit/credit) cards to make payments. In other words, the ability to serve a specific customer segment that was familiar with digital solutions was a key driver. This would also result in new customer acquisition over a period of time.</li>\r\n 	<li>Among the merchants who refused to use or adopt a PoS machine, the dominant reason for nonadoption was the absence of customer demand (62 percent, Figure 1). These merchants were unwilling to act as enablers to train customers in using a new digital solution. If the customers asked for the service, they were happy to provide it.</li>\r\n 	<li>The remaining 10 percent (Figure 1) reported the inherent cash stickiness of their business as a major deterrent. Another 2 percent (Figure 1) cited the cost of the machine as a major barrier to accepting digital payments.</li>\r\n</ul>\r\n[/vc_column_text][vc_single_image image=\"39433\" img_size=\"full\" alignment=\"center\"][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]<em>Note: From top right: existing loan usage, source of loan, purpose of loans and awareness about CIBIL scores of 18 merchants who agreed to reveal information about a prior loan.</em>[/vc_column_text][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]While most merchants who were part of the pilot preferred not to share their current loan practices, those who revealed that they had availed a loan (18 out of 409) had done so from a formal source. Fourteen of the 18 were also aware of their credit score (CIBIL) and its related impact on their credit eligibility.\r\n<ul>\r\n 	<li>Only 18 fixed store merchants (4 percent) with an average monthly revenue of INR 90,000 (double the population median of INR 45,000) reported that they had availed of a loan in the past.</li>\r\n 	<li>The average tenure of the loans was two to three years; 17 merchants sourced the loan from banks and one from a Micro Finance Institution (MFI);</li>\r\n 	<li>The purpose for which loans were taken varied from business expansion (10 merchants), household requirements (four merchants) to health emergencies (one merchant). Utility loans such as for two wheelers (three merchants) formed another major category of reasons for taking loans; and</li>\r\n 	<li>The ticket size of the loans taken by the merchants varied from INR 40,000 to INR 9 lakhs.</li>\r\n</ul>\r\n[/vc_column_text][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#c9213b\" padding_top=\"75\" padding_bottom=\"75\" inline_style=\"font-style: normal;\"][vc_column][vc_row_inner][vc_column_inner][vc_custom_heading text=\"MERCHANTS’ PERCEPTION ON THE BUNDLED PRODUCT\r\n\" font_container=\"tag:h2|font_size:26px|text_align:center|color:%23ffffff|line_height:32px\" google_fonts=\"font_family:Roboto%20Condensed%3A300%2C300italic%2Cregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal\" letter_spacing=\"\" el_class=\"normal-style \"][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#ffffff\" inline_style=\"font-style: normal;\"][vc_column][vc_row_inner][vc_column_inner el_class=\"normal-style \"][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]Perceived vs. real interest in loan: When offered the bundled product of payment device and credit, 25 merchants showed initial interest solely in accessing the loan during their first interaction with the CATALYST FoS team. However, 24 had changed their minds when the lender’s agent approached them after a week, perhaps because merchants are always interested in understanding options for credit but may not avail of it even if they express an interest initially.\r\n\r\nOne merchant who agreed to try the combination of a PoS device and loan had a fixed cloth store in Shastri Nagar market. He wanted a loan of INR 1-2 lakhs. Unfortunately, the request was denied since his residence was located outside the serviceable area set by the lender. This fact was discovered after the processing was done, and resulted in a poor customer experience for the merchant.\r\n\r\n<strong>Why was there a low uptake? </strong>\r\n\r\nThe experiment shows that while there was individual adoption of the card swipe machines, there was little uptake of the bundled product. Technology did seamlessly bind the products together but the communication to merchants was often unclear and did not explain how payment device usage would help them get a loan of higher amount in the future. The reasons this product could not cater to customer expectations or improve customer experience as expected are:\r\n\r\n<strong>Loan structure:</strong> While the lender assured the merchants of a credit-build-up model, the merchants were keen to understand the exact qualifiers for the build-up process, i.e., number and/or value of transactions required to qualify for the next tranche of loans. Additionally, they wanted to know by what percentage the loan amount could grow through increased usage of digital transactions. None of this information was provided to merchants since the lender had not yet thought it through. The product’s value proposition stated in one line by the lender as ‘enhanced loan size for incremental usage of digital payments’ failed to gain the merchants’ trust.\r\n\r\n<strong>Single interface for credit and digital payments:</strong> During the CATALYST pilot, the lending company and the digital payment solution company used two separate applications to onboard customers. For the merchants who saw the two as a single product, it was important for the digital payment solution provider and the lending partner to integrate their solution into one single application for simplicity and usage. The existing process offered poor customer experience because filling out two applications is a time-consuming process.\r\n\r\n<strong>Large time lags:</strong> Loan disbursal followed a lengthy process, i.e., lead generation by field agents (CATALYST FoS team) from an initial interaction, followed by a calling exercise by the credit assessor and then a site verification. This long time period between initial contact and disbursement was a pain point. Additionally, there were delays in disbursing the card swipe machine. Partnering with an early stage startup for PoS machines led to a resource crunch, which resulted in operational delays. The time lag between initial lead generation and delivery of the machine ranged from 15-20 days which was too long a time to retain interest.\r\n\r\n<strong>High cost of on boarding:</strong> The loan offer had a customer onboarding cost plus GST that hiked up the existing rates of interest by 3 to 4 percent so the lending interest rate worked out to be around 30 percent annually. These nuanced details deterred many of the merchants to finally take up the loan despite having shown an initial interest in the loan product.\r\n\r\n<strong>Short tenure of the pilot:</strong> Lastly, one must note that three or four months is too short a time to launch and iterate on a product bundle that includes a loan repayment timeline of nine to 36 months. To understand access and usage of repeat loans, the pilot experiment should essentially be of a much longer tenure.[/vc_column_text][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#373b3c\" padding_top=\"75\" padding_bottom=\"75\" inline_style=\"font-style: normal;\"][vc_column][vc_row_inner][vc_column_inner][vc_custom_heading text=\"RECOMMENDATIONS\" font_container=\"tag:h2|font_size:26px|text_align:center|color:%23ffffff|line_height:32px\" google_fonts=\"font_family:Roboto%20Condensed%3A300%2C300italic%2Cregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal\" letter_spacing=\"\" el_class=\"normal-style \"][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#ffffff\"][vc_column][vc_row_inner equal_height=\"yes\"][vc_column_inner el_class=\"normal-style\"][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]<strong>Need for a local presence: </strong>An implementation challenge that needs to be addressed in order to iterate on the pilot experiment and help it succeed is decreasing the time lags between the first point of contact to in-person onboarding with the card swipe machine and the loan. To avoid such operational delays, it is advisable to work with a local company with a greater field presence than with a well-known company based out of another metropolis but with little field support, as was the case during this pilot. Otherwise, the card swipe company/loan company should partner with a channel partner that should be assigned locally to cover the high customer acquisition cost which must be incurred (by default) for wider reach and larger impact among the segment of merchants who are new to digital payment usage.\r\n\r\n<strong>Lower cost of product:</strong> If such loans could get priority sector lending status, obtaining funds would be easier for an NBFC, making access to credit easier and cheaper.\r\n\r\n<strong>Alternate digital payment solutions:</strong> Current credit products are more inclined towards PoS machine uptake and usage. However, given the rise in use of other digital payment modes such as Unified Payments Interface (UPI), e-wallets and other Aadhaar-based solutions could lead to faster and cheaper adoption among merchants.\r\n\r\n<strong>Simple product structure:</strong> As the pilot results suggest, clearly informing the merchants of the exact qualifying factors for incremental loans will help develop higher trust and better customer relationships for a credit-builder model.\r\n\r\n<strong>Provide digital training and awareness:</strong> Multiple field visits and available data on awareness of credit history or usage of digital payments suggest that small fixed store merchants need substantial handholding, training and awareness to understand fundamental financial concepts, the importance of formal loans, and use of credit history. The experiment results suggest that the small merchants would be better off with expert handholding support and training from their first point of contact, as they would be without operational delays. Further, digital training and awareness building must extend to consumers who shop at these merchant locations, since customer demand is a huge driver in merchant acceptance of digital solutions.[/vc_column_text][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#c9213b\" padding_top=\"75\" padding_bottom=\"75\" inline_style=\"font-style: normal;\"][vc_column][vc_row_inner][vc_column_inner][vc_custom_heading text=\"CONCLUSION\" font_container=\"tag:h2|font_size:26px|text_align:center|color:%23ffffff|line_height:32px\" google_fonts=\"font_family:Roboto%20Condensed%3A300%2C300italic%2Cregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal\" letter_spacing=\"\" el_class=\"normal-style \"][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#ffffff\"][vc_column][vc_row_inner equal_height=\"yes\"][vc_column_inner el_class=\"normal-style\"][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]Credit can potentially act as a hook for usage of digital solutions, provided the effective costs are lower compared to credit from informal sources, and access is speedier. Merchants also need to be provided information on the clear pathway on increase in credit as they continue using the digital facilities. Lenders and payment service providers must present a unified front and offer a superior customer experience to the merchants. Lastly, acceptance of new payment solutions requires end customers to be sensitized equally[/vc_column_text][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#ffffff\"][vc_column][vc_column_text letter_spacing=\"\"]\r\n<p style=\"text-align: left;\"><span style=\"color: #da092b;\">TECHNICAL WRITERS:</span> John Arun and Shubhranka Mondal</p>\r\n<p style=\"text-align: left;\"><span style=\"color: #da092b;\">ACKNOWLEDGEMENTS:</span> The authors would like to thank Jayshree Venkatesan for her expert advice, and CATALYST’s Feet on Street team, for their ground support</p>\r\n[/vc_column_text][kleo_button title=\"Download full report\" href=\"https://cashlesscatalyst.org/wp-content/uploads/2018/11/CH-Learning-Note.pdf\" target=\"_blank\" position=\"center\" size=\"lg\" type=\"boxed-icon\" special=\"no\" icon=\"download\" font_size=\"14px\" letter_spacing=\"\" el_class=\"pkirbtn\" icon_custom_background=\"#d11e3c\" icon_custom_text=\"#ffffff\"][/vc_column][/vc_row][vc_row el_id=\"footer_area\" text_align=\"center\" type=\"image\" bg_position_horizontal=\"center\" enable_parallax=\"false\" padding_top=\"50px\" padding_bottom=\"50px\" bg_image=\"7886\"][vc_column width=\"1/4\"][/vc_column][vc_column width=\"1/2\" offset=\"vc_col-lg-offset-0 vc_col-md-offset-0 vc_col-sm-offset-0\"][vc_single_image image=\"7888\" img_size=\"full\" alignment=\"center\"][vc_column_text text_color=\"#ffffff\" font_size=\"14px\" letter_spacing=\"\" css=\".vc_custom_1484826151396{margin-top: 35px !important;margin-bottom: 5px !important;padding-right: 20px !important;}\"]\r\n<p style=\"text-align: center;\">CATALYST is an initiative seeded by an alliance between the Government of India &amp; USAID, to expand digital payments and financial inclusion in India, especially for small merchants and low-income consumers.</p>\r\n[/vc_column_text][kleo_gap][vc_column_text letter_spacing=\"\" css=\".vc_custom_1484051069491{margin-bottom: 0px !important;}\"]\r\n<p style=\"text-align: center;\">[email-newsletter-plugin]</p>\r\n[/vc_column_text][kleo_icon icon=\"facebook\" href=\"https://www.facebook.com/CashlessCatalyst/\" target=\"_blank\" padding=\"15px\" icon_color=\"#ffffff\"][kleo_icon icon=\"linkedin\" href=\"https://www.linkedin.com/company/13221050?trk=tyah&amp;trkInfo=clickedVertical%3Acompany%2CclickedEntityId%3A13221050%2Cidx%3A2-1-2%2CtarId%3A1476420479247%2Ctas%3Acashless%20catalyst\" target=\"_blank\" padding=\"15px\" icon_color=\"#ffffff\"][kleo_icon icon=\"twitter\" href=\"https://twitter.com/cashlesscatalys\" target=\"_blank\" padding=\"15px\" icon_color=\"#ffffff\"][kleo_icon icon=\"youtube-play\" href=\"https://www.youtube.com/channel/UChuc38_PfawDOu44IfYS4lw\" target=\"_blank\" padding=\"15px\" icon_color=\"#ffffff\"][/vc_column][vc_column width=\"1/4\"][/vc_column][/vc_row]', 'DIGITAL LENDING FOR SMALL MERCHANTS: THE MISSING ROAD TO THE LAST MILE', '', 'inherit', 'closed', 'closed', '', '39421-revision-v1', '', '', '2018-11-20 09:15:16', '2018-11-20 09:15:16', '', 39421, 'https://cashlesscatalyst.org/media/39421-revision-v1/', 0, 'revision', '', 0);
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(39438, 20, '2018-11-20 09:17:54', '2018-11-20 09:17:54', '[vc_row equal_height=\"yes\" content_placement=\"middle\" type=\"image\" enable_parallax=\"false\" parallax_speed=\"0.4\" padding_top=\"110\" padding_bottom=\"0\" bg_image=\"39430\"][vc_column][kleo_gap size=\"100px\"][vc_row_inner][vc_column_inner width=\"1/6\"][/vc_column_inner][vc_column_inner width=\"2/3\"][vc_custom_heading text=\"DIGITAL LENDING FOR SMALL MERCHANTS: THE MISSING ROAD TO THE LAST MILE\" font_container=\"tag:h2|font_size:48px|text_align:center|color:%23ffffff|line_height:54px\" google_fonts=\"font_family:Roboto%20Condensed%3A300%2C300italic%2Cregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal\" letter_spacing=\"\"][/vc_column_inner][vc_column_inner width=\"1/6\"][/vc_column_inner][/vc_row_inner][kleo_gap size=\"140px\"][kleo_gap size=\"50px\"][/vc_column][/vc_row][vc_row equal_height=\"yes\" content_placement=\"middle\" padding_bottom=\"0\"][vc_column width=\"1/2\"][/vc_column][vc_column width=\"1/2\"][vc_row_inner equal_height=\"yes\" content_placement=\"middle\"][vc_column_inner width=\"5/12\"][/vc_column_inner][vc_column_inner width=\"1/3\" css=\".vc_custom_1488531456733{padding-right: 0px !important;}\"][vc_column_text letter_spacing=\"\"][addtoany][/vc_column_text][/vc_column_inner][vc_column_inner width=\"1/4\" css=\".vc_custom_1488531444909{padding-left: 0px !important;}\"][kleo_button title=\"Print this page\" href=\"https://cashlesscatalyst.org/wp-content/uploads/2018/11/CH-Learning-Note.pdf\" target=\"_blank\" style=\"custom\" position=\"left\" size=\"lg\" special=\"no\" border=\"no\" icon=\"print\" font_size=\"16px\" letter_spacing=\"\" el_class=\"grey-icon\" custom_text=\"#d11e3c\"][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#ffffff\"][vc_column][vc_custom_heading text=\"BACKGROUND\" font_container=\"tag:h2|font_size:26px|text_align:left|color:%23383b3b|line_height:32px\" google_fonts=\"font_family:Roboto%20Condensed%3A300%2C300italic%2Cregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal\" letter_spacing=\"\"][vc_row_inner css=\".vc_custom_1537456868816{margin-bottom: 35px !important;}\"][vc_column_inner][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]Ninety-three percent of India’s US$670 billion retail market continues to be unorganized, operating through mom-and-pop, kirana or standalone stores.<sup>1</sup> According to a recent Boston Consulting GroupConfederation of Indian Industry (BCG-CII) report, this sector is projected to double from a US$1.1-1.2 trillion market by 2020, driven by a 70 percent rise in income levels and a 100 million addition in the number of youth entering the labor force.<sup>2</sup> However, despite growth projections, there are several factors that hinder the growth of these informal enterprises which provide livelihood options to nearly 111 million workers,<sup>3</sup> thus forming an important engine for India’s economic growth.\r\n\r\nThe lack of proper infrastructure and technical skills notwithstanding, a pressing factor hindering attainment of scale by informal enterprises is the lack of credit from formal sources at affordable rates of interest. According to an International Finance Corporation (IFC) report, the credit gap for informal enterprises within the Micro, Small and Medium Enterprises (MSME) sector in India was estimated at US$418 billion in 2012-13.<sup>4</sup> Underlying the gap in accessing formal credit is the story of missing applicant credit histories or other parameters of credit worthiness used in traditional appraisal processes by lenders.<sup>5</sup> Under such circumstances, most enterprises resort to informal lenders, despite the high interest rates charged. Reluctance to adopt digital payments further exacerbates this situation, since it is near impossible to convince lenders of credit worthiness in the face of missing information on credit and other transactional histories. Lack of awareness, low capability and unwillingness to try new technologies for fear of failure are some reasons that contribute to this wariness and create a vicious cycle that has been hard to break.\r\n\r\nCATALYST, in its drive to explore the digital readiness of this segment, hypothesized that providing access to a small amount of credit at lower rates could act as a hook for digital payment adoption and usage, which in turn could trigger a positive spiral to access higher amounts of credit. In a preliminary study to understand the financial behavior and borrowing pattern of small businesses, CATALYST conducted a Credit Needs Assessment Survey (CNAS) where 1,140 small fixed store merchants in Jaipur were interviewed in September 2017. The survey showed that 69 percent of the merchants sourced their credit from informal sources such as friends, family and local moneylenders. Merchants expressed dissatisfaction with local moneylenders because they charged an interest rate of over 30 percent per month. But they still tend to prefer informal lenders over formal ones because of ease of access, no requirement of lengthy documentation, and speedy processes.\r\n\r\nArmed with these insights, CATALYST launched the Credit as a Hook pilot in Jaipur in June 2018 for a select set of merchants. The pilot aimed to provide incremental loans through a starter-builder model starting with a small loan that would increase based on usage of digital payments, where the payment footprint would help merchants build their formal credit history. CATALYST hypothesized that, for the  merchants, this would result in larger loans over a period of time at better rates of interest. For lenders, the presence of a digital footprint would provide the means to underwrite loans better and allow them to acquire new customers (i.e., a set of small merchants that was hitherto unserved by formal financial institutions). The initial pre-assessment survey carried out prior to the product launch, CATALYST’s CNAS report, revealed that 92 percent merchants contacted during the survey was aware of digital payment solutions. Of these, 53.5 percent was interested in availing credit through a digital platform with an expectation of quick processing time.\r\n\r\nThe first challenge that CATALYST faced was to convince lenders to provide an initial loan, albeit small, in the absence of a digital payment history. Traditionally, the route to access credit has been via an established digital payment footprint because of the inherent difference in the way payment and credit operates. Payment systems work better when more people use them, and therefore are designed to be more inclusive in nature. Credit, on the other hand, is designed to hedge excessive risks, and therefore is harder to establish as the first step to financial inclusion of the underserved market segment with no credit history.\r\n\r\nA lending model is predicated on profits from taking calculated risks. So, lenders seek to build strong relationships with their customers and get a broad base of information to calculate the exact underlying risk. On the other hand, payment companies are inherently less dependent on understanding customer risk. Payment businesses therefore tend to be more transactional and less relationship-based than lending ones. The quality or depth of individual customer relationships matters less. Instead, the number and breadth of customers and their networks matter more.<sup>6</sup>\r\n\r\nUnderstanding these basic functions of payments and credit is critical to exploring how the two can be linked. Technology and access to customer data play a huge role in leveraging the payment and credit lens to achieve financial inclusion.\r\n\r\nThe CATALYST pilot aimed at precisely this understanding. How can we urge merchants to start using digital solutions, which in turn can help them access credit at better terms?\r\n\r\nWhile the merits of credit are known, research is beginning to show the advantages of digital credit as well. Early evidence from studying M-Shawri<sup>7</sup> in Kenya has shown that uptake of digital loans has helped improve household resilience against shocks and increased the propensity of families to spend on welfare activities such as health and education.<sup>8</sup> While we have little evidence available from similar experiments in India, we expect the positive benefits would be similar.\r\n\r\nWe hope that the following results of CATALYST’s Credit as a Hook pilot reveal the opportunities and challenges of launching a digital payment and loan product bundle for underserved informal sector merchants in India.[/vc_column_text][vc_column_text text_color=\"#757c74\" font_size=\"14px\" letter_spacing=\"\"]<em><sup>1</sup>India’s $670 billion retail market is heading for a dream run, April 16, 2018, Quartz.</em>\r\n\r\n<em><sup>2</sup>Retail Transformation: Changing Your Performance Trajectory, BCG-CII National Retail Summit Report, 2016.</em>\r\n\r\n<em><sup>3</sup>Found: 111 million MSME workers in India as data rules changes, Livemint, November 22, 2017.</em>\r\n\r\n<em><sup>4</sup>MSME Finance Gap, Assessment of the shortfalls and opportunities in financing micro, small and medium enterprises in emerging markets, IFC, 2017.</em>\r\n\r\n<em><sup>5</sup>Research by Entrepreneurial Finance Lab, retrieved from The Hindu Business Line, ‘There is a credit gap of 56% in the MSME sector’, July 2, 2014</em>\r\n\r\n<em><sup>6</sup>Buckley, R. and I..Mas. The coming of age of digital payment as a field of expertise, Journal of Law Technology and Policy, June 2016, Vol.2016.</em>\r\n\r\n<em><sup>7</sup>M-Shwari is a paperless banking service offered through M-Pesa. M-Shwari bank accounts are opened and maintained through mobile phones.</em>\r\n\r\n<em><sup>8</sup>Bharadwaj, P., W. Jack and T. Suri. Can Digital Loans Deliver: Take Up and Impact of Digital Loans in Kenya, 2018 (Working Paper, draft received on special request from T. Suri).</em>[/vc_column_text][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"image\" bg_position_horizontal=\"center\" enable_parallax=\"false\" parallax_speed=\"0.4\" padding_top=\"150\" padding_bottom=\"150\" bg_image=\"39431\"][vc_column][vc_custom_heading text=\"INSIGHTS FROM THE PILOT\" font_container=\"tag:h2|font_size:26px|text_align:center|color:%23ffffff|line_height:32px\" google_fonts=\"font_family:Roboto%20Condensed%3A300%2C300italic%2Cregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal\" letter_spacing=\"\"][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#ffffff\"][vc_column][vc_row_inner][vc_column_inner][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]Testing the hypothesis involved bringing together a payment provider and a lender — a role that was played by CATALYST. For the pilot, CATALYST partnered with Nupay, a Point of Sale (PoS) device or card swipe machine provider and an early stage startup, and Capital First, a Non Banking Financial Company (NBFC), which agreed to provide term loans to fixed store merchants in Jaipur. The combination of a payment device and loan was offered as a bundle, with the intention of testing the extent to which credit can act as a ‘hook’ to adopt and use digital payments. This combination was created for the purpose of the pilot alone since lenders are unclear of the risks involved in offering a small amount of credit, no matter how small, before they can establish credit history based on transactions on the device provided. Since the combination of partners was arranged by CATALYST for the pilot, CATALYST also had to provide a set of Feet on Street (FoS) for on-the-ground support to roll out the services. The FoS team, trained by CATALYST, provided support in marketing and customer acquisition.\r\n\r\n&nbsp;\r\n\r\n<strong>Product bundle: Capital First and Nupay, a term loan with a card swipe machine</strong>\r\n\r\nProduct bundle details: Capital First (the lender) agreed to provide loans of a ticket size of INR 25,000 to INR 5 lakh at an interest rate of 18 percent to 24 percent annually for a tenure of nine months to 36 months, depending on the ticket size and repayment capacity.\r\n\r\nNupay’s card swipe machine had a monthly rental of INR 350 (~ US$5) plus 18 percent Goods and Service Tax (GST), which was also to be paid by merchants. The lender agreed that merchants would be considered for an incremental loan based on their repayment history observed in the first tranche of the loan, and their digital transaction footprint.\r\n\r\n&nbsp;\r\n\r\n<strong>Project roll-out and findings: digital payment adoption vs. non-adoption</strong>\r\n\r\nDuring the pilot, CATALYST reached out to 409 fixed store merchants across six major markets in Jaipur (Shastri Nagar, Sodala, Durgapura, Khatirpura, Jhotwara and Bani Park).9 These stores have been in business for an average of 10 years and had a median monthly revenue of INR 45,000. Most stores (99 percent) were owned by men; 87 percent was sole proprietorships while a smaller group (13 percent) was managed jointly with other family members. Sixty-five of them were already using a PoS or a card swipe machine and the remaining 344 merchants were given a demo on using a new PoS machine with the help of CATALYST’s FoS team.[/vc_column_text][vc_single_image image=\"39426\" img_size=\"full\" alignment=\"center\"][vc_column_text text_color=\"#757c74\" font_size=\"14px\" letter_spacing=\"\"]<em><sup>9</sup>This data set is separate from the earlier CNAS data. With a time lag of eight months, it is often difficult to work with earlier data sets. So, 490 new fixed stores were chosen from six new markets in Jaipur</em>[/vc_column_text][/vc_column_inner][/vc_row_inner][vc_row_inner css=\".vc_custom_1537937440359{padding-top: 30px !important;}\"][vc_column_inner][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]<strong>Key results from the experiment were:</strong>\r\n<ul>\r\n 	<li>There were eight fixed store merchants who had never used a card swipe machine but eventually adopted digital payment solutions after being trained on card swipe usage by the CATALYST FoS team.</li>\r\n 	<li>The primary reason for adoption was that it would allow them to service a broader customer segment that used (debit/credit) cards to make payments. In other words, the ability to serve a specific customer segment that was familiar with digital solutions was a key driver. This would also result in new customer acquisition over a period of time.</li>\r\n 	<li>Among the merchants who refused to use or adopt a PoS machine, the dominant reason for nonadoption was the absence of customer demand (62 percent, Figure 1). These merchants were unwilling to act as enablers to train customers in using a new digital solution. If the customers asked for the service, they were happy to provide it.</li>\r\n 	<li>The remaining 10 percent (Figure 1) reported the inherent cash stickiness of their business as a major deterrent. Another 2 percent (Figure 1) cited the cost of the machine as a major barrier to accepting digital payments.</li>\r\n</ul>\r\n[/vc_column_text][vc_single_image image=\"39433\" img_size=\"full\" alignment=\"center\"][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]<em>Note: From top right: existing loan usage, source of loan, purpose of loans and awareness about CIBIL scores of 18 merchants who agreed to reveal information about a prior loan.</em>[/vc_column_text][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]While most merchants who were part of the pilot preferred not to share their current loan practices, those who revealed that they had availed a loan (18 out of 409) had done so from a formal source. Fourteen of the 18 were also aware of their credit score (CIBIL) and its related impact on their credit eligibility.\r\n<ul>\r\n 	<li>Only 18 fixed store merchants (4 percent) with an average monthly revenue of INR 90,000 (double the population median of INR 45,000) reported that they had availed of a loan in the past.</li>\r\n 	<li>The average tenure of the loans was two to three years; 17 merchants sourced the loan from banks and one from a Micro Finance Institution (MFI);</li>\r\n 	<li>The purpose for which loans were taken varied from business expansion (10 merchants), household requirements (four merchants) to health emergencies (one merchant). Utility loans such as for two wheelers (three merchants) formed another major category of reasons for taking loans; and</li>\r\n 	<li>The ticket size of the loans taken by the merchants varied from INR 40,000 to INR 9 lakhs.</li>\r\n</ul>\r\n[/vc_column_text][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#c9213b\" padding_top=\"75\" padding_bottom=\"75\" inline_style=\"font-style: normal;\"][vc_column][vc_row_inner][vc_column_inner][vc_custom_heading text=\"MERCHANTS’ PERCEPTION ON THE BUNDLED PRODUCT\r\n\" font_container=\"tag:h2|font_size:26px|text_align:center|color:%23ffffff|line_height:32px\" google_fonts=\"font_family:Roboto%20Condensed%3A300%2C300italic%2Cregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal\" letter_spacing=\"\" el_class=\"normal-style \"][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#ffffff\" inline_style=\"font-style: normal;\"][vc_column][vc_row_inner][vc_column_inner el_class=\"normal-style \"][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]Perceived vs. real interest in loan: When offered the bundled product of payment device and credit, 25 merchants showed initial interest solely in accessing the loan during their first interaction with the CATALYST FoS team. However, 24 had changed their minds when the lender’s agent approached them after a week, perhaps because merchants are always interested in understanding options for credit but may not avail of it even if they express an interest initially.\r\n\r\nOne merchant who agreed to try the combination of a PoS device and loan had a fixed cloth store in Shastri Nagar market. He wanted a loan of INR 1-2 lakhs. Unfortunately, the request was denied since his residence was located outside the serviceable area set by the lender. This fact was discovered after the processing was done, and resulted in a poor customer experience for the merchant.\r\n\r\n<strong>Why was there a low uptake? </strong>\r\n\r\nThe experiment shows that while there was individual adoption of the card swipe machines, there was little uptake of the bundled product. Technology did seamlessly bind the products together but the communication to merchants was often unclear and did not explain how payment device usage would help them get a loan of higher amount in the future. The reasons this product could not cater to customer expectations or improve customer experience as expected are:\r\n\r\n<strong>Loan structure:</strong> While the lender assured the merchants of a credit-build-up model, the merchants were keen to understand the exact qualifiers for the build-up process, i.e., number and/or value of transactions required to qualify for the next tranche of loans. Additionally, they wanted to know by what percentage the loan amount could grow through increased usage of digital transactions. None of this information was provided to merchants since the lender had not yet thought it through. The product’s value proposition stated in one line by the lender as ‘enhanced loan size for incremental usage of digital payments’ failed to gain the merchants’ trust.\r\n\r\n<strong>Single interface for credit and digital payments:</strong> During the CATALYST pilot, the lending company and the digital payment solution company used two separate applications to onboard customers. For the merchants who saw the two as a single product, it was important for the digital payment solution provider and the lending partner to integrate their solution into one single application for simplicity and usage. The existing process offered poor customer experience because filling out two applications is a time-consuming process.\r\n\r\n<strong>Large time lags:</strong> Loan disbursal followed a lengthy process, i.e., lead generation by field agents (CATALYST FoS team) from an initial interaction, followed by a calling exercise by the credit assessor and then a site verification. This long time period between initial contact and disbursement was a pain point. Additionally, there were delays in disbursing the card swipe machine. Partnering with an early stage startup for PoS machines led to a resource crunch, which resulted in operational delays. The time lag between initial lead generation and delivery of the machine ranged from 15-20 days which was too long a time to retain interest.\r\n\r\n<strong>High cost of on boarding:</strong> The loan offer had a customer onboarding cost plus GST that hiked up the existing rates of interest by 3 to 4 percent so the lending interest rate worked out to be around 30 percent annually. These nuanced details deterred many of the merchants to finally take up the loan despite having shown an initial interest in the loan product.\r\n\r\n<strong>Short tenure of the pilot:</strong> Lastly, one must note that three or four months is too short a time to launch and iterate on a product bundle that includes a loan repayment timeline of nine to 36 months. To understand access and usage of repeat loans, the pilot experiment should essentially be of a much longer tenure.[/vc_column_text][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#373b3c\" padding_top=\"75\" padding_bottom=\"75\" inline_style=\"font-style: normal;\"][vc_column][vc_row_inner][vc_column_inner][vc_custom_heading text=\"RECOMMENDATIONS\" font_container=\"tag:h2|font_size:26px|text_align:center|color:%23ffffff|line_height:32px\" google_fonts=\"font_family:Roboto%20Condensed%3A300%2C300italic%2Cregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal\" letter_spacing=\"\" el_class=\"normal-style \"][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#ffffff\"][vc_column][vc_row_inner equal_height=\"yes\"][vc_column_inner el_class=\"normal-style\"][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]<strong>Need for a local presence: </strong>An implementation challenge that needs to be addressed in order to iterate on the pilot experiment and help it succeed is decreasing the time lags between the first point of contact to in-person onboarding with the card swipe machine and the loan. To avoid such operational delays, it is advisable to work with a local company with a greater field presence than with a well-known company based out of another metropolis but with little field support, as was the case during this pilot. Otherwise, the card swipe company/loan company should partner with a channel partner that should be assigned locally to cover the high customer acquisition cost which must be incurred (by default) for wider reach and larger impact among the segment of merchants who are new to digital payment usage.\r\n\r\n<strong>Lower cost of product:</strong> If such loans could get priority sector lending status, obtaining funds would be easier for an NBFC, making access to credit easier and cheaper.\r\n\r\n<strong>Alternate digital payment solutions:</strong> Current credit products are more inclined towards PoS machine uptake and usage. However, given the rise in use of other digital payment modes such as Unified Payments Interface (UPI), e-wallets and other Aadhaar-based solutions could lead to faster and cheaper adoption among merchants.\r\n\r\n<strong>Simple product structure:</strong> As the pilot results suggest, clearly informing the merchants of the exact qualifying factors for incremental loans will help develop higher trust and better customer relationships for a credit-builder model.\r\n\r\n<strong>Provide digital training and awareness:</strong> Multiple field visits and available data on awareness of credit history or usage of digital payments suggest that small fixed store merchants need substantial handholding, training and awareness to understand fundamental financial concepts, the importance of formal loans, and use of credit history. The experiment results suggest that the small merchants would be better off with expert handholding support and training from their first point of contact, as they would be without operational delays. Further, digital training and awareness building must extend to consumers who shop at these merchant locations, since customer demand is a huge driver in merchant acceptance of digital solutions.[/vc_column_text][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#c9213b\" padding_top=\"75\" padding_bottom=\"75\" inline_style=\"font-style: normal;\"][vc_column][vc_row_inner][vc_column_inner][vc_custom_heading text=\"CONCLUSION\" font_container=\"tag:h2|font_size:26px|text_align:center|color:%23ffffff|line_height:32px\" google_fonts=\"font_family:Roboto%20Condensed%3A300%2C300italic%2Cregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal\" letter_spacing=\"\" el_class=\"normal-style \"][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#ffffff\"][vc_column][vc_row_inner equal_height=\"yes\"][vc_column_inner el_class=\"normal-style\"][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]Credit can potentially act as a hook for usage of digital solutions, provided the effective costs are lower compared to credit from informal sources, and access is speedier. Merchants also need to be provided information on the clear pathway on increase in credit as they continue using the digital facilities. Lenders and payment service providers must present a unified front and offer a superior customer experience to the merchants. Lastly, acceptance of new payment solutions requires end customers to be sensitized equally[/vc_column_text][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#ffffff\"][vc_column][vc_column_text letter_spacing=\"\"]\r\n<p style=\"text-align: left;\"><span style=\"color: #da092b;\">TECHNICAL WRITERS:</span> John Arun and Shubhranka Mondal</p>\r\n<p style=\"text-align: left;\"><span style=\"color: #da092b;\">ACKNOWLEDGEMENTS:</span> The authors would like to thank Jayshree Venkatesan for her expert advice, and CATALYST’s Feet on Street team, for their ground support</p>\r\n[/vc_column_text][kleo_button title=\"Download full report\" href=\"https://cashlesscatalyst.org/wp-content/uploads/2018/11/CH-Learning-Note.pdf\" target=\"_blank\" position=\"center\" size=\"lg\" type=\"boxed-icon\" special=\"no\" icon=\"download\" font_size=\"14px\" letter_spacing=\"\" el_class=\"pkirbtn\" icon_custom_background=\"#d11e3c\" icon_custom_text=\"#ffffff\"][/vc_column][/vc_row][vc_row el_id=\"footer_area\" text_align=\"center\" type=\"image\" bg_position_horizontal=\"center\" enable_parallax=\"false\" padding_top=\"50px\" padding_bottom=\"50px\" bg_image=\"7886\"][vc_column width=\"1/4\"][/vc_column][vc_column width=\"1/2\" offset=\"vc_col-lg-offset-0 vc_col-md-offset-0 vc_col-sm-offset-0\"][vc_single_image image=\"7888\" img_size=\"full\" alignment=\"center\"][vc_column_text text_color=\"#ffffff\" font_size=\"14px\" letter_spacing=\"\" css=\".vc_custom_1484826151396{margin-top: 35px !important;margin-bottom: 5px !important;padding-right: 20px !important;}\"]\r\n<p style=\"text-align: center;\">CATALYST is an initiative seeded by an alliance between the Government of India &amp; USAID, to expand digital payments and financial inclusion in India, especially for small merchants and low-income consumers.</p>\r\n[/vc_column_text][kleo_gap][vc_column_text letter_spacing=\"\" css=\".vc_custom_1484051069491{margin-bottom: 0px !important;}\"]\r\n<p style=\"text-align: center;\">[email-newsletter-plugin]</p>\r\n[/vc_column_text][kleo_icon icon=\"facebook\" href=\"https://www.facebook.com/CashlessCatalyst/\" target=\"_blank\" padding=\"15px\" icon_color=\"#ffffff\"][kleo_icon icon=\"linkedin\" href=\"https://www.linkedin.com/company/13221050?trk=tyah&amp;trkInfo=clickedVertical%3Acompany%2CclickedEntityId%3A13221050%2Cidx%3A2-1-2%2CtarId%3A1476420479247%2Ctas%3Acashless%20catalyst\" target=\"_blank\" padding=\"15px\" icon_color=\"#ffffff\"][kleo_icon icon=\"twitter\" href=\"https://twitter.com/cashlesscatalys\" target=\"_blank\" padding=\"15px\" icon_color=\"#ffffff\"][kleo_icon icon=\"youtube-play\" href=\"https://www.youtube.com/channel/UChuc38_PfawDOu44IfYS4lw\" target=\"_blank\" padding=\"15px\" icon_color=\"#ffffff\"][/vc_column][vc_column width=\"1/4\"][/vc_column][/vc_row]', 'DIGITAL LENDING FOR SMALL MERCHANTS: THE MISSING ROAD TO THE LAST MILE', '', 'inherit', 'closed', 'closed', '', '39421-revision-v1', '', '', '2018-11-20 09:17:54', '2018-11-20 09:17:54', '', 39421, 'https://cashlesscatalyst.org/media/39421-revision-v1/', 0, 'revision', '', 0),
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(39440, 20, '2018-11-20 09:22:12', '2018-11-20 09:22:12', '[vc_row equal_height=\"yes\" content_placement=\"middle\" type=\"image\" enable_parallax=\"false\" parallax_speed=\"0.4\" padding_top=\"110\" padding_bottom=\"0\" bg_image=\"39430\"][vc_column][kleo_gap size=\"100px\"][vc_row_inner][vc_column_inner width=\"1/6\"][/vc_column_inner][vc_column_inner width=\"2/3\"][vc_custom_heading text=\"DIGITAL LENDING FOR SMALL MERCHANTS: THE MISSING ROAD TO THE LAST MILE\" font_container=\"tag:h2|font_size:48px|text_align:center|color:%23ffffff|line_height:54px\" google_fonts=\"font_family:Roboto%20Condensed%3A300%2C300italic%2Cregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal\" letter_spacing=\"\"][/vc_column_inner][vc_column_inner width=\"1/6\"][/vc_column_inner][/vc_row_inner][kleo_gap size=\"140px\"][kleo_gap size=\"50px\"][/vc_column][/vc_row][vc_row equal_height=\"yes\" content_placement=\"middle\" padding_bottom=\"0\"][vc_column width=\"1/2\"][/vc_column][vc_column width=\"1/2\"][vc_row_inner equal_height=\"yes\" content_placement=\"middle\"][vc_column_inner width=\"5/12\"][/vc_column_inner][vc_column_inner width=\"1/3\" css=\".vc_custom_1488531456733{padding-right: 0px !important;}\"][vc_column_text letter_spacing=\"\"][addtoany][/vc_column_text][/vc_column_inner][vc_column_inner width=\"1/4\" css=\".vc_custom_1488531444909{padding-left: 0px !important;}\"][kleo_button title=\"Print this page\" href=\"https://cashlesscatalyst.org/wp-content/uploads/2018/11/CH-Learning-Note.pdf\" target=\"_blank\" style=\"custom\" position=\"left\" size=\"lg\" special=\"no\" border=\"no\" icon=\"print\" font_size=\"16px\" letter_spacing=\"\" el_class=\"grey-icon\" custom_text=\"#d11e3c\"][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#ffffff\"][vc_column][vc_custom_heading text=\"BACKGROUND\" font_container=\"tag:h2|font_size:26px|text_align:left|color:%23383b3b|line_height:32px\" google_fonts=\"font_family:Roboto%20Condensed%3A300%2C300italic%2Cregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal\" letter_spacing=\"\"][vc_row_inner css=\".vc_custom_1537456868816{margin-bottom: 35px !important;}\"][vc_column_inner][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]Ninety-three percent of India’s US$670 billion retail market continues to be unorganized, operating through mom-and-pop, kirana or standalone stores.<sup>1</sup> According to a recent Boston Consulting GroupConfederation of Indian Industry (BCG-CII) report, this sector is projected to double from a US$1.1-1.2 trillion market by 2020, driven by a 70 percent rise in income levels and a 100 million addition in the number of youth entering the labor force.<sup>2</sup> However, despite growth projections, there are several factors that hinder the growth of these informal enterprises which provide livelihood options to nearly 111 million workers,<sup>3</sup> thus forming an important engine for India’s economic growth.\r\n\r\nThe lack of proper infrastructure and technical skills notwithstanding, a pressing factor hindering attainment of scale by informal enterprises is the lack of credit from formal sources at affordable rates of interest. According to an International Finance Corporation (IFC) report, the credit gap for informal enterprises within the Micro, Small and Medium Enterprises (MSME) sector in India was estimated at US$418 billion in 2012-13.<sup>4</sup> Underlying the gap in accessing formal credit is the story of missing applicant credit histories or other parameters of credit worthiness used in traditional appraisal processes by lenders.<sup>5</sup> Under such circumstances, most enterprises resort to informal lenders, despite the high interest rates charged. Reluctance to adopt digital payments further exacerbates this situation, since it is near impossible to convince lenders of credit worthiness in the face of missing information on credit and other transactional histories. Lack of awareness, low capability and unwillingness to try new technologies for fear of failure are some reasons that contribute to this wariness and create a vicious cycle that has been hard to break.\r\n\r\nCATALYST, in its drive to explore the digital readiness of this segment, hypothesized that providing access to a small amount of credit at lower rates could act as a hook for digital payment adoption and usage, which in turn could trigger a positive spiral to access higher amounts of credit. In a preliminary study to understand the financial behavior and borrowing pattern of small businesses, CATALYST conducted a Credit Needs Assessment Survey (CNAS) where 1,140 small fixed store merchants in Jaipur were interviewed in September 2017. The survey showed that 69 percent of the merchants sourced their credit from informal sources such as friends, family and local moneylenders. Merchants expressed dissatisfaction with local moneylenders because they charged an interest rate of over 30 percent per month. But they still tend to prefer informal lenders over formal ones because of ease of access, no requirement of lengthy documentation, and speedy processes.\r\n\r\nArmed with these insights, CATALYST launched the Credit as a Hook pilot in Jaipur in June 2018 for a select set of merchants. The pilot aimed to provide incremental loans through a starter-builder model starting with a small loan that would increase based on usage of digital payments, where the payment footprint would help merchants build their formal credit history. CATALYST hypothesized that, for the  merchants, this would result in larger loans over a period of time at better rates of interest. For lenders, the presence of a digital footprint would provide the means to underwrite loans better and allow them to acquire new customers (i.e., a set of small merchants that was hitherto unserved by formal financial institutions). The initial pre-assessment survey carried out prior to the product launch, CATALYST’s CNAS report, revealed that 92 percent merchants contacted during the survey was aware of digital payment solutions. Of these, 53.5 percent was interested in availing credit through a digital platform with an expectation of quick processing time.\r\n\r\nThe first challenge that CATALYST faced was to convince lenders to provide an initial loan, albeit small, in the absence of a digital payment history. Traditionally, the route to access credit has been via an established digital payment footprint because of the inherent difference in the way payment and credit operates. Payment systems work better when more people use them, and therefore are designed to be more inclusive in nature. Credit, on the other hand, is designed to hedge excessive risks, and therefore is harder to establish as the first step to financial inclusion of the underserved market segment with no credit history.\r\n\r\nA lending model is predicated on profits from taking calculated risks. So, lenders seek to build strong relationships with their customers and get a broad base of information to calculate the exact underlying risk. On the other hand, payment companies are inherently less dependent on understanding customer risk. Payment businesses therefore tend to be more transactional and less relationship-based than lending ones. The quality or depth of individual customer relationships matters less. Instead, the number and breadth of customers and their networks matter more.<sup>6</sup>\r\n\r\nUnderstanding these basic functions of payments and credit is critical to exploring how the two can be linked. Technology and access to customer data play a huge role in leveraging the payment and credit lens to achieve financial inclusion.\r\n\r\nThe CATALYST pilot aimed at precisely this understanding. How can we urge merchants to start using digital solutions, which in turn can help them access credit at better terms?\r\n\r\nWhile the merits of credit are known, research is beginning to show the advantages of digital credit as well. Early evidence from studying M-Shawri<sup>7</sup> in Kenya has shown that uptake of digital loans has helped improve household resilience against shocks and increased the propensity of families to spend on welfare activities such as health and education.<sup>8</sup> While we have little evidence available from similar experiments in India, we expect the positive benefits would be similar.\r\n\r\nWe hope that the following results of CATALYST’s Credit as a Hook pilot reveal the opportunities and challenges of launching a digital payment and loan product bundle for underserved informal sector merchants in India.[/vc_column_text][vc_column_text text_color=\"#757c74\" font_size=\"14px\" letter_spacing=\"\"]<em><sup>1</sup>India’s $670 billion retail market is heading for a dream run, April 16, 2018, Quartz.</em>\r\n\r\n<em><sup>2</sup>Retail Transformation: Changing Your Performance Trajectory, BCG-CII National Retail Summit Report, 2016.</em>\r\n\r\n<em><sup>3</sup>Found: 111 million MSME workers in India as data rules changes, Livemint, November 22, 2017.</em>\r\n\r\n<em><sup>4</sup>MSME Finance Gap, Assessment of the shortfalls and opportunities in financing micro, small and medium enterprises in emerging markets, IFC, 2017.</em>\r\n\r\n<em><sup>5</sup>Research by Entrepreneurial Finance Lab, retrieved from The Hindu Business Line, ‘There is a credit gap of 56% in the MSME sector’, July 2, 2014</em>\r\n\r\n<em><sup>6</sup>Buckley, R. and I..Mas. The coming of age of digital payment as a field of expertise, Journal of Law Technology and Policy, June 2016, Vol.2016.</em>\r\n\r\n<em><sup>7</sup>M-Shwari is a paperless banking service offered through M-Pesa. M-Shwari bank accounts are opened and maintained through mobile phones.</em>\r\n\r\n<em><sup>8</sup>Bharadwaj, P., W. Jack and T. Suri. Can Digital Loans Deliver: Take Up and Impact of Digital Loans in Kenya, 2018 (Working Paper, draft received on special request from T. Suri).</em>[/vc_column_text][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"image\" bg_position_horizontal=\"center\" enable_parallax=\"false\" parallax_speed=\"0.4\" padding_top=\"150\" padding_bottom=\"150\" bg_image=\"39431\"][vc_column][vc_custom_heading text=\"INSIGHTS FROM THE PILOT\" font_container=\"tag:h2|font_size:26px|text_align:center|color:%23ffffff|line_height:32px\" google_fonts=\"font_family:Roboto%20Condensed%3A300%2C300italic%2Cregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal\" letter_spacing=\"\"][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#ffffff\"][vc_column][vc_row_inner][vc_column_inner][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]Testing the hypothesis involved bringing together a payment provider and a lender — a role that was played by CATALYST. For the pilot, CATALYST partnered with Nupay, a Point of Sale (PoS) device or card swipe machine provider and an early stage startup, and Capital First, a Non Banking Financial Company (NBFC), which agreed to provide term loans to fixed store merchants in Jaipur. The combination of a payment device and loan was offered as a bundle, with the intention of testing the extent to which credit can act as a ‘hook’ to adopt and use digital payments. This combination was created for the purpose of the pilot alone since lenders are unclear of the risks involved in offering a small amount of credit, no matter how small, before they can establish credit history based on transactions on the device provided. Since the combination of partners was arranged by CATALYST for the pilot, CATALYST also had to provide a set of Feet on Street (FoS) for on-the-ground support to roll out the services. The FoS team, trained by CATALYST, provided support in marketing and customer acquisition.\r\n\r\n&nbsp;\r\n\r\n<strong>Product bundle: Capital First and Nupay, a term loan with a card swipe machine</strong>\r\n\r\nProduct bundle details: Capital First (the lender) agreed to provide loans of a ticket size of INR 25,000 to INR 5 lakh at an interest rate of 18 percent to 24 percent annually for a tenure of nine months to 36 months, depending on the ticket size and repayment capacity.\r\n\r\nNupay’s card swipe machine had a monthly rental of INR 350 (~ US$5) plus 18 percent Goods and Service Tax (GST), which was also to be paid by merchants. The lender agreed that merchants would be considered for an incremental loan based on their repayment history observed in the first tranche of the loan, and their digital transaction footprint.\r\n\r\n&nbsp;\r\n\r\n<strong>Project roll-out and findings: digital payment adoption vs. non-adoption</strong>\r\n\r\nDuring the pilot, CATALYST reached out to 409 fixed store merchants across six major markets in Jaipur (Shastri Nagar, Sodala, Durgapura, Khatirpura, Jhotwara and Bani Park).9 These stores have been in business for an average of 10 years and had a median monthly revenue of INR 45,000. Most stores (99 percent) were owned by men; 87 percent was sole proprietorships while a smaller group (13 percent) was managed jointly with other family members. Sixty-five of them were already using a PoS or a card swipe machine and the remaining 344 merchants were given a demo on using a new PoS machine with the help of CATALYST’s FoS team.[/vc_column_text][vc_single_image image=\"39426\" img_size=\"full\" alignment=\"center\"][vc_column_text text_color=\"#757c74\" font_size=\"14px\" letter_spacing=\"\"]<em><sup>9</sup>This data set is separate from the earlier CNAS data. With a time lag of eight months, it is often difficult to work with earlier data sets. So, 490 new fixed stores were chosen from six new markets in Jaipur</em>[/vc_column_text][/vc_column_inner][/vc_row_inner][vc_row_inner css=\".vc_custom_1537937440359{padding-top: 30px !important;}\"][vc_column_inner][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]<strong>Key results from the experiment were:</strong>\r\n<ul>\r\n 	<li>There were eight fixed store merchants who had never used a card swipe machine but eventually adopted digital payment solutions after being trained on card swipe usage by the CATALYST FoS team.</li>\r\n 	<li>The primary reason for adoption was that it would allow them to service a broader customer segment that used (debit/credit) cards to make payments. In other words, the ability to serve a specific customer segment that was familiar with digital solutions was a key driver. This would also result in new customer acquisition over a period of time.</li>\r\n 	<li>Among the merchants who refused to use or adopt a PoS machine, the dominant reason for nonadoption was the absence of customer demand (62 percent, Figure 1). These merchants were unwilling to act as enablers to train customers in using a new digital solution. If the customers asked for the service, they were happy to provide it.</li>\r\n 	<li>The remaining 10 percent (Figure 1) reported the inherent cash stickiness of their business as a major deterrent. Another 2 percent (Figure 1) cited the cost of the machine as a major barrier to accepting digital payments.</li>\r\n</ul>\r\n[/vc_column_text][vc_single_image image=\"39433\" img_size=\"full\" alignment=\"center\"][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]<em>Note: From top right: existing loan usage, source of loan, purpose of loans and awareness about CIBIL scores of 18 merchants who agreed to reveal information about a prior loan.</em>[/vc_column_text][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]While most merchants who were part of the pilot preferred not to share their current loan practices, those who revealed that they had availed a loan (18 out of 409) had done so from a formal source. Fourteen of the 18 were also aware of their credit score (CIBIL) and its related impact on their credit eligibility.\r\n<ul>\r\n 	<li>Only 18 fixed store merchants (4 percent) with an average monthly revenue of INR 90,000 (double the population median of INR 45,000) reported that they had availed of a loan in the past.</li>\r\n 	<li>The average tenure of the loans was two to three years; 17 merchants sourced the loan from banks and one from a Micro Finance Institution (MFI);</li>\r\n 	<li>The purpose for which loans were taken varied from business expansion (10 merchants), household requirements (four merchants) to health emergencies (one merchant). Utility loans such as for two wheelers (three merchants) formed another major category of reasons for taking loans; and</li>\r\n 	<li>The ticket size of the loans taken by the merchants varied from INR 40,000 to INR 9 lakhs.</li>\r\n</ul>\r\n[/vc_column_text][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"image\" bg_color=\"#c9213b\" padding_top=\"75\" padding_bottom=\"75\" inline_style=\"font-style: normal;\" bg_image=\"39439\"][vc_column][vc_row_inner][vc_column_inner][vc_custom_heading text=\"MERCHANTS’ PERCEPTION ON THE BUNDLED PRODUCT\r\n\" font_container=\"tag:h2|font_size:26px|text_align:center|color:%23ffffff|line_height:32px\" google_fonts=\"font_family:Roboto%20Condensed%3A300%2C300italic%2Cregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal\" letter_spacing=\"\" el_class=\"normal-style \"][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#ffffff\" inline_style=\"font-style: normal;\"][vc_column][vc_row_inner][vc_column_inner el_class=\"normal-style \"][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]Perceived vs. real interest in loan: When offered the bundled product of payment device and credit, 25 merchants showed initial interest solely in accessing the loan during their first interaction with the CATALYST FoS team. However, 24 had changed their minds when the lender’s agent approached them after a week, perhaps because merchants are always interested in understanding options for credit but may not avail of it even if they express an interest initially.\r\n\r\nOne merchant who agreed to try the combination of a PoS device and loan had a fixed cloth store in Shastri Nagar market. He wanted a loan of INR 1-2 lakhs. Unfortunately, the request was denied since his residence was located outside the serviceable area set by the lender. This fact was discovered after the processing was done, and resulted in a poor customer experience for the merchant.\r\n\r\n<strong>Why was there a low uptake? </strong>\r\n\r\nThe experiment shows that while there was individual adoption of the card swipe machines, there was little uptake of the bundled product. Technology did seamlessly bind the products together but the communication to merchants was often unclear and did not explain how payment device usage would help them get a loan of higher amount in the future. The reasons this product could not cater to customer expectations or improve customer experience as expected are:\r\n\r\n<strong>Loan structure:</strong> While the lender assured the merchants of a credit-build-up model, the merchants were keen to understand the exact qualifiers for the build-up process, i.e., number and/or value of transactions required to qualify for the next tranche of loans. Additionally, they wanted to know by what percentage the loan amount could grow through increased usage of digital transactions. None of this information was provided to merchants since the lender had not yet thought it through. The product’s value proposition stated in one line by the lender as ‘enhanced loan size for incremental usage of digital payments’ failed to gain the merchants’ trust.\r\n\r\n<strong>Single interface for credit and digital payments:</strong> During the CATALYST pilot, the lending company and the digital payment solution company used two separate applications to onboard customers. For the merchants who saw the two as a single product, it was important for the digital payment solution provider and the lending partner to integrate their solution into one single application for simplicity and usage. The existing process offered poor customer experience because filling out two applications is a time-consuming process.\r\n\r\n<strong>Large time lags:</strong> Loan disbursal followed a lengthy process, i.e., lead generation by field agents (CATALYST FoS team) from an initial interaction, followed by a calling exercise by the credit assessor and then a site verification. This long time period between initial contact and disbursement was a pain point. Additionally, there were delays in disbursing the card swipe machine. Partnering with an early stage startup for PoS machines led to a resource crunch, which resulted in operational delays. The time lag between initial lead generation and delivery of the machine ranged from 15-20 days which was too long a time to retain interest.\r\n\r\n<strong>High cost of on boarding:</strong> The loan offer had a customer onboarding cost plus GST that hiked up the existing rates of interest by 3 to 4 percent so the lending interest rate worked out to be around 30 percent annually. These nuanced details deterred many of the merchants to finally take up the loan despite having shown an initial interest in the loan product.\r\n\r\n<strong>Short tenure of the pilot:</strong> Lastly, one must note that three or four months is too short a time to launch and iterate on a product bundle that includes a loan repayment timeline of nine to 36 months. To understand access and usage of repeat loans, the pilot experiment should essentially be of a much longer tenure.[/vc_column_text][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#373b3c\" padding_top=\"75\" padding_bottom=\"75\" inline_style=\"font-style: normal;\"][vc_column][vc_row_inner][vc_column_inner][vc_custom_heading text=\"RECOMMENDATIONS\" font_container=\"tag:h2|font_size:26px|text_align:center|color:%23ffffff|line_height:32px\" google_fonts=\"font_family:Roboto%20Condensed%3A300%2C300italic%2Cregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal\" letter_spacing=\"\" el_class=\"normal-style \"][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#ffffff\"][vc_column][vc_row_inner equal_height=\"yes\"][vc_column_inner el_class=\"normal-style\"][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]<strong>Need for a local presence: </strong>An implementation challenge that needs to be addressed in order to iterate on the pilot experiment and help it succeed is decreasing the time lags between the first point of contact to in-person onboarding with the card swipe machine and the loan. To avoid such operational delays, it is advisable to work with a local company with a greater field presence than with a well-known company based out of another metropolis but with little field support, as was the case during this pilot. Otherwise, the card swipe company/loan company should partner with a channel partner that should be assigned locally to cover the high customer acquisition cost which must be incurred (by default) for wider reach and larger impact among the segment of merchants who are new to digital payment usage.\r\n\r\n<strong>Lower cost of product:</strong> If such loans could get priority sector lending status, obtaining funds would be easier for an NBFC, making access to credit easier and cheaper.\r\n\r\n<strong>Alternate digital payment solutions:</strong> Current credit products are more inclined towards PoS machine uptake and usage. However, given the rise in use of other digital payment modes such as Unified Payments Interface (UPI), e-wallets and other Aadhaar-based solutions could lead to faster and cheaper adoption among merchants.\r\n\r\n<strong>Simple product structure:</strong> As the pilot results suggest, clearly informing the merchants of the exact qualifying factors for incremental loans will help develop higher trust and better customer relationships for a credit-builder model.\r\n\r\n<strong>Provide digital training and awareness:</strong> Multiple field visits and available data on awareness of credit history or usage of digital payments suggest that small fixed store merchants need substantial handholding, training and awareness to understand fundamental financial concepts, the importance of formal loans, and use of credit history. The experiment results suggest that the small merchants would be better off with expert handholding support and training from their first point of contact, as they would be without operational delays. Further, digital training and awareness building must extend to consumers who shop at these merchant locations, since customer demand is a huge driver in merchant acceptance of digital solutions.[/vc_column_text][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#c9213b\" padding_top=\"75\" padding_bottom=\"75\" inline_style=\"font-style: normal;\"][vc_column][vc_row_inner][vc_column_inner][vc_custom_heading text=\"CONCLUSION\" font_container=\"tag:h2|font_size:26px|text_align:center|color:%23ffffff|line_height:32px\" google_fonts=\"font_family:Roboto%20Condensed%3A300%2C300italic%2Cregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal\" letter_spacing=\"\" el_class=\"normal-style \"][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#ffffff\"][vc_column][vc_row_inner equal_height=\"yes\"][vc_column_inner el_class=\"normal-style\"][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]Credit can potentially act as a hook for usage of digital solutions, provided the effective costs are lower compared to credit from informal sources, and access is speedier. Merchants also need to be provided information on the clear pathway on increase in credit as they continue using the digital facilities. Lenders and payment service providers must present a unified front and offer a superior customer experience to the merchants. Lastly, acceptance of new payment solutions requires end customers to be sensitized equally[/vc_column_text][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#ffffff\"][vc_column][vc_column_text letter_spacing=\"\"]\r\n<p style=\"text-align: left;\"><span style=\"color: #da092b;\">TECHNICAL WRITERS:</span> John Arun and Shubhranka Mondal</p>\r\n<p style=\"text-align: left;\"><span style=\"color: #da092b;\">ACKNOWLEDGEMENTS:</span> The authors would like to thank Jayshree Venkatesan for her expert advice, and CATALYST’s Feet on Street team, for their ground support</p>\r\n[/vc_column_text][kleo_button title=\"Download full report\" href=\"https://cashlesscatalyst.org/wp-content/uploads/2018/11/CH-Learning-Note.pdf\" target=\"_blank\" position=\"center\" size=\"lg\" type=\"boxed-icon\" special=\"no\" icon=\"download\" font_size=\"14px\" letter_spacing=\"\" el_class=\"pkirbtn\" icon_custom_background=\"#d11e3c\" icon_custom_text=\"#ffffff\"][/vc_column][/vc_row][vc_row el_id=\"footer_area\" text_align=\"center\" type=\"image\" bg_position_horizontal=\"center\" enable_parallax=\"false\" padding_top=\"50px\" padding_bottom=\"50px\" bg_image=\"7886\"][vc_column width=\"1/4\"][/vc_column][vc_column width=\"1/2\" offset=\"vc_col-lg-offset-0 vc_col-md-offset-0 vc_col-sm-offset-0\"][vc_single_image image=\"7888\" img_size=\"full\" alignment=\"center\"][vc_column_text text_color=\"#ffffff\" font_size=\"14px\" letter_spacing=\"\" css=\".vc_custom_1484826151396{margin-top: 35px !important;margin-bottom: 5px !important;padding-right: 20px !important;}\"]\r\n<p style=\"text-align: center;\">CATALYST is an initiative seeded by an alliance between the Government of India &amp; USAID, to expand digital payments and financial inclusion in India, especially for small merchants and low-income consumers.</p>\r\n[/vc_column_text][kleo_gap][vc_column_text letter_spacing=\"\" css=\".vc_custom_1484051069491{margin-bottom: 0px !important;}\"]\r\n<p style=\"text-align: center;\">[email-newsletter-plugin]</p>\r\n[/vc_column_text][kleo_icon icon=\"facebook\" href=\"https://www.facebook.com/CashlessCatalyst/\" target=\"_blank\" padding=\"15px\" icon_color=\"#ffffff\"][kleo_icon icon=\"linkedin\" href=\"https://www.linkedin.com/company/13221050?trk=tyah&amp;trkInfo=clickedVertical%3Acompany%2CclickedEntityId%3A13221050%2Cidx%3A2-1-2%2CtarId%3A1476420479247%2Ctas%3Acashless%20catalyst\" target=\"_blank\" padding=\"15px\" icon_color=\"#ffffff\"][kleo_icon icon=\"twitter\" href=\"https://twitter.com/cashlesscatalys\" target=\"_blank\" padding=\"15px\" icon_color=\"#ffffff\"][kleo_icon icon=\"youtube-play\" href=\"https://www.youtube.com/channel/UChuc38_PfawDOu44IfYS4lw\" target=\"_blank\" padding=\"15px\" icon_color=\"#ffffff\"][/vc_column][vc_column width=\"1/4\"][/vc_column][/vc_row]', 'DIGITAL LENDING FOR SMALL MERCHANTS: THE MISSING ROAD TO THE LAST MILE', '', 'inherit', 'closed', 'closed', '', '39421-revision-v1', '', '', '2018-11-20 09:22:12', '2018-11-20 09:22:12', '', 39421, 'https://cashlesscatalyst.org/media/39421-revision-v1/', 0, 'revision', '', 0);
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(39441, 20, '2018-11-20 09:23:09', '2018-11-20 09:23:09', '[vc_row equal_height=\"yes\" content_placement=\"middle\" type=\"image\" enable_parallax=\"false\" parallax_speed=\"0.4\" padding_top=\"110\" padding_bottom=\"0\" bg_image=\"39430\"][vc_column][kleo_gap size=\"100px\"][vc_row_inner][vc_column_inner width=\"1/6\"][/vc_column_inner][vc_column_inner width=\"2/3\"][vc_custom_heading text=\"DIGITAL LENDING FOR SMALL MERCHANTS: THE MISSING ROAD TO THE LAST MILE\" font_container=\"tag:h2|font_size:48px|text_align:center|color:%23ffffff|line_height:54px\" google_fonts=\"font_family:Roboto%20Condensed%3A300%2C300italic%2Cregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal\" letter_spacing=\"\"][/vc_column_inner][vc_column_inner width=\"1/6\"][/vc_column_inner][/vc_row_inner][kleo_gap size=\"140px\"][kleo_gap size=\"50px\"][/vc_column][/vc_row][vc_row equal_height=\"yes\" content_placement=\"middle\" padding_bottom=\"0\"][vc_column width=\"1/2\"][/vc_column][vc_column width=\"1/2\"][vc_row_inner equal_height=\"yes\" content_placement=\"middle\"][vc_column_inner width=\"5/12\"][/vc_column_inner][vc_column_inner width=\"1/3\" css=\".vc_custom_1488531456733{padding-right: 0px !important;}\"][vc_column_text letter_spacing=\"\"][addtoany][/vc_column_text][/vc_column_inner][vc_column_inner width=\"1/4\" css=\".vc_custom_1488531444909{padding-left: 0px !important;}\"][kleo_button title=\"Print this page\" href=\"https://cashlesscatalyst.org/wp-content/uploads/2018/11/CH-Learning-Note.pdf\" target=\"_blank\" style=\"custom\" position=\"left\" size=\"lg\" special=\"no\" border=\"no\" icon=\"print\" font_size=\"16px\" letter_spacing=\"\" el_class=\"grey-icon\" custom_text=\"#d11e3c\"][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#ffffff\"][vc_column][vc_custom_heading text=\"BACKGROUND\" font_container=\"tag:h2|font_size:26px|text_align:left|color:%23383b3b|line_height:32px\" google_fonts=\"font_family:Roboto%20Condensed%3A300%2C300italic%2Cregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal\" letter_spacing=\"\"][vc_row_inner css=\".vc_custom_1537456868816{margin-bottom: 35px !important;}\"][vc_column_inner][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]Ninety-three percent of India’s US$670 billion retail market continues to be unorganized, operating through mom-and-pop, kirana or standalone stores.<sup>1</sup> According to a recent Boston Consulting GroupConfederation of Indian Industry (BCG-CII) report, this sector is projected to double from a US$1.1-1.2 trillion market by 2020, driven by a 70 percent rise in income levels and a 100 million addition in the number of youth entering the labor force.<sup>2</sup> However, despite growth projections, there are several factors that hinder the growth of these informal enterprises which provide livelihood options to nearly 111 million workers,<sup>3</sup> thus forming an important engine for India’s economic growth.\r\n\r\nThe lack of proper infrastructure and technical skills notwithstanding, a pressing factor hindering attainment of scale by informal enterprises is the lack of credit from formal sources at affordable rates of interest. According to an International Finance Corporation (IFC) report, the credit gap for informal enterprises within the Micro, Small and Medium Enterprises (MSME) sector in India was estimated at US$418 billion in 2012-13.<sup>4</sup> Underlying the gap in accessing formal credit is the story of missing applicant credit histories or other parameters of credit worthiness used in traditional appraisal processes by lenders.<sup>5</sup> Under such circumstances, most enterprises resort to informal lenders, despite the high interest rates charged. Reluctance to adopt digital payments further exacerbates this situation, since it is near impossible to convince lenders of credit worthiness in the face of missing information on credit and other transactional histories. Lack of awareness, low capability and unwillingness to try new technologies for fear of failure are some reasons that contribute to this wariness and create a vicious cycle that has been hard to break.\r\n\r\nCATALYST, in its drive to explore the digital readiness of this segment, hypothesized that providing access to a small amount of credit at lower rates could act as a hook for digital payment adoption and usage, which in turn could trigger a positive spiral to access higher amounts of credit. In a preliminary study to understand the financial behavior and borrowing pattern of small businesses, CATALYST conducted a Credit Needs Assessment Survey (CNAS) where 1,140 small fixed store merchants in Jaipur were interviewed in September 2017. The survey showed that 69 percent of the merchants sourced their credit from informal sources such as friends, family and local moneylenders. Merchants expressed dissatisfaction with local moneylenders because they charged an interest rate of over 30 percent per month. But they still tend to prefer informal lenders over formal ones because of ease of access, no requirement of lengthy documentation, and speedy processes.\r\n\r\nArmed with these insights, CATALYST launched the Credit as a Hook pilot in Jaipur in June 2018 for a select set of merchants. The pilot aimed to provide incremental loans through a starter-builder model starting with a small loan that would increase based on usage of digital payments, where the payment footprint would help merchants build their formal credit history. CATALYST hypothesized that, for the  merchants, this would result in larger loans over a period of time at better rates of interest. For lenders, the presence of a digital footprint would provide the means to underwrite loans better and allow them to acquire new customers (i.e., a set of small merchants that was hitherto unserved by formal financial institutions). The initial pre-assessment survey carried out prior to the product launch, CATALYST’s CNAS report, revealed that 92 percent merchants contacted during the survey was aware of digital payment solutions. Of these, 53.5 percent was interested in availing credit through a digital platform with an expectation of quick processing time.\r\n\r\nThe first challenge that CATALYST faced was to convince lenders to provide an initial loan, albeit small, in the absence of a digital payment history. Traditionally, the route to access credit has been via an established digital payment footprint because of the inherent difference in the way payment and credit operates. Payment systems work better when more people use them, and therefore are designed to be more inclusive in nature. Credit, on the other hand, is designed to hedge excessive risks, and therefore is harder to establish as the first step to financial inclusion of the underserved market segment with no credit history.\r\n\r\nA lending model is predicated on profits from taking calculated risks. So, lenders seek to build strong relationships with their customers and get a broad base of information to calculate the exact underlying risk. On the other hand, payment companies are inherently less dependent on understanding customer risk. Payment businesses therefore tend to be more transactional and less relationship-based than lending ones. The quality or depth of individual customer relationships matters less. Instead, the number and breadth of customers and their networks matter more.<sup>6</sup>\r\n\r\nUnderstanding these basic functions of payments and credit is critical to exploring how the two can be linked. Technology and access to customer data play a huge role in leveraging the payment and credit lens to achieve financial inclusion.\r\n\r\nThe CATALYST pilot aimed at precisely this understanding. How can we urge merchants to start using digital solutions, which in turn can help them access credit at better terms?\r\n\r\nWhile the merits of credit are known, research is beginning to show the advantages of digital credit as well. Early evidence from studying M-Shawri<sup>7</sup> in Kenya has shown that uptake of digital loans has helped improve household resilience against shocks and increased the propensity of families to spend on welfare activities such as health and education.<sup>8</sup> While we have little evidence available from similar experiments in India, we expect the positive benefits would be similar.\r\n\r\nWe hope that the following results of CATALYST’s Credit as a Hook pilot reveal the opportunities and challenges of launching a digital payment and loan product bundle for underserved informal sector merchants in India.[/vc_column_text][vc_column_text text_color=\"#757c74\" font_size=\"14px\" letter_spacing=\"\"]<em><sup>1</sup>India’s $670 billion retail market is heading for a dream run, April 16, 2018, Quartz.</em>\r\n\r\n<em><sup>2</sup>Retail Transformation: Changing Your Performance Trajectory, BCG-CII National Retail Summit Report, 2016.</em>\r\n\r\n<em><sup>3</sup>Found: 111 million MSME workers in India as data rules changes, Livemint, November 22, 2017.</em>\r\n\r\n<em><sup>4</sup>MSME Finance Gap, Assessment of the shortfalls and opportunities in financing micro, small and medium enterprises in emerging markets, IFC, 2017.</em>\r\n\r\n<em><sup>5</sup>Research by Entrepreneurial Finance Lab, retrieved from The Hindu Business Line, ‘There is a credit gap of 56% in the MSME sector’, July 2, 2014</em>\r\n\r\n<em><sup>6</sup>Buckley, R. and I..Mas. The coming of age of digital payment as a field of expertise, Journal of Law Technology and Policy, June 2016, Vol.2016.</em>\r\n\r\n<em><sup>7</sup>M-Shwari is a paperless banking service offered through M-Pesa. M-Shwari bank accounts are opened and maintained through mobile phones.</em>\r\n\r\n<em><sup>8</sup>Bharadwaj, P., W. Jack and T. Suri. Can Digital Loans Deliver: Take Up and Impact of Digital Loans in Kenya, 2018 (Working Paper, draft received on special request from T. Suri).</em>[/vc_column_text][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"image\" bg_position_horizontal=\"center\" enable_parallax=\"false\" parallax_speed=\"0.4\" padding_top=\"150\" padding_bottom=\"150\" bg_image=\"39431\"][vc_column][vc_custom_heading text=\"INSIGHTS FROM THE PILOT\" font_container=\"tag:h2|font_size:26px|text_align:center|color:%23ffffff|line_height:32px\" google_fonts=\"font_family:Roboto%20Condensed%3A300%2C300italic%2Cregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal\" letter_spacing=\"\"][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#ffffff\"][vc_column][vc_row_inner][vc_column_inner][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]Testing the hypothesis involved bringing together a payment provider and a lender — a role that was played by CATALYST. For the pilot, CATALYST partnered with Nupay, a Point of Sale (PoS) device or card swipe machine provider and an early stage startup, and Capital First, a Non Banking Financial Company (NBFC), which agreed to provide term loans to fixed store merchants in Jaipur. The combination of a payment device and loan was offered as a bundle, with the intention of testing the extent to which credit can act as a ‘hook’ to adopt and use digital payments. This combination was created for the purpose of the pilot alone since lenders are unclear of the risks involved in offering a small amount of credit, no matter how small, before they can establish credit history based on transactions on the device provided. Since the combination of partners was arranged by CATALYST for the pilot, CATALYST also had to provide a set of Feet on Street (FoS) for on-the-ground support to roll out the services. The FoS team, trained by CATALYST, provided support in marketing and customer acquisition.\r\n\r\n&nbsp;\r\n\r\n<strong>Product bundle: Capital First and Nupay, a term loan with a card swipe machine</strong>\r\n\r\nProduct bundle details: Capital First (the lender) agreed to provide loans of a ticket size of INR 25,000 to INR 5 lakh at an interest rate of 18 percent to 24 percent annually for a tenure of nine months to 36 months, depending on the ticket size and repayment capacity.\r\n\r\nNupay’s card swipe machine had a monthly rental of INR 350 (~ US$5) plus 18 percent Goods and Service Tax (GST), which was also to be paid by merchants. The lender agreed that merchants would be considered for an incremental loan based on their repayment history observed in the first tranche of the loan, and their digital transaction footprint.\r\n\r\n&nbsp;\r\n\r\n<strong>Project roll-out and findings: digital payment adoption vs. non-adoption</strong>\r\n\r\nDuring the pilot, CATALYST reached out to 409 fixed store merchants across six major markets in Jaipur (Shastri Nagar, Sodala, Durgapura, Khatirpura, Jhotwara and Bani Park).9 These stores have been in business for an average of 10 years and had a median monthly revenue of INR 45,000. Most stores (99 percent) were owned by men; 87 percent was sole proprietorships while a smaller group (13 percent) was managed jointly with other family members. Sixty-five of them were already using a PoS or a card swipe machine and the remaining 344 merchants were given a demo on using a new PoS machine with the help of CATALYST’s FoS team.[/vc_column_text][vc_single_image image=\"39426\" img_size=\"full\" alignment=\"center\"][vc_column_text text_color=\"#757c74\" font_size=\"14px\" letter_spacing=\"\"]<em><sup>9</sup>This data set is separate from the earlier CNAS data. With a time lag of eight months, it is often difficult to work with earlier data sets. So, 490 new fixed stores were chosen from six new markets in Jaipur</em>[/vc_column_text][/vc_column_inner][/vc_row_inner][vc_row_inner css=\".vc_custom_1537937440359{padding-top: 30px !important;}\"][vc_column_inner][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]<strong>Key results from the experiment were:</strong>\r\n<ul>\r\n 	<li>There were eight fixed store merchants who had never used a card swipe machine but eventually adopted digital payment solutions after being trained on card swipe usage by the CATALYST FoS team.</li>\r\n 	<li>The primary reason for adoption was that it would allow them to service a broader customer segment that used (debit/credit) cards to make payments. In other words, the ability to serve a specific customer segment that was familiar with digital solutions was a key driver. This would also result in new customer acquisition over a period of time.</li>\r\n 	<li>Among the merchants who refused to use or adopt a PoS machine, the dominant reason for nonadoption was the absence of customer demand (62 percent, Figure 1). These merchants were unwilling to act as enablers to train customers in using a new digital solution. If the customers asked for the service, they were happy to provide it.</li>\r\n 	<li>The remaining 10 percent (Figure 1) reported the inherent cash stickiness of their business as a major deterrent. Another 2 percent (Figure 1) cited the cost of the machine as a major barrier to accepting digital payments.</li>\r\n</ul>\r\n[/vc_column_text][vc_single_image image=\"39433\" img_size=\"full\" alignment=\"center\"][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]<em>Note: From top right: existing loan usage, source of loan, purpose of loans and awareness about CIBIL scores of 18 merchants who agreed to reveal information about a prior loan.</em>[/vc_column_text][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]While most merchants who were part of the pilot preferred not to share their current loan practices, those who revealed that they had availed a loan (18 out of 409) had done so from a formal source. Fourteen of the 18 were also aware of their credit score (CIBIL) and its related impact on their credit eligibility.\r\n<ul>\r\n 	<li>Only 18 fixed store merchants (4 percent) with an average monthly revenue of INR 90,000 (double the population median of INR 45,000) reported that they had availed of a loan in the past.</li>\r\n 	<li>The average tenure of the loans was two to three years; 17 merchants sourced the loan from banks and one from a Micro Finance Institution (MFI);</li>\r\n 	<li>The purpose for which loans were taken varied from business expansion (10 merchants), household requirements (four merchants) to health emergencies (one merchant). Utility loans such as for two wheelers (three merchants) formed another major category of reasons for taking loans; and</li>\r\n 	<li>The ticket size of the loans taken by the merchants varied from INR 40,000 to INR 9 lakhs.</li>\r\n</ul>\r\n[/vc_column_text][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"image\" bg_color=\"#c9213b\" padding_top=\"150\" padding_bottom=\"150\" inline_style=\"font-style: normal;\" bg_image=\"39439\"][vc_column][vc_row_inner][vc_column_inner][vc_custom_heading text=\"MERCHANTS’ PERCEPTION ON THE BUNDLED PRODUCT\r\n\" font_container=\"tag:h2|font_size:26px|text_align:center|color:%23ffffff|line_height:32px\" google_fonts=\"font_family:Roboto%20Condensed%3A300%2C300italic%2Cregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal\" letter_spacing=\"\" el_class=\"normal-style \"][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#ffffff\" inline_style=\"font-style: normal;\"][vc_column][vc_row_inner][vc_column_inner el_class=\"normal-style \"][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]Perceived vs. real interest in loan: When offered the bundled product of payment device and credit, 25 merchants showed initial interest solely in accessing the loan during their first interaction with the CATALYST FoS team. However, 24 had changed their minds when the lender’s agent approached them after a week, perhaps because merchants are always interested in understanding options for credit but may not avail of it even if they express an interest initially.\r\n\r\nOne merchant who agreed to try the combination of a PoS device and loan had a fixed cloth store in Shastri Nagar market. He wanted a loan of INR 1-2 lakhs. Unfortunately, the request was denied since his residence was located outside the serviceable area set by the lender. This fact was discovered after the processing was done, and resulted in a poor customer experience for the merchant.\r\n\r\n<strong>Why was there a low uptake? </strong>\r\n\r\nThe experiment shows that while there was individual adoption of the card swipe machines, there was little uptake of the bundled product. Technology did seamlessly bind the products together but the communication to merchants was often unclear and did not explain how payment device usage would help them get a loan of higher amount in the future. The reasons this product could not cater to customer expectations or improve customer experience as expected are:\r\n\r\n<strong>Loan structure:</strong> While the lender assured the merchants of a credit-build-up model, the merchants were keen to understand the exact qualifiers for the build-up process, i.e., number and/or value of transactions required to qualify for the next tranche of loans. Additionally, they wanted to know by what percentage the loan amount could grow through increased usage of digital transactions. None of this information was provided to merchants since the lender had not yet thought it through. The product’s value proposition stated in one line by the lender as ‘enhanced loan size for incremental usage of digital payments’ failed to gain the merchants’ trust.\r\n\r\n<strong>Single interface for credit and digital payments:</strong> During the CATALYST pilot, the lending company and the digital payment solution company used two separate applications to onboard customers. For the merchants who saw the two as a single product, it was important for the digital payment solution provider and the lending partner to integrate their solution into one single application for simplicity and usage. The existing process offered poor customer experience because filling out two applications is a time-consuming process.\r\n\r\n<strong>Large time lags:</strong> Loan disbursal followed a lengthy process, i.e., lead generation by field agents (CATALYST FoS team) from an initial interaction, followed by a calling exercise by the credit assessor and then a site verification. This long time period between initial contact and disbursement was a pain point. Additionally, there were delays in disbursing the card swipe machine. Partnering with an early stage startup for PoS machines led to a resource crunch, which resulted in operational delays. The time lag between initial lead generation and delivery of the machine ranged from 15-20 days which was too long a time to retain interest.\r\n\r\n<strong>High cost of on boarding:</strong> The loan offer had a customer onboarding cost plus GST that hiked up the existing rates of interest by 3 to 4 percent so the lending interest rate worked out to be around 30 percent annually. These nuanced details deterred many of the merchants to finally take up the loan despite having shown an initial interest in the loan product.\r\n\r\n<strong>Short tenure of the pilot:</strong> Lastly, one must note that three or four months is too short a time to launch and iterate on a product bundle that includes a loan repayment timeline of nine to 36 months. To understand access and usage of repeat loans, the pilot experiment should essentially be of a much longer tenure.[/vc_column_text][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#373b3c\" padding_top=\"75\" padding_bottom=\"75\" inline_style=\"font-style: normal;\"][vc_column][vc_row_inner][vc_column_inner][vc_custom_heading text=\"RECOMMENDATIONS\" font_container=\"tag:h2|font_size:26px|text_align:center|color:%23ffffff|line_height:32px\" google_fonts=\"font_family:Roboto%20Condensed%3A300%2C300italic%2Cregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal\" letter_spacing=\"\" el_class=\"normal-style \"][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#ffffff\"][vc_column][vc_row_inner equal_height=\"yes\"][vc_column_inner el_class=\"normal-style\"][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]<strong>Need for a local presence: </strong>An implementation challenge that needs to be addressed in order to iterate on the pilot experiment and help it succeed is decreasing the time lags between the first point of contact to in-person onboarding with the card swipe machine and the loan. To avoid such operational delays, it is advisable to work with a local company with a greater field presence than with a well-known company based out of another metropolis but with little field support, as was the case during this pilot. Otherwise, the card swipe company/loan company should partner with a channel partner that should be assigned locally to cover the high customer acquisition cost which must be incurred (by default) for wider reach and larger impact among the segment of merchants who are new to digital payment usage.\r\n\r\n<strong>Lower cost of product:</strong> If such loans could get priority sector lending status, obtaining funds would be easier for an NBFC, making access to credit easier and cheaper.\r\n\r\n<strong>Alternate digital payment solutions:</strong> Current credit products are more inclined towards PoS machine uptake and usage. However, given the rise in use of other digital payment modes such as Unified Payments Interface (UPI), e-wallets and other Aadhaar-based solutions could lead to faster and cheaper adoption among merchants.\r\n\r\n<strong>Simple product structure:</strong> As the pilot results suggest, clearly informing the merchants of the exact qualifying factors for incremental loans will help develop higher trust and better customer relationships for a credit-builder model.\r\n\r\n<strong>Provide digital training and awareness:</strong> Multiple field visits and available data on awareness of credit history or usage of digital payments suggest that small fixed store merchants need substantial handholding, training and awareness to understand fundamental financial concepts, the importance of formal loans, and use of credit history. The experiment results suggest that the small merchants would be better off with expert handholding support and training from their first point of contact, as they would be without operational delays. Further, digital training and awareness building must extend to consumers who shop at these merchant locations, since customer demand is a huge driver in merchant acceptance of digital solutions.[/vc_column_text][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#c9213b\" padding_top=\"75\" padding_bottom=\"75\" inline_style=\"font-style: normal;\"][vc_column][vc_row_inner][vc_column_inner][vc_custom_heading text=\"CONCLUSION\" font_container=\"tag:h2|font_size:26px|text_align:center|color:%23ffffff|line_height:32px\" google_fonts=\"font_family:Roboto%20Condensed%3A300%2C300italic%2Cregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal\" letter_spacing=\"\" el_class=\"normal-style \"][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#ffffff\"][vc_column][vc_row_inner equal_height=\"yes\"][vc_column_inner el_class=\"normal-style\"][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]Credit can potentially act as a hook for usage of digital solutions, provided the effective costs are lower compared to credit from informal sources, and access is speedier. Merchants also need to be provided information on the clear pathway on increase in credit as they continue using the digital facilities. Lenders and payment service providers must present a unified front and offer a superior customer experience to the merchants. Lastly, acceptance of new payment solutions requires end customers to be sensitized equally[/vc_column_text][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#ffffff\"][vc_column][vc_column_text letter_spacing=\"\"]\r\n<p style=\"text-align: left;\"><span style=\"color: #da092b;\">TECHNICAL WRITERS:</span> John Arun and Shubhranka Mondal</p>\r\n<p style=\"text-align: left;\"><span style=\"color: #da092b;\">ACKNOWLEDGEMENTS:</span> The authors would like to thank Jayshree Venkatesan for her expert advice, and CATALYST’s Feet on Street team, for their ground support</p>\r\n[/vc_column_text][kleo_button title=\"Download full report\" href=\"https://cashlesscatalyst.org/wp-content/uploads/2018/11/CH-Learning-Note.pdf\" target=\"_blank\" position=\"center\" size=\"lg\" type=\"boxed-icon\" special=\"no\" icon=\"download\" font_size=\"14px\" letter_spacing=\"\" el_class=\"pkirbtn\" icon_custom_background=\"#d11e3c\" icon_custom_text=\"#ffffff\"][/vc_column][/vc_row][vc_row el_id=\"footer_area\" text_align=\"center\" type=\"image\" bg_position_horizontal=\"center\" enable_parallax=\"false\" padding_top=\"50px\" padding_bottom=\"50px\" bg_image=\"7886\"][vc_column width=\"1/4\"][/vc_column][vc_column width=\"1/2\" offset=\"vc_col-lg-offset-0 vc_col-md-offset-0 vc_col-sm-offset-0\"][vc_single_image image=\"7888\" img_size=\"full\" alignment=\"center\"][vc_column_text text_color=\"#ffffff\" font_size=\"14px\" letter_spacing=\"\" css=\".vc_custom_1484826151396{margin-top: 35px !important;margin-bottom: 5px !important;padding-right: 20px !important;}\"]\r\n<p style=\"text-align: center;\">CATALYST is an initiative seeded by an alliance between the Government of India &amp; USAID, to expand digital payments and financial inclusion in India, especially for small merchants and low-income consumers.</p>\r\n[/vc_column_text][kleo_gap][vc_column_text letter_spacing=\"\" css=\".vc_custom_1484051069491{margin-bottom: 0px !important;}\"]\r\n<p style=\"text-align: center;\">[email-newsletter-plugin]</p>\r\n[/vc_column_text][kleo_icon icon=\"facebook\" href=\"https://www.facebook.com/CashlessCatalyst/\" target=\"_blank\" padding=\"15px\" icon_color=\"#ffffff\"][kleo_icon icon=\"linkedin\" href=\"https://www.linkedin.com/company/13221050?trk=tyah&amp;trkInfo=clickedVertical%3Acompany%2CclickedEntityId%3A13221050%2Cidx%3A2-1-2%2CtarId%3A1476420479247%2Ctas%3Acashless%20catalyst\" target=\"_blank\" padding=\"15px\" icon_color=\"#ffffff\"][kleo_icon icon=\"twitter\" href=\"https://twitter.com/cashlesscatalys\" target=\"_blank\" padding=\"15px\" icon_color=\"#ffffff\"][kleo_icon icon=\"youtube-play\" href=\"https://www.youtube.com/channel/UChuc38_PfawDOu44IfYS4lw\" target=\"_blank\" padding=\"15px\" icon_color=\"#ffffff\"][/vc_column][vc_column width=\"1/4\"][/vc_column][/vc_row]', 'DIGITAL LENDING FOR SMALL MERCHANTS: THE MISSING ROAD TO THE LAST MILE', '', 'inherit', 'closed', 'closed', '', '39421-revision-v1', '', '', '2018-11-20 09:23:09', '2018-11-20 09:23:09', '', 39421, 'https://cashlesscatalyst.org/media/39421-revision-v1/', 0, 'revision', '', 0);
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(39442, 20, '2018-11-20 09:24:03', '2018-11-20 09:24:03', '[vc_row equal_height=\"yes\" content_placement=\"middle\" type=\"image\" enable_parallax=\"false\" parallax_speed=\"0.4\" padding_top=\"110\" padding_bottom=\"0\" bg_image=\"39430\"][vc_column][kleo_gap size=\"100px\"][vc_row_inner][vc_column_inner width=\"1/6\"][/vc_column_inner][vc_column_inner width=\"2/3\"][vc_custom_heading text=\"DIGITAL LENDING FOR SMALL MERCHANTS: THE MISSING ROAD TO THE LAST MILE\" font_container=\"tag:h2|font_size:48px|text_align:center|color:%23ffffff|line_height:54px\" google_fonts=\"font_family:Roboto%20Condensed%3A300%2C300italic%2Cregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal\" letter_spacing=\"\"][/vc_column_inner][vc_column_inner width=\"1/6\"][/vc_column_inner][/vc_row_inner][kleo_gap size=\"140px\"][kleo_gap size=\"50px\"][/vc_column][/vc_row][vc_row equal_height=\"yes\" content_placement=\"middle\" padding_bottom=\"0\"][vc_column width=\"1/2\"][/vc_column][vc_column width=\"1/2\"][vc_row_inner equal_height=\"yes\" content_placement=\"middle\"][vc_column_inner width=\"5/12\"][/vc_column_inner][vc_column_inner width=\"1/3\" css=\".vc_custom_1488531456733{padding-right: 0px !important;}\"][vc_column_text letter_spacing=\"\"][addtoany][/vc_column_text][/vc_column_inner][vc_column_inner width=\"1/4\" css=\".vc_custom_1488531444909{padding-left: 0px !important;}\"][kleo_button title=\"Print this page\" href=\"https://cashlesscatalyst.org/wp-content/uploads/2018/11/CH-Learning-Note.pdf\" target=\"_blank\" style=\"custom\" position=\"left\" size=\"lg\" special=\"no\" border=\"no\" icon=\"print\" font_size=\"16px\" letter_spacing=\"\" el_class=\"grey-icon\" custom_text=\"#d11e3c\"][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#ffffff\"][vc_column][vc_custom_heading text=\"BACKGROUND\" font_container=\"tag:h2|font_size:26px|text_align:left|color:%23383b3b|line_height:32px\" google_fonts=\"font_family:Roboto%20Condensed%3A300%2C300italic%2Cregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal\" letter_spacing=\"\"][vc_row_inner css=\".vc_custom_1537456868816{margin-bottom: 35px !important;}\"][vc_column_inner][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]Ninety-three percent of India’s US$670 billion retail market continues to be unorganized, operating through mom-and-pop, kirana or standalone stores.<sup>1</sup> According to a recent Boston Consulting GroupConfederation of Indian Industry (BCG-CII) report, this sector is projected to double from a US$1.1-1.2 trillion market by 2020, driven by a 70 percent rise in income levels and a 100 million addition in the number of youth entering the labor force.<sup>2</sup> However, despite growth projections, there are several factors that hinder the growth of these informal enterprises which provide livelihood options to nearly 111 million workers,<sup>3</sup> thus forming an important engine for India’s economic growth.\r\n\r\nThe lack of proper infrastructure and technical skills notwithstanding, a pressing factor hindering attainment of scale by informal enterprises is the lack of credit from formal sources at affordable rates of interest. According to an International Finance Corporation (IFC) report, the credit gap for informal enterprises within the Micro, Small and Medium Enterprises (MSME) sector in India was estimated at US$418 billion in 2012-13.<sup>4</sup> Underlying the gap in accessing formal credit is the story of missing applicant credit histories or other parameters of credit worthiness used in traditional appraisal processes by lenders.<sup>5</sup> Under such circumstances, most enterprises resort to informal lenders, despite the high interest rates charged. Reluctance to adopt digital payments further exacerbates this situation, since it is near impossible to convince lenders of credit worthiness in the face of missing information on credit and other transactional histories. Lack of awareness, low capability and unwillingness to try new technologies for fear of failure are some reasons that contribute to this wariness and create a vicious cycle that has been hard to break.\r\n\r\nCATALYST, in its drive to explore the digital readiness of this segment, hypothesized that providing access to a small amount of credit at lower rates could act as a hook for digital payment adoption and usage, which in turn could trigger a positive spiral to access higher amounts of credit. In a preliminary study to understand the financial behavior and borrowing pattern of small businesses, CATALYST conducted a Credit Needs Assessment Survey (CNAS) where 1,140 small fixed store merchants in Jaipur were interviewed in September 2017. The survey showed that 69 percent of the merchants sourced their credit from informal sources such as friends, family and local moneylenders. Merchants expressed dissatisfaction with local moneylenders because they charged an interest rate of over 30 percent per month. But they still tend to prefer informal lenders over formal ones because of ease of access, no requirement of lengthy documentation, and speedy processes.\r\n\r\nArmed with these insights, CATALYST launched the Credit as a Hook pilot in Jaipur in June 2018 for a select set of merchants. The pilot aimed to provide incremental loans through a starter-builder model starting with a small loan that would increase based on usage of digital payments, where the payment footprint would help merchants build their formal credit history. CATALYST hypothesized that, for the  merchants, this would result in larger loans over a period of time at better rates of interest. For lenders, the presence of a digital footprint would provide the means to underwrite loans better and allow them to acquire new customers (i.e., a set of small merchants that was hitherto unserved by formal financial institutions). The initial pre-assessment survey carried out prior to the product launch, CATALYST’s CNAS report, revealed that 92 percent merchants contacted during the survey was aware of digital payment solutions. Of these, 53.5 percent was interested in availing credit through a digital platform with an expectation of quick processing time.\r\n\r\nThe first challenge that CATALYST faced was to convince lenders to provide an initial loan, albeit small, in the absence of a digital payment history. Traditionally, the route to access credit has been via an established digital payment footprint because of the inherent difference in the way payment and credit operates. Payment systems work better when more people use them, and therefore are designed to be more inclusive in nature. Credit, on the other hand, is designed to hedge excessive risks, and therefore is harder to establish as the first step to financial inclusion of the underserved market segment with no credit history.\r\n\r\nA lending model is predicated on profits from taking calculated risks. So, lenders seek to build strong relationships with their customers and get a broad base of information to calculate the exact underlying risk. On the other hand, payment companies are inherently less dependent on understanding customer risk. Payment businesses therefore tend to be more transactional and less relationship-based than lending ones. The quality or depth of individual customer relationships matters less. Instead, the number and breadth of customers and their networks matter more.<sup>6</sup>\r\n\r\nUnderstanding these basic functions of payments and credit is critical to exploring how the two can be linked. Technology and access to customer data play a huge role in leveraging the payment and credit lens to achieve financial inclusion.\r\n\r\nThe CATALYST pilot aimed at precisely this understanding. How can we urge merchants to start using digital solutions, which in turn can help them access credit at better terms?\r\n\r\nWhile the merits of credit are known, research is beginning to show the advantages of digital credit as well. Early evidence from studying M-Shawri<sup>7</sup> in Kenya has shown that uptake of digital loans has helped improve household resilience against shocks and increased the propensity of families to spend on welfare activities such as health and education.<sup>8</sup> While we have little evidence available from similar experiments in India, we expect the positive benefits would be similar.\r\n\r\nWe hope that the following results of CATALYST’s Credit as a Hook pilot reveal the opportunities and challenges of launching a digital payment and loan product bundle for underserved informal sector merchants in India.[/vc_column_text][vc_column_text text_color=\"#757c74\" font_size=\"14px\" letter_spacing=\"\"]<em><sup>1</sup>India’s $670 billion retail market is heading for a dream run, April 16, 2018, Quartz.</em>\r\n\r\n<em><sup>2</sup>Retail Transformation: Changing Your Performance Trajectory, BCG-CII National Retail Summit Report, 2016.</em>\r\n\r\n<em><sup>3</sup>Found: 111 million MSME workers in India as data rules changes, Livemint, November 22, 2017.</em>\r\n\r\n<em><sup>4</sup>MSME Finance Gap, Assessment of the shortfalls and opportunities in financing micro, small and medium enterprises in emerging markets, IFC, 2017.</em>\r\n\r\n<em><sup>5</sup>Research by Entrepreneurial Finance Lab, retrieved from The Hindu Business Line, ‘There is a credit gap of 56% in the MSME sector’, July 2, 2014</em>\r\n\r\n<em><sup>6</sup>Buckley, R. and I..Mas. The coming of age of digital payment as a field of expertise, Journal of Law Technology and Policy, June 2016, Vol.2016.</em>\r\n\r\n<em><sup>7</sup>M-Shwari is a paperless banking service offered through M-Pesa. M-Shwari bank accounts are opened and maintained through mobile phones.</em>\r\n\r\n<em><sup>8</sup>Bharadwaj, P., W. Jack and T. Suri. Can Digital Loans Deliver: Take Up and Impact of Digital Loans in Kenya, 2018 (Working Paper, draft received on special request from T. Suri).</em>[/vc_column_text][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"image\" bg_position_horizontal=\"center\" enable_parallax=\"false\" parallax_speed=\"0.4\" padding_top=\"150\" padding_bottom=\"150\" bg_image=\"39431\"][vc_column][vc_custom_heading text=\"INSIGHTS FROM THE PILOT\" font_container=\"tag:h2|font_size:26px|text_align:center|color:%23ffffff|line_height:32px\" google_fonts=\"font_family:Roboto%20Condensed%3A300%2C300italic%2Cregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal\" letter_spacing=\"\"][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#ffffff\"][vc_column][vc_row_inner][vc_column_inner][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]Testing the hypothesis involved bringing together a payment provider and a lender — a role that was played by CATALYST. For the pilot, CATALYST partnered with Nupay, a Point of Sale (PoS) device or card swipe machine provider and an early stage startup, and Capital First, a Non Banking Financial Company (NBFC), which agreed to provide term loans to fixed store merchants in Jaipur. The combination of a payment device and loan was offered as a bundle, with the intention of testing the extent to which credit can act as a ‘hook’ to adopt and use digital payments. This combination was created for the purpose of the pilot alone since lenders are unclear of the risks involved in offering a small amount of credit, no matter how small, before they can establish credit history based on transactions on the device provided. Since the combination of partners was arranged by CATALYST for the pilot, CATALYST also had to provide a set of Feet on Street (FoS) for on-the-ground support to roll out the services. The FoS team, trained by CATALYST, provided support in marketing and customer acquisition.\r\n\r\n&nbsp;\r\n\r\n<strong>Product bundle: Capital First and Nupay, a term loan with a card swipe machine</strong>\r\n\r\nProduct bundle details: Capital First (the lender) agreed to provide loans of a ticket size of INR 25,000 to INR 5 lakh at an interest rate of 18 percent to 24 percent annually for a tenure of nine months to 36 months, depending on the ticket size and repayment capacity.\r\n\r\nNupay’s card swipe machine had a monthly rental of INR 350 (~ US$5) plus 18 percent Goods and Service Tax (GST), which was also to be paid by merchants. The lender agreed that merchants would be considered for an incremental loan based on their repayment history observed in the first tranche of the loan, and their digital transaction footprint.\r\n\r\n&nbsp;\r\n\r\n<strong>Project roll-out and findings: digital payment adoption vs. non-adoption</strong>\r\n\r\nDuring the pilot, CATALYST reached out to 409 fixed store merchants across six major markets in Jaipur (Shastri Nagar, Sodala, Durgapura, Khatirpura, Jhotwara and Bani Park).9 These stores have been in business for an average of 10 years and had a median monthly revenue of INR 45,000. Most stores (99 percent) were owned by men; 87 percent was sole proprietorships while a smaller group (13 percent) was managed jointly with other family members. Sixty-five of them were already using a PoS or a card swipe machine and the remaining 344 merchants were given a demo on using a new PoS machine with the help of CATALYST’s FoS team.[/vc_column_text][vc_single_image image=\"39426\" img_size=\"full\" alignment=\"center\"][vc_column_text text_color=\"#757c74\" font_size=\"14px\" letter_spacing=\"\"]<em><sup>9</sup>This data set is separate from the earlier CNAS data. With a time lag of eight months, it is often difficult to work with earlier data sets. So, 490 new fixed stores were chosen from six new markets in Jaipur</em>[/vc_column_text][/vc_column_inner][/vc_row_inner][vc_row_inner css=\".vc_custom_1537937440359{padding-top: 30px !important;}\"][vc_column_inner][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]<strong>Key results from the experiment were:</strong>\r\n<ul>\r\n 	<li>There were eight fixed store merchants who had never used a card swipe machine but eventually adopted digital payment solutions after being trained on card swipe usage by the CATALYST FoS team.</li>\r\n 	<li>The primary reason for adoption was that it would allow them to service a broader customer segment that used (debit/credit) cards to make payments. In other words, the ability to serve a specific customer segment that was familiar with digital solutions was a key driver. This would also result in new customer acquisition over a period of time.</li>\r\n 	<li>Among the merchants who refused to use or adopt a PoS machine, the dominant reason for nonadoption was the absence of customer demand (62 percent, Figure 1). These merchants were unwilling to act as enablers to train customers in using a new digital solution. If the customers asked for the service, they were happy to provide it.</li>\r\n 	<li>The remaining 10 percent (Figure 1) reported the inherent cash stickiness of their business as a major deterrent. Another 2 percent (Figure 1) cited the cost of the machine as a major barrier to accepting digital payments.</li>\r\n</ul>\r\n[/vc_column_text][vc_single_image image=\"39433\" img_size=\"full\" alignment=\"center\"][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]<em>Note: From top right: existing loan usage, source of loan, purpose of loans and awareness about CIBIL scores of 18 merchants who agreed to reveal information about a prior loan.</em>[/vc_column_text][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]While most merchants who were part of the pilot preferred not to share their current loan practices, those who revealed that they had availed a loan (18 out of 409) had done so from a formal source. Fourteen of the 18 were also aware of their credit score (CIBIL) and its related impact on their credit eligibility.\r\n<ul>\r\n 	<li>Only 18 fixed store merchants (4 percent) with an average monthly revenue of INR 90,000 (double the population median of INR 45,000) reported that they had availed of a loan in the past.</li>\r\n 	<li>The average tenure of the loans was two to three years; 17 merchants sourced the loan from banks and one from a Micro Finance Institution (MFI);</li>\r\n 	<li>The purpose for which loans were taken varied from business expansion (10 merchants), household requirements (four merchants) to health emergencies (one merchant). Utility loans such as for two wheelers (three merchants) formed another major category of reasons for taking loans; and</li>\r\n 	<li>The ticket size of the loans taken by the merchants varied from INR 40,000 to INR 9 lakhs.</li>\r\n</ul>\r\n[/vc_column_text][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"image\" bg_color=\"#c9213b\" enable_parallax=\"false\" padding_top=\"150\" padding_bottom=\"150\" inline_style=\"font-style: normal;\" bg_image=\"39439\"][vc_column][vc_row_inner][vc_column_inner][vc_custom_heading text=\"MERCHANTS’ PERCEPTION ON THE BUNDLED PRODUCT\r\n\" font_container=\"tag:h2|font_size:26px|text_align:center|color:%23ffffff|line_height:32px\" google_fonts=\"font_family:Roboto%20Condensed%3A300%2C300italic%2Cregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal\" letter_spacing=\"\" el_class=\"normal-style \"][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#ffffff\" inline_style=\"font-style: normal;\"][vc_column][vc_row_inner][vc_column_inner el_class=\"normal-style \"][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]Perceived vs. real interest in loan: When offered the bundled product of payment device and credit, 25 merchants showed initial interest solely in accessing the loan during their first interaction with the CATALYST FoS team. However, 24 had changed their minds when the lender’s agent approached them after a week, perhaps because merchants are always interested in understanding options for credit but may not avail of it even if they express an interest initially.\r\n\r\nOne merchant who agreed to try the combination of a PoS device and loan had a fixed cloth store in Shastri Nagar market. He wanted a loan of INR 1-2 lakhs. Unfortunately, the request was denied since his residence was located outside the serviceable area set by the lender. This fact was discovered after the processing was done, and resulted in a poor customer experience for the merchant.\r\n\r\n<strong>Why was there a low uptake? </strong>\r\n\r\nThe experiment shows that while there was individual adoption of the card swipe machines, there was little uptake of the bundled product. Technology did seamlessly bind the products together but the communication to merchants was often unclear and did not explain how payment device usage would help them get a loan of higher amount in the future. The reasons this product could not cater to customer expectations or improve customer experience as expected are:\r\n\r\n<strong>Loan structure:</strong> While the lender assured the merchants of a credit-build-up model, the merchants were keen to understand the exact qualifiers for the build-up process, i.e., number and/or value of transactions required to qualify for the next tranche of loans. Additionally, they wanted to know by what percentage the loan amount could grow through increased usage of digital transactions. None of this information was provided to merchants since the lender had not yet thought it through. The product’s value proposition stated in one line by the lender as ‘enhanced loan size for incremental usage of digital payments’ failed to gain the merchants’ trust.\r\n\r\n<strong>Single interface for credit and digital payments:</strong> During the CATALYST pilot, the lending company and the digital payment solution company used two separate applications to onboard customers. For the merchants who saw the two as a single product, it was important for the digital payment solution provider and the lending partner to integrate their solution into one single application for simplicity and usage. The existing process offered poor customer experience because filling out two applications is a time-consuming process.\r\n\r\n<strong>Large time lags:</strong> Loan disbursal followed a lengthy process, i.e., lead generation by field agents (CATALYST FoS team) from an initial interaction, followed by a calling exercise by the credit assessor and then a site verification. This long time period between initial contact and disbursement was a pain point. Additionally, there were delays in disbursing the card swipe machine. Partnering with an early stage startup for PoS machines led to a resource crunch, which resulted in operational delays. The time lag between initial lead generation and delivery of the machine ranged from 15-20 days which was too long a time to retain interest.\r\n\r\n<strong>High cost of on boarding:</strong> The loan offer had a customer onboarding cost plus GST that hiked up the existing rates of interest by 3 to 4 percent so the lending interest rate worked out to be around 30 percent annually. These nuanced details deterred many of the merchants to finally take up the loan despite having shown an initial interest in the loan product.\r\n\r\n<strong>Short tenure of the pilot:</strong> Lastly, one must note that three or four months is too short a time to launch and iterate on a product bundle that includes a loan repayment timeline of nine to 36 months. To understand access and usage of repeat loans, the pilot experiment should essentially be of a much longer tenure.[/vc_column_text][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#373b3c\" padding_top=\"75\" padding_bottom=\"75\" inline_style=\"font-style: normal;\"][vc_column][vc_row_inner][vc_column_inner][vc_custom_heading text=\"RECOMMENDATIONS\" font_container=\"tag:h2|font_size:26px|text_align:center|color:%23ffffff|line_height:32px\" google_fonts=\"font_family:Roboto%20Condensed%3A300%2C300italic%2Cregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal\" letter_spacing=\"\" el_class=\"normal-style \"][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#ffffff\"][vc_column][vc_row_inner equal_height=\"yes\"][vc_column_inner el_class=\"normal-style\"][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]<strong>Need for a local presence: </strong>An implementation challenge that needs to be addressed in order to iterate on the pilot experiment and help it succeed is decreasing the time lags between the first point of contact to in-person onboarding with the card swipe machine and the loan. To avoid such operational delays, it is advisable to work with a local company with a greater field presence than with a well-known company based out of another metropolis but with little field support, as was the case during this pilot. Otherwise, the card swipe company/loan company should partner with a channel partner that should be assigned locally to cover the high customer acquisition cost which must be incurred (by default) for wider reach and larger impact among the segment of merchants who are new to digital payment usage.\r\n\r\n<strong>Lower cost of product:</strong> If such loans could get priority sector lending status, obtaining funds would be easier for an NBFC, making access to credit easier and cheaper.\r\n\r\n<strong>Alternate digital payment solutions:</strong> Current credit products are more inclined towards PoS machine uptake and usage. However, given the rise in use of other digital payment modes such as Unified Payments Interface (UPI), e-wallets and other Aadhaar-based solutions could lead to faster and cheaper adoption among merchants.\r\n\r\n<strong>Simple product structure:</strong> As the pilot results suggest, clearly informing the merchants of the exact qualifying factors for incremental loans will help develop higher trust and better customer relationships for a credit-builder model.\r\n\r\n<strong>Provide digital training and awareness:</strong> Multiple field visits and available data on awareness of credit history or usage of digital payments suggest that small fixed store merchants need substantial handholding, training and awareness to understand fundamental financial concepts, the importance of formal loans, and use of credit history. The experiment results suggest that the small merchants would be better off with expert handholding support and training from their first point of contact, as they would be without operational delays. Further, digital training and awareness building must extend to consumers who shop at these merchant locations, since customer demand is a huge driver in merchant acceptance of digital solutions.[/vc_column_text][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#c9213b\" padding_top=\"75\" padding_bottom=\"75\" inline_style=\"font-style: normal;\"][vc_column][vc_row_inner][vc_column_inner][vc_custom_heading text=\"CONCLUSION\" font_container=\"tag:h2|font_size:26px|text_align:center|color:%23ffffff|line_height:32px\" google_fonts=\"font_family:Roboto%20Condensed%3A300%2C300italic%2Cregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal\" letter_spacing=\"\" el_class=\"normal-style \"][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#ffffff\"][vc_column][vc_row_inner equal_height=\"yes\"][vc_column_inner el_class=\"normal-style\"][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]Credit can potentially act as a hook for usage of digital solutions, provided the effective costs are lower compared to credit from informal sources, and access is speedier. Merchants also need to be provided information on the clear pathway on increase in credit as they continue using the digital facilities. Lenders and payment service providers must present a unified front and offer a superior customer experience to the merchants. Lastly, acceptance of new payment solutions requires end customers to be sensitized equally[/vc_column_text][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#ffffff\"][vc_column][vc_column_text letter_spacing=\"\"]\r\n<p style=\"text-align: left;\"><span style=\"color: #da092b;\">TECHNICAL WRITERS:</span> John Arun and Shubhranka Mondal</p>\r\n<p style=\"text-align: left;\"><span style=\"color: #da092b;\">ACKNOWLEDGEMENTS:</span> The authors would like to thank Jayshree Venkatesan for her expert advice, and CATALYST’s Feet on Street team, for their ground support</p>\r\n[/vc_column_text][kleo_button title=\"Download full report\" href=\"https://cashlesscatalyst.org/wp-content/uploads/2018/11/CH-Learning-Note.pdf\" target=\"_blank\" position=\"center\" size=\"lg\" type=\"boxed-icon\" special=\"no\" icon=\"download\" font_size=\"14px\" letter_spacing=\"\" el_class=\"pkirbtn\" icon_custom_background=\"#d11e3c\" icon_custom_text=\"#ffffff\"][/vc_column][/vc_row][vc_row el_id=\"footer_area\" text_align=\"center\" type=\"image\" bg_position_horizontal=\"center\" enable_parallax=\"false\" padding_top=\"50px\" padding_bottom=\"50px\" bg_image=\"7886\"][vc_column width=\"1/4\"][/vc_column][vc_column width=\"1/2\" offset=\"vc_col-lg-offset-0 vc_col-md-offset-0 vc_col-sm-offset-0\"][vc_single_image image=\"7888\" img_size=\"full\" alignment=\"center\"][vc_column_text text_color=\"#ffffff\" font_size=\"14px\" letter_spacing=\"\" css=\".vc_custom_1484826151396{margin-top: 35px !important;margin-bottom: 5px !important;padding-right: 20px !important;}\"]\r\n<p style=\"text-align: center;\">CATALYST is an initiative seeded by an alliance between the Government of India &amp; USAID, to expand digital payments and financial inclusion in India, especially for small merchants and low-income consumers.</p>\r\n[/vc_column_text][kleo_gap][vc_column_text letter_spacing=\"\" css=\".vc_custom_1484051069491{margin-bottom: 0px !important;}\"]\r\n<p style=\"text-align: center;\">[email-newsletter-plugin]</p>\r\n[/vc_column_text][kleo_icon icon=\"facebook\" href=\"https://www.facebook.com/CashlessCatalyst/\" target=\"_blank\" padding=\"15px\" icon_color=\"#ffffff\"][kleo_icon icon=\"linkedin\" href=\"https://www.linkedin.com/company/13221050?trk=tyah&amp;trkInfo=clickedVertical%3Acompany%2CclickedEntityId%3A13221050%2Cidx%3A2-1-2%2CtarId%3A1476420479247%2Ctas%3Acashless%20catalyst\" target=\"_blank\" padding=\"15px\" icon_color=\"#ffffff\"][kleo_icon icon=\"twitter\" href=\"https://twitter.com/cashlesscatalys\" target=\"_blank\" padding=\"15px\" icon_color=\"#ffffff\"][kleo_icon icon=\"youtube-play\" href=\"https://www.youtube.com/channel/UChuc38_PfawDOu44IfYS4lw\" target=\"_blank\" padding=\"15px\" icon_color=\"#ffffff\"][/vc_column][vc_column width=\"1/4\"][/vc_column][/vc_row]', 'DIGITAL LENDING FOR SMALL MERCHANTS: THE MISSING ROAD TO THE LAST MILE', '', 'inherit', 'closed', 'closed', '', '39421-revision-v1', '', '', '2018-11-20 09:24:03', '2018-11-20 09:24:03', '', 39421, 'https://cashlesscatalyst.org/media/39421-revision-v1/', 0, 'revision', '', 0);
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(40372, 23, '2019-02-06 09:44:23', '2019-02-06 09:44:23', '[vc_row equal_height=\"yes\" content_placement=\"middle\" type=\"image\" enable_parallax=\"false\" parallax_speed=\"0.4\" padding_top=\"110\" padding_bottom=\"0\" bg_image=\"39430\"][vc_column][kleo_gap size=\"100px\"][vc_row_inner][vc_column_inner width=\"1/6\"][/vc_column_inner][vc_column_inner width=\"2/3\"][vc_custom_heading text=\"DIGITAL LENDING FOR SMALL MERCHANTS: THE MISSING ROAD TO THE LAST MILE\" font_container=\"tag:h2|font_size:48px|text_align:center|color:%23ffffff|line_height:54px\" google_fonts=\"font_family:Roboto%20Condensed%3A300%2C300italic%2Cregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal\" letter_spacing=\"\"][/vc_column_inner][vc_column_inner width=\"1/6\"][/vc_column_inner][/vc_row_inner][kleo_gap size=\"140px\"][kleo_gap size=\"50px\"][/vc_column][/vc_row][vc_row equal_height=\"yes\" content_placement=\"middle\" padding_bottom=\"0\"][vc_column width=\"1/2\"][/vc_column][vc_column width=\"1/2\"][vc_row_inner equal_height=\"yes\" content_placement=\"middle\"][vc_column_inner width=\"5/12\"][/vc_column_inner][vc_column_inner width=\"1/3\" css=\".vc_custom_1488531456733{padding-right: 0px !important;}\"][vc_column_text letter_spacing=\"\"][addtoany][/vc_column_text][/vc_column_inner][vc_column_inner width=\"1/4\" css=\".vc_custom_1488531444909{padding-left: 0px !important;}\"][kleo_button title=\"Print this page\" href=\"https://cashlesscatalyst.org/wp-content/uploads/2018/11/CH-Learning-Note-v2.pdf\" target=\"_blank\" style=\"custom\" position=\"left\" size=\"lg\" special=\"no\" border=\"no\" icon=\"print\" font_size=\"16px\" letter_spacing=\"\" el_class=\"grey-icon\" custom_text=\"#d11e3c\"][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#ffffff\"][vc_column][vc_custom_heading text=\"BACKGROUND\" font_container=\"tag:h2|font_size:26px|text_align:left|color:%23383b3b|line_height:32px\" google_fonts=\"font_family:Roboto%20Condensed%3A300%2C300italic%2Cregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal\" letter_spacing=\"\"][vc_row_inner css=\".vc_custom_1537456868816{margin-bottom: 35px !important;}\"][vc_column_inner][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]Ninety-three percent of India’s US$670 billion retail market continues to be unorganized, operating through mom-and-pop, kirana or standalone stores.<sup>1</sup> According to a recent Boston Consulting GroupConfederation of Indian Industry (BCG-CII) report, this sector is projected to double from a US$1.1-1.2 trillion market by 2020, driven by a 70 percent rise in income levels and a 100 million addition in the number of youth entering the labor force.<sup>2</sup> However, despite growth projections, there are several factors that hinder the growth of these informal enterprises which provide livelihood options to nearly 111 million workers,<sup>3</sup> thus forming an important engine for India’s economic growth.\r\n\r\nThe lack of proper infrastructure and technical skills notwithstanding, a pressing factor hindering attainment of scale by informal enterprises is the lack of credit from formal sources at affordable rates of interest. According to an International Finance Corporation (IFC) report, the credit gap for informal enterprises within the Micro, Small and Medium Enterprises (MSME) sector in India was estimated at US$418 billion in 2012-13.<sup>4</sup> Underlying the gap in accessing formal credit is the story of missing applicant credit histories or other parameters of credit worthiness used in traditional appraisal processes by lenders.<sup>5</sup> Under such circumstances, most enterprises resort to informal lenders, despite the high interest rates charged. Reluctance to adopt digital payments further exacerbates this situation, since it is near impossible to convince lenders of credit worthiness in the face of missing information on credit and other transactional histories. Lack of awareness, low capability and unwillingness to try new technologies for fear of failure are some reasons that contribute to this wariness and create a vicious cycle that has been hard to break.\r\n\r\nCATALYST, in its drive to explore the digital readiness of this segment, hypothesized that providing access to a small amount of credit at lower rates could act as a hook for digital payment adoption and usage, which in turn could trigger a positive spiral to access higher amounts of credit. In a preliminary study to understand the financial behavior and borrowing pattern of small businesses, CATALYST conducted a Credit Needs Assessment Survey (CNAS) where 1,140 small fixed store merchants in Jaipur were interviewed in September 2017. The survey showed that 69 percent of the merchants sourced their credit from informal sources such as friends, family and local moneylenders. Merchants expressed dissatisfaction with local moneylenders because they charged an interest rate of over 30 percent per month. But they still tend to prefer informal lenders over formal ones because of ease of access, no requirement of lengthy documentation, and speedy processes.\r\n\r\nArmed with these insights, CATALYST launched the Credit as a Hook pilot in Jaipur in June 2018 for a select set of merchants. The pilot aimed to provide incremental loans through a starter-builder model starting with a small loan that would increase based on usage of digital payments, where the payment footprint would help merchants build their formal credit history. CATALYST hypothesized that, for the  merchants, this would result in larger loans over a period of time at better rates of interest. For lenders, the presence of a digital footprint would provide the means to underwrite loans better and allow them to acquire new customers (i.e., a set of small merchants that was hitherto unserved by formal financial institutions). The initial pre-assessment survey carried out prior to the product launch, CATALYST’s CNAS report, revealed that 92 percent merchants contacted during the survey was aware of digital payment solutions. Of these, 53.5 percent was interested in availing credit through a digital platform with an expectation of quick processing time.\r\n\r\nThe first challenge that CATALYST faced was to convince lenders to provide an initial loan, albeit small, in the absence of a digital payment history. Traditionally, the route to access credit has been via an established digital payment footprint because of the inherent difference in the way payment and credit operates. Payment systems work better when more people use them, and therefore are designed to be more inclusive in nature. Credit, on the other hand, is designed to hedge excessive risks, and therefore is harder to establish as the first step to financial inclusion of the underserved market segment with no credit history.\r\n\r\nA lending model is predicated on profits from taking calculated risks. So, lenders seek to build strong relationships with their customers and get a broad base of information to calculate the exact underlying risk. On the other hand, payment companies are inherently less dependent on understanding customer risk. Payment businesses therefore tend to be more transactional and less relationship-based than lending ones. The quality or depth of individual customer relationships matters less. Instead, the number and breadth of customers and their networks matter more.<sup>6</sup>\r\n\r\nUnderstanding these basic functions of payments and credit is critical to exploring how the two can be linked. Technology and access to customer data play a huge role in leveraging the payment and credit lens to achieve financial inclusion.\r\n\r\nThe CATALYST pilot aimed at precisely this understanding. How can we urge merchants to start using digital solutions, which in turn can help them access credit at better terms?\r\n\r\nWhile the merits of credit are known, research is beginning to show the advantages of digital credit as well. Early evidence from studying M-Shawri<sup>7</sup> in Kenya has shown that uptake of digital loans has helped improve household resilience against shocks and increased the propensity of families to spend on welfare activities such as health and education.<sup>8</sup> While we have little evidence available from similar experiments in India, we expect the positive benefits would be similar.\r\n\r\nWe hope that the following results of CATALYST’s Credit as a Hook pilot reveal the opportunities and challenges of launching a digital payment and loan product bundle for underserved informal sector merchants in India.[/vc_column_text][vc_column_text text_color=\"#757c74\" font_size=\"14px\" letter_spacing=\"\"]<em><sup>1</sup>India’s $670 billion retail market is heading for a dream run, April 16, 2018, Quartz.</em>\r\n\r\n<em><sup>2</sup>Retail Transformation: Changing Your Performance Trajectory, BCG-CII National Retail Summit Report, 2016.</em>\r\n\r\n<em><sup>3</sup>Found: 111 million MSME workers in India as data rules changes, Livemint, November 22, 2017.</em>\r\n\r\n<em><sup>4</sup>MSME Finance Gap, Assessment of the shortfalls and opportunities in financing micro, small and medium enterprises in emerging markets, IFC, 2017.</em>\r\n\r\n<em><sup>5</sup>Research by Entrepreneurial Finance Lab, retrieved from The Hindu Business Line, ‘There is a credit gap of 56% in the MSME sector’, July 2, 2014</em>\r\n\r\n<em><sup>6</sup>Buckley, R. and I.Mas. The coming of age of digital payment as a field of expertise, Journal of Law Technology and Policy, June 2016, Vol.2016.</em>\r\n\r\n<em><sup>7</sup>M-Shwari is a paperless banking service offered through M-Pesa. M-Shwari bank accounts are opened and maintained through mobile phones.</em>\r\n\r\n<em><sup>8</sup>Bharadwaj, P., W. Jack and T. Suri. Can Digital Loans Deliver: Take Up and Impact of Digital Loans in Kenya, 2018 (Working Paper, draft received on special request from T. Suri).</em>[/vc_column_text][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"image\" bg_position_horizontal=\"center\" enable_parallax=\"false\" parallax_speed=\"0.4\" padding_top=\"150\" padding_bottom=\"150\" bg_image=\"39431\"][vc_column][vc_custom_heading text=\"INSIGHTS FROM THE PILOT\" font_container=\"tag:h2|font_size:26px|text_align:center|color:%23ffffff|line_height:32px\" google_fonts=\"font_family:Roboto%20Condensed%3A300%2C300italic%2Cregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal\" letter_spacing=\"\"][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#ffffff\"][vc_column][vc_row_inner][vc_column_inner][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]Testing the hypothesis involved bringing together a payment provider and a lender — a role that was played by CATALYST. For the pilot, CATALYST partnered with Nupay, a Point of Sale (PoS) device or card swipe machine provider and an early stage startup, and Capital First, a Non Banking Financial Company (NBFC), which agreed to provide term loans to fixed store merchants in Jaipur. The combination of a payment device and loan was offered as a bundle, with the intention of testing the extent to which credit can act as a ‘hook’ to adopt and use digital payments. This combination was created for the purpose of the pilot alone since lenders are unclear of the risks involved in offering a small amount of credit, no matter how small, before they can establish credit history based on transactions on the device provided. Since the combination of partners was arranged by CATALYST for the pilot, CATALYST also had to provide a set of Feet on Street (FoS) for on-the-ground support to roll out the services. The FoS team, trained by CATALYST, provided support in marketing and customer acquisition.\r\n\r\n&nbsp;\r\n\r\n<strong>Product bundle: Capital First and Nupay, a term loan with a card swipe machine</strong>\r\n\r\nProduct bundle details: Capital First (the lender) agreed to provide loans of a ticket size of INR 25,000 to INR 5 lakh at an interest rate of 18 percent to 24 percent annually for a tenure of nine months to 36 months, depending on the ticket size and repayment capacity.\r\n\r\nNupay’s card swipe machine had a monthly rental of INR 350 (~ US$5) plus 18 percent Goods and Service Tax (GST), which was also to be paid by merchants. The lender agreed that merchants would be considered for an incremental loan based on their repayment history observed in the first tranche of the loan, and their digital transaction footprint.\r\n\r\n&nbsp;\r\n\r\n<strong>Project roll-out and findings: digital payment adoption vs. non-adoption</strong>\r\n\r\nDuring the pilot, CATALYST reached out to 409 fixed store merchants across six major markets in Jaipur (Shastri Nagar, Sodala, Durgapura, Khatirpura, Jhotwara and Bani Park).<sup>9</sup> These stores have been in business for an average of 10 years and had a median monthly revenue of INR 45,000. Most stores (99 percent) were owned by men; 87 percent was sole proprietorships while a smaller group (13 percent) was managed jointly with other family members. Sixty-five of them were already using a PoS or a card swipe machine and the remaining 344 merchants were given a demo on using a new PoS machine with the help of CATALYST’s FoS team.[/vc_column_text][vc_single_image image=\"39426\" img_size=\"full\" alignment=\"center\"][vc_column_text text_color=\"#757c74\" font_size=\"14px\" letter_spacing=\"\"]<em><sup>9</sup>This data set is separate from the earlier CNAS data. With a time lag of eight months, it is often difficult to work with earlier data sets. So, 490 new fixed stores were chosen from six new markets in Jaipur</em>[/vc_column_text][/vc_column_inner][/vc_row_inner][vc_row_inner css=\".vc_custom_1537937440359{padding-top: 30px !important;}\"][vc_column_inner][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]<strong>Key results from the experiment were:</strong>\r\n<ul>\r\n 	<li>There were eight fixed store merchants who had never used a card swipe machine but eventually adopted digital payment solutions after being trained on card swipe usage by the CATALYST FoS team.</li>\r\n 	<li>The primary reason for adoption was that it would allow them to service a broader customer segment that used (debit/credit) cards to make payments. In other words, the ability to serve a specific customer segment that was familiar with digital solutions was a key driver. This would also result in new customer acquisition over a period of time.</li>\r\n 	<li>Among the merchants who refused to use or adopt a PoS machine, the dominant reason for nonadoption was the absence of customer demand (62 percent, Figure 1). These merchants were unwilling to act as enablers to train customers in using a new digital solution. If the customers asked for the service, they were happy to provide it.</li>\r\n 	<li>The remaining 10 percent (Figure 1) reported the inherent cash stickiness of their business as a major deterrent. Another 2 percent (Figure 1) cited the cost of the machine as a major barrier to accepting digital payments.</li>\r\n</ul>\r\n[/vc_column_text][vc_single_image image=\"39433\" img_size=\"full\" alignment=\"center\"][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]<em>Note: From top right: existing loan usage, source of loan, purpose of loans and awareness about CIBIL scores of 18 merchants who agreed to reveal information about a prior loan.</em>[/vc_column_text][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]While most merchants who were part of the pilot preferred not to share their current loan practices, those who revealed that they had availed a loan (18 out of 409) had done so from a formal source. Fourteen of the 18 were also aware of their credit score (CIBIL) and its related impact on their credit eligibility.\r\n<ul>\r\n 	<li>Only 18 fixed store merchants (4 percent) with an average monthly revenue of INR 90,000 (double the population median of INR 45,000) reported that they had availed of a loan in the past.</li>\r\n 	<li>The average tenure of the loans was two to three years; 17 merchants sourced the loan from banks and one from a Micro Finance Institution (MFI);</li>\r\n 	<li>The purpose for which loans were taken varied from business expansion (10 merchants), household requirements (four merchants) to health emergencies (one merchant). Utility loans such as for two wheelers (three merchants) formed another major category of reasons for taking loans; and</li>\r\n 	<li>The ticket size of the loans taken by the merchants varied from INR 40,000 to INR 9 lakhs.</li>\r\n</ul>\r\n[/vc_column_text][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"image\" bg_color=\"#c9213b\" enable_parallax=\"false\" padding_top=\"150\" padding_bottom=\"150\" inline_style=\"font-style: normal;\" bg_image=\"39439\"][vc_column][vc_row_inner][vc_column_inner][vc_custom_heading text=\"MERCHANTS’ PERCEPTION ON THE BUNDLED PRODUCT\r\n\" font_container=\"tag:h2|font_size:26px|text_align:center|color:%23ffffff|line_height:32px\" google_fonts=\"font_family:Roboto%20Condensed%3A300%2C300italic%2Cregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal\" letter_spacing=\"\" el_class=\"normal-style \"][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#ffffff\" inline_style=\"font-style: normal;\"][vc_column][vc_row_inner][vc_column_inner el_class=\"normal-style \"][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]Perceived vs. real interest in loan: When offered the bundled product of payment device and credit, 25 merchants showed initial interest solely in accessing the loan during their first interaction with the CATALYST FoS team. However, 24 had changed their minds when the lender’s agent approached them after a week, perhaps because merchants are always interested in understanding options for credit but may not avail of it even if they express an interest initially.\r\n\r\nOne merchant who agreed to try the combination of a PoS device and loan had a fixed cloth store in Shastri Nagar market. He wanted a loan of INR 1-2 lakhs. Unfortunately, the request was denied since his residence was located outside the serviceable area set by the lender. This fact was discovered after the processing was done, and resulted in a poor customer experience for the merchant.\r\n\r\n<strong>Why was there a low uptake? </strong>\r\n\r\nThe experiment shows that while there was individual adoption of the card swipe machines, there was little uptake of the bundled product. Technology did seamlessly bind the products together but the communication to merchants was often unclear and did not explain how payment device usage would help them get a loan of higher amount in the future. The reasons this product could not cater to customer expectations or improve customer experience as expected are:\r\n\r\n<strong>Loan structure:</strong> While the lender assured the merchants of a credit-build-up model, the merchants were keen to understand the exact qualifiers for the build-up process, i.e., number and/or value of transactions required to qualify for the next tranche of loans. Additionally, they wanted to know by what percentage the loan amount could grow through increased usage of digital transactions. None of this information was provided to merchants since the lender had not yet thought it through. The product’s value proposition stated in one line by the lender as ‘enhanced loan size for incremental usage of digital payments’ failed to gain the merchants’ trust.\r\n\r\n<strong>Single interface for credit and digital payments:</strong> During the CATALYST pilot, the lending company and the digital payment solution company used two separate applications to onboard customers. For the merchants who saw the two as a single product, it was important for the digital payment solution provider and the lending partner to integrate their solution into one single application for simplicity and usage. The existing process offered poor customer experience because filling out two applications is a time-consuming process.\r\n\r\n<strong>Large time lags:</strong> Loan disbursal followed a lengthy process, i.e., lead generation by field agents (CATALYST FoS team) from an initial interaction, followed by a calling exercise by the credit assessor and then a site verification. This long time period between initial contact and disbursement was a pain point. Additionally, there were delays in disbursing the card swipe machine. Partnering with an early stage startup for PoS machines led to a resource crunch, which resulted in operational delays. The time lag between initial lead generation and delivery of the machine ranged from 15-20 days which was too long a time to retain interest.\r\n\r\n<strong>High cost of on boarding:</strong> The loan offer had a customer onboarding cost plus GST that hiked up the existing rates of interest by 3 to 4 percent so the lending interest rate worked out to be around 30 percent annually. These nuanced details deterred many of the merchants to finally take up the loan despite having shown an initial interest in the loan product.\r\n\r\n<strong>Short tenure of the pilot:</strong> Lastly, one must note that three or four months is too short a time to launch and iterate on a product bundle that includes a loan repayment timeline of nine to 36 months. To understand access and usage of repeat loans, the pilot experiment should essentially be of a much longer tenure.[/vc_column_text][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#373b3c\" padding_top=\"75\" padding_bottom=\"75\" inline_style=\"font-style: normal;\"][vc_column][vc_row_inner][vc_column_inner][vc_custom_heading text=\"RECOMMENDATIONS\" font_container=\"tag:h2|font_size:26px|text_align:center|color:%23ffffff|line_height:32px\" google_fonts=\"font_family:Roboto%20Condensed%3A300%2C300italic%2Cregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal\" letter_spacing=\"\" el_class=\"normal-style \"][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#ffffff\"][vc_column][vc_row_inner equal_height=\"yes\"][vc_column_inner el_class=\"normal-style\"][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]<strong>Need for a local presence: </strong>An implementation challenge that needs to be addressed in order to iterate on the pilot experiment and help it succeed is decreasing the time lags between the first point of contact to in-person onboarding with the card swipe machine and the loan. To avoid such operational delays, it is advisable to work with a local company with a greater field presence than with a well-known company based out of another metropolis but with little field support, as was the case during this pilot. Otherwise, the card swipe company/loan company should partner with a channel partner that should be assigned locally to cover the high customer acquisition cost which must be incurred (by default) for wider reach and larger impact among the segment of merchants who are new to digital payment usage.\r\n\r\n<strong>Lower cost of product:</strong> If such loans could get priority sector lending status, obtaining funds would be easier for an NBFC, making access to credit easier and cheaper.\r\n\r\n<strong>Alternate digital payment solutions:</strong> Current credit products are more inclined towards PoS machine uptake and usage. However, given the rise in use of other digital payment modes such as Unified Payments Interface (UPI), e-wallets and other Aadhaar-based solutions could lead to faster and cheaper adoption among merchants.\r\n\r\n<strong>Simple product structure:</strong> As the pilot results suggest, clearly informing the merchants of the exact qualifying factors for incremental loans will help develop higher trust and better customer relationships for a credit-builder model.\r\n\r\n<strong>Provide digital training and awareness:</strong> Multiple field visits and available data on awareness of credit history or usage of digital payments suggest that small fixed store merchants need substantial handholding, training and awareness to understand fundamental financial concepts, the importance of formal loans, and use of credit history. The experiment results suggest that the small merchants would be better off with expert handholding support and training from their first point of contact, as they would be without operational delays. Further, digital training and awareness building must extend to consumers who shop at these merchant locations, since customer demand is a huge driver in merchant acceptance of digital solutions.[/vc_column_text][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#c9213b\" padding_top=\"75\" padding_bottom=\"75\" inline_style=\"font-style: normal;\"][vc_column][vc_row_inner][vc_column_inner][vc_custom_heading text=\"CONCLUSION\" font_container=\"tag:h2|font_size:26px|text_align:center|color:%23ffffff|line_height:32px\" google_fonts=\"font_family:Roboto%20Condensed%3A300%2C300italic%2Cregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal\" letter_spacing=\"\" el_class=\"normal-style \"][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#ffffff\"][vc_column][vc_row_inner equal_height=\"yes\"][vc_column_inner el_class=\"normal-style\"][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]Credit can potentially act as a hook for usage of digital solutions, provided the effective costs are lower compared to credit from informal sources, and access is speedier. Merchants also need to be provided information on the clear pathway on increase in credit as they continue using the digital facilities. Lenders and payment service providers must present a unified front and offer a superior customer experience to the merchants. Lastly, acceptance of new payment solutions requires end customers to be sensitized equally[/vc_column_text][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#ffffff\"][vc_column][vc_column_text letter_spacing=\"\"]\r\n<p style=\"text-align: left;\"><span style=\"color: #da092b;\">TECHNICAL WRITERS:</span> John Arun and Shubhranka Mondal</p>\r\n<p style=\"text-align: left;\"><span style=\"color: #da092b;\">ACKNOWLEDGEMENTS:</span> The authors would like to thank Jayshree Venkatesan for her expert advice, and CATALYST’s Feet on Street team, for their ground support</p>\r\n[/vc_column_text][kleo_button title=\"Download full report\" href=\"https://cashlesscatalyst.org/wp-content/uploads/2018/11/CH-Learning-Note-v2.pdf\" target=\"_blank\" position=\"center\" size=\"lg\" type=\"boxed-icon\" special=\"no\" icon=\"download\" font_size=\"14px\" letter_spacing=\"\" el_class=\"pkirbtn\" icon_custom_background=\"#d11e3c\" icon_custom_text=\"#ffffff\"][/vc_column][/vc_row][vc_row el_id=\"footer_area\" text_align=\"center\" type=\"image\" bg_position_horizontal=\"center\" enable_parallax=\"false\" padding_top=\"50px\" padding_bottom=\"50px\" bg_image=\"7886\"][vc_column width=\"1/4\"][/vc_column][vc_column width=\"1/2\" offset=\"vc_col-lg-offset-0 vc_col-md-offset-0 vc_col-sm-offset-0\"][vc_single_image image=\"7888\" img_size=\"full\" alignment=\"center\"][vc_column_text text_color=\"#ffffff\" font_size=\"14px\" letter_spacing=\"\" css=\".vc_custom_1549446257975{margin-top: 35px !important;margin-bottom: 5px !important;padding-right: 20px !important;}\"]\r\n<p style=\"text-align: center;\">[footer_copy]</p>\r\n[/vc_column_text][kleo_gap][vc_column_text letter_spacing=\"\" css=\".vc_custom_1484051069491{margin-bottom: 0px !important;}\"]\r\n<p style=\"text-align: center;\">[email-newsletter-plugin]</p>\r\n[/vc_column_text][kleo_icon icon=\"facebook\" href=\"https://www.facebook.com/CashlessCatalyst/\" target=\"_blank\" padding=\"15px\" icon_color=\"#ffffff\"][kleo_icon icon=\"linkedin\" href=\"https://www.linkedin.com/company/13221050?trk=tyah&amp;trkInfo=clickedVertical%3Acompany%2CclickedEntityId%3A13221050%2Cidx%3A2-1-2%2CtarId%3A1476420479247%2Ctas%3Acashless%20catalyst\" target=\"_blank\" padding=\"15px\" icon_color=\"#ffffff\"][kleo_icon icon=\"twitter\" href=\"https://twitter.com/cashlesscatalys\" target=\"_blank\" padding=\"15px\" icon_color=\"#ffffff\"][kleo_icon icon=\"youtube-play\" href=\"https://www.youtube.com/channel/UChuc38_PfawDOu44IfYS4lw\" target=\"_blank\" padding=\"15px\" icon_color=\"#ffffff\"][/vc_column][vc_column width=\"1/4\"][/vc_column][/vc_row]', 'DIGITAL LENDING FOR SMALL MERCHANTS: THE MISSING ROAD TO THE LAST MILE', '', 'inherit', 'closed', 'closed', '', '39421-revision-v1', '', '', '2019-02-06 09:44:23', '2019-02-06 09:44:23', '', 39421, 'https://cashlesscatalyst.org/media/39421-revision-v1/', 0, 'revision', '', 0);
INSERT INTO `in_posts` (`ID`, `post_author`, `post_date`, `post_date_gmt`, `post_content`, `post_title`, `post_excerpt`, `post_status`, `comment_status`, `ping_status`, `post_password`, `post_name`, `to_ping`, `pinged`, `post_modified`, `post_modified_gmt`, `post_content_filtered`, `post_parent`, `guid`, `menu_order`, `post_type`, `post_mime_type`, `comment_count`) VALUES
(39455, 20, '2018-11-21 08:04:09', '2018-11-21 08:04:09', '[vc_row equal_height=\"yes\" content_placement=\"middle\" type=\"image\" enable_parallax=\"false\" parallax_speed=\"0.4\" padding_top=\"110\" padding_bottom=\"0\" bg_image=\"39430\"][vc_column][kleo_gap size=\"100px\"][vc_row_inner][vc_column_inner width=\"1/6\"][/vc_column_inner][vc_column_inner width=\"2/3\"][vc_custom_heading text=\"DIGITAL LENDING FOR SMALL MERCHANTS: THE MISSING ROAD TO THE LAST MILE\" font_container=\"tag:h2|font_size:48px|text_align:center|color:%23ffffff|line_height:54px\" google_fonts=\"font_family:Roboto%20Condensed%3A300%2C300italic%2Cregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal\" letter_spacing=\"\"][/vc_column_inner][vc_column_inner width=\"1/6\"][/vc_column_inner][/vc_row_inner][kleo_gap size=\"140px\"][kleo_gap size=\"50px\"][/vc_column][/vc_row][vc_row equal_height=\"yes\" content_placement=\"middle\" padding_bottom=\"0\"][vc_column width=\"1/2\"][/vc_column][vc_column width=\"1/2\"][vc_row_inner equal_height=\"yes\" content_placement=\"middle\"][vc_column_inner width=\"5/12\"][/vc_column_inner][vc_column_inner width=\"1/3\" css=\".vc_custom_1488531456733{padding-right: 0px !important;}\"][vc_column_text letter_spacing=\"\"][addtoany][/vc_column_text][/vc_column_inner][vc_column_inner width=\"1/4\" css=\".vc_custom_1488531444909{padding-left: 0px !important;}\"][kleo_button title=\"Print this page\" href=\"https://cashlesscatalyst.org/wp-content/uploads/2018/11/CH-Learning-Note.pdf\" target=\"_blank\" style=\"custom\" position=\"left\" size=\"lg\" special=\"no\" border=\"no\" icon=\"print\" font_size=\"16px\" letter_spacing=\"\" el_class=\"grey-icon\" custom_text=\"#d11e3c\"][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#ffffff\"][vc_column][vc_custom_heading text=\"BACKGROUND\" font_container=\"tag:h2|font_size:26px|text_align:left|color:%23383b3b|line_height:32px\" google_fonts=\"font_family:Roboto%20Condensed%3A300%2C300italic%2Cregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal\" letter_spacing=\"\"][vc_row_inner css=\".vc_custom_1537456868816{margin-bottom: 35px !important;}\"][vc_column_inner][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]Ninety-three percent of India’s US$670 billion retail market continues to be unorganized, operating through mom-and-pop, kirana or standalone stores.<sup>1</sup> According to a recent Boston Consulting GroupConfederation of Indian Industry (BCG-CII) report, this sector is projected to double from a US$1.1-1.2 trillion market by 2020, driven by a 70 percent rise in income levels and a 100 million addition in the number of youth entering the labor force.<sup>2</sup> However, despite growth projections, there are several factors that hinder the growth of these informal enterprises which provide livelihood options to nearly 111 million workers,<sup>3</sup> thus forming an important engine for India’s economic growth.\r\n\r\nThe lack of proper infrastructure and technical skills notwithstanding, a pressing factor hindering attainment of scale by informal enterprises is the lack of credit from formal sources at affordable rates of interest. According to an International Finance Corporation (IFC) report, the credit gap for informal enterprises within the Micro, Small and Medium Enterprises (MSME) sector in India was estimated at US$418 billion in 2012-13.<sup>4</sup> Underlying the gap in accessing formal credit is the story of missing applicant credit histories or other parameters of credit worthiness used in traditional appraisal processes by lenders.<sup>5</sup> Under such circumstances, most enterprises resort to informal lenders, despite the high interest rates charged. Reluctance to adopt digital payments further exacerbates this situation, since it is near impossible to convince lenders of credit worthiness in the face of missing information on credit and other transactional histories. Lack of awareness, low capability and unwillingness to try new technologies for fear of failure are some reasons that contribute to this wariness and create a vicious cycle that has been hard to break.\r\n\r\nCATALYST, in its drive to explore the digital readiness of this segment, hypothesized that providing access to a small amount of credit at lower rates could act as a hook for digital payment adoption and usage, which in turn could trigger a positive spiral to access higher amounts of credit. In a preliminary study to understand the financial behavior and borrowing pattern of small businesses, CATALYST conducted a Credit Needs Assessment Survey (CNAS) where 1,140 small fixed store merchants in Jaipur were interviewed in September 2017. The survey showed that 69 percent of the merchants sourced their credit from informal sources such as friends, family and local moneylenders. Merchants expressed dissatisfaction with local moneylenders because they charged an interest rate of over 30 percent per month. But they still tend to prefer informal lenders over formal ones because of ease of access, no requirement of lengthy documentation, and speedy processes.\r\n\r\nArmed with these insights, CATALYST launched the Credit as a Hook pilot in Jaipur in June 2018 for a select set of merchants. The pilot aimed to provide incremental loans through a starter-builder model starting with a small loan that would increase based on usage of digital payments, where the payment footprint would help merchants build their formal credit history. CATALYST hypothesized that, for the  merchants, this would result in larger loans over a period of time at better rates of interest. For lenders, the presence of a digital footprint would provide the means to underwrite loans better and allow them to acquire new customers (i.e., a set of small merchants that was hitherto unserved by formal financial institutions). The initial pre-assessment survey carried out prior to the product launch, CATALYST’s CNAS report, revealed that 92 percent merchants contacted during the survey was aware of digital payment solutions. Of these, 53.5 percent was interested in availing credit through a digital platform with an expectation of quick processing time.\r\n\r\nThe first challenge that CATALYST faced was to convince lenders to provide an initial loan, albeit small, in the absence of a digital payment history. Traditionally, the route to access credit has been via an established digital payment footprint because of the inherent difference in the way payment and credit operates. Payment systems work better when more people use them, and therefore are designed to be more inclusive in nature. Credit, on the other hand, is designed to hedge excessive risks, and therefore is harder to establish as the first step to financial inclusion of the underserved market segment with no credit history.\r\n\r\nA lending model is predicated on profits from taking calculated risks. So, lenders seek to build strong relationships with their customers and get a broad base of information to calculate the exact underlying risk. On the other hand, payment companies are inherently less dependent on understanding customer risk. Payment businesses therefore tend to be more transactional and less relationship-based than lending ones. The quality or depth of individual customer relationships matters less. Instead, the number and breadth of customers and their networks matter more.<sup>6</sup>\r\n\r\nUnderstanding these basic functions of payments and credit is critical to exploring how the two can be linked. Technology and access to customer data play a huge role in leveraging the payment and credit lens to achieve financial inclusion.\r\n\r\nThe CATALYST pilot aimed at precisely this understanding. How can we urge merchants to start using digital solutions, which in turn can help them access credit at better terms?\r\n\r\nWhile the merits of credit are known, research is beginning to show the advantages of digital credit as well. Early evidence from studying M-Shawri<sup>7</sup> in Kenya has shown that uptake of digital loans has helped improve household resilience against shocks and increased the propensity of families to spend on welfare activities such as health and education.<sup>8</sup> While we have little evidence available from similar experiments in India, we expect the positive benefits would be similar.\r\n\r\nWe hope that the following results of CATALYST’s Credit as a Hook pilot reveal the opportunities and challenges of launching a digital payment and loan product bundle for underserved informal sector merchants in India.[/vc_column_text][vc_column_text text_color=\"#757c74\" font_size=\"14px\" letter_spacing=\"\"]<em><sup>1</sup>India’s $670 billion retail market is heading for a dream run, April 16, 2018, Quartz.</em>\r\n\r\n<em><sup>2</sup>Retail Transformation: Changing Your Performance Trajectory, BCG-CII National Retail Summit Report, 2016.</em>\r\n\r\n<em><sup>3</sup>Found: 111 million MSME workers in India as data rules changes, Livemint, November 22, 2017.</em>\r\n\r\n<em><sup>4</sup>MSME Finance Gap, Assessment of the shortfalls and opportunities in financing micro, small and medium enterprises in emerging markets, IFC, 2017.</em>\r\n\r\n<em><sup>5</sup>Research by Entrepreneurial Finance Lab, retrieved from The Hindu Business Line, ‘There is a credit gap of 56% in the MSME sector’, July 2, 2014</em>\r\n\r\n<em><sup>6</sup>Buckley, R. and I.Mas. The coming of age of digital payment as a field of expertise, Journal of Law Technology and Policy, June 2016, Vol.2016.</em>\r\n\r\n<em><sup>7</sup>M-Shwari is a paperless banking service offered through M-Pesa. M-Shwari bank accounts are opened and maintained through mobile phones.</em>\r\n\r\n<em><sup>8</sup>Bharadwaj, P., W. Jack and T. Suri. Can Digital Loans Deliver: Take Up and Impact of Digital Loans in Kenya, 2018 (Working Paper, draft received on special request from T. Suri).</em>[/vc_column_text][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"image\" bg_position_horizontal=\"center\" enable_parallax=\"false\" parallax_speed=\"0.4\" padding_top=\"150\" padding_bottom=\"150\" bg_image=\"39431\"][vc_column][vc_custom_heading text=\"INSIGHTS FROM THE PILOT\" font_container=\"tag:h2|font_size:26px|text_align:center|color:%23ffffff|line_height:32px\" google_fonts=\"font_family:Roboto%20Condensed%3A300%2C300italic%2Cregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal\" letter_spacing=\"\"][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#ffffff\"][vc_column][vc_row_inner][vc_column_inner][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]Testing the hypothesis involved bringing together a payment provider and a lender — a role that was played by CATALYST. For the pilot, CATALYST partnered with Nupay, a Point of Sale (PoS) device or card swipe machine provider and an early stage startup, and Capital First, a Non Banking Financial Company (NBFC), which agreed to provide term loans to fixed store merchants in Jaipur. The combination of a payment device and loan was offered as a bundle, with the intention of testing the extent to which credit can act as a ‘hook’ to adopt and use digital payments. This combination was created for the purpose of the pilot alone since lenders are unclear of the risks involved in offering a small amount of credit, no matter how small, before they can establish credit history based on transactions on the device provided. Since the combination of partners was arranged by CATALYST for the pilot, CATALYST also had to provide a set of Feet on Street (FoS) for on-the-ground support to roll out the services. The FoS team, trained by CATALYST, provided support in marketing and customer acquisition.\r\n\r\n&nbsp;\r\n\r\n<strong>Product bundle: Capital First and Nupay, a term loan with a card swipe machine</strong>\r\n\r\nProduct bundle details: Capital First (the lender) agreed to provide loans of a ticket size of INR 25,000 to INR 5 lakh at an interest rate of 18 percent to 24 percent annually for a tenure of nine months to 36 months, depending on the ticket size and repayment capacity.\r\n\r\nNupay’s card swipe machine had a monthly rental of INR 350 (~ US$5) plus 18 percent Goods and Service Tax (GST), which was also to be paid by merchants. The lender agreed that merchants would be considered for an incremental loan based on their repayment history observed in the first tranche of the loan, and their digital transaction footprint.\r\n\r\n&nbsp;\r\n\r\n<strong>Project roll-out and findings: digital payment adoption vs. non-adoption</strong>\r\n\r\nDuring the pilot, CATALYST reached out to 409 fixed store merchants across six major markets in Jaipur (Shastri Nagar, Sodala, Durgapura, Khatirpura, Jhotwara and Bani Park).<sup>9</sup> These stores have been in business for an average of 10 years and had a median monthly revenue of INR 45,000. Most stores (99 percent) were owned by men; 87 percent was sole proprietorships while a smaller group (13 percent) was managed jointly with other family members. Sixty-five of them were already using a PoS or a card swipe machine and the remaining 344 merchants were given a demo on using a new PoS machine with the help of CATALYST’s FoS team.[/vc_column_text][vc_single_image image=\"39426\" img_size=\"full\" alignment=\"center\"][vc_column_text text_color=\"#757c74\" font_size=\"14px\" letter_spacing=\"\"]<em><sup>9</sup>This data set is separate from the earlier CNAS data. With a time lag of eight months, it is often difficult to work with earlier data sets. So, 490 new fixed stores were chosen from six new markets in Jaipur</em>[/vc_column_text][/vc_column_inner][/vc_row_inner][vc_row_inner css=\".vc_custom_1537937440359{padding-top: 30px !important;}\"][vc_column_inner][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]<strong>Key results from the experiment were:</strong>\r\n<ul>\r\n 	<li>There were eight fixed store merchants who had never used a card swipe machine but eventually adopted digital payment solutions after being trained on card swipe usage by the CATALYST FoS team.</li>\r\n 	<li>The primary reason for adoption was that it would allow them to service a broader customer segment that used (debit/credit) cards to make payments. In other words, the ability to serve a specific customer segment that was familiar with digital solutions was a key driver. This would also result in new customer acquisition over a period of time.</li>\r\n 	<li>Among the merchants who refused to use or adopt a PoS machine, the dominant reason for nonadoption was the absence of customer demand (62 percent, Figure 1). These merchants were unwilling to act as enablers to train customers in using a new digital solution. If the customers asked for the service, they were happy to provide it.</li>\r\n 	<li>The remaining 10 percent (Figure 1) reported the inherent cash stickiness of their business as a major deterrent. Another 2 percent (Figure 1) cited the cost of the machine as a major barrier to accepting digital payments.</li>\r\n</ul>\r\n[/vc_column_text][vc_single_image image=\"39433\" img_size=\"full\" alignment=\"center\"][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]<em>Note: From top right: existing loan usage, source of loan, purpose of loans and awareness about CIBIL scores of 18 merchants who agreed to reveal information about a prior loan.</em>[/vc_column_text][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]While most merchants who were part of the pilot preferred not to share their current loan practices, those who revealed that they had availed a loan (18 out of 409) had done so from a formal source. Fourteen of the 18 were also aware of their credit score (CIBIL) and its related impact on their credit eligibility.\r\n<ul>\r\n 	<li>Only 18 fixed store merchants (4 percent) with an average monthly revenue of INR 90,000 (double the population median of INR 45,000) reported that they had availed of a loan in the past.</li>\r\n 	<li>The average tenure of the loans was two to three years; 17 merchants sourced the loan from banks and one from a Micro Finance Institution (MFI);</li>\r\n 	<li>The purpose for which loans were taken varied from business expansion (10 merchants), household requirements (four merchants) to health emergencies (one merchant). Utility loans such as for two wheelers (three merchants) formed another major category of reasons for taking loans; and</li>\r\n 	<li>The ticket size of the loans taken by the merchants varied from INR 40,000 to INR 9 lakhs.</li>\r\n</ul>\r\n[/vc_column_text][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"image\" bg_color=\"#c9213b\" enable_parallax=\"false\" padding_top=\"150\" padding_bottom=\"150\" inline_style=\"font-style: normal;\" bg_image=\"39439\"][vc_column][vc_row_inner][vc_column_inner][vc_custom_heading text=\"MERCHANTS’ PERCEPTION ON THE BUNDLED PRODUCT\r\n\" font_container=\"tag:h2|font_size:26px|text_align:center|color:%23ffffff|line_height:32px\" google_fonts=\"font_family:Roboto%20Condensed%3A300%2C300italic%2Cregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal\" letter_spacing=\"\" el_class=\"normal-style \"][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#ffffff\" inline_style=\"font-style: normal;\"][vc_column][vc_row_inner][vc_column_inner el_class=\"normal-style \"][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]Perceived vs. real interest in loan: When offered the bundled product of payment device and credit, 25 merchants showed initial interest solely in accessing the loan during their first interaction with the CATALYST FoS team. However, 24 had changed their minds when the lender’s agent approached them after a week, perhaps because merchants are always interested in understanding options for credit but may not avail of it even if they express an interest initially.\r\n\r\nOne merchant who agreed to try the combination of a PoS device and loan had a fixed cloth store in Shastri Nagar market. He wanted a loan of INR 1-2 lakhs. Unfortunately, the request was denied since his residence was located outside the serviceable area set by the lender. This fact was discovered after the processing was done, and resulted in a poor customer experience for the merchant.\r\n\r\n<strong>Why was there a low uptake? </strong>\r\n\r\nThe experiment shows that while there was individual adoption of the card swipe machines, there was little uptake of the bundled product. Technology did seamlessly bind the products together but the communication to merchants was often unclear and did not explain how payment device usage would help them get a loan of higher amount in the future. The reasons this product could not cater to customer expectations or improve customer experience as expected are:\r\n\r\n<strong>Loan structure:</strong> While the lender assured the merchants of a credit-build-up model, the merchants were keen to understand the exact qualifiers for the build-up process, i.e., number and/or value of transactions required to qualify for the next tranche of loans. Additionally, they wanted to know by what percentage the loan amount could grow through increased usage of digital transactions. None of this information was provided to merchants since the lender had not yet thought it through. The product’s value proposition stated in one line by the lender as ‘enhanced loan size for incremental usage of digital payments’ failed to gain the merchants’ trust.\r\n\r\n<strong>Single interface for credit and digital payments:</strong> During the CATALYST pilot, the lending company and the digital payment solution company used two separate applications to onboard customers. For the merchants who saw the two as a single product, it was important for the digital payment solution provider and the lending partner to integrate their solution into one single application for simplicity and usage. The existing process offered poor customer experience because filling out two applications is a time-consuming process.\r\n\r\n<strong>Large time lags:</strong> Loan disbursal followed a lengthy process, i.e., lead generation by field agents (CATALYST FoS team) from an initial interaction, followed by a calling exercise by the credit assessor and then a site verification. This long time period between initial contact and disbursement was a pain point. Additionally, there were delays in disbursing the card swipe machine. Partnering with an early stage startup for PoS machines led to a resource crunch, which resulted in operational delays. The time lag between initial lead generation and delivery of the machine ranged from 15-20 days which was too long a time to retain interest.\r\n\r\n<strong>High cost of on boarding:</strong> The loan offer had a customer onboarding cost plus GST that hiked up the existing rates of interest by 3 to 4 percent so the lending interest rate worked out to be around 30 percent annually. These nuanced details deterred many of the merchants to finally take up the loan despite having shown an initial interest in the loan product.\r\n\r\n<strong>Short tenure of the pilot:</strong> Lastly, one must note that three or four months is too short a time to launch and iterate on a product bundle that includes a loan repayment timeline of nine to 36 months. To understand access and usage of repeat loans, the pilot experiment should essentially be of a much longer tenure.[/vc_column_text][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#373b3c\" padding_top=\"75\" padding_bottom=\"75\" inline_style=\"font-style: normal;\"][vc_column][vc_row_inner][vc_column_inner][vc_custom_heading text=\"RECOMMENDATIONS\" font_container=\"tag:h2|font_size:26px|text_align:center|color:%23ffffff|line_height:32px\" google_fonts=\"font_family:Roboto%20Condensed%3A300%2C300italic%2Cregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal\" letter_spacing=\"\" el_class=\"normal-style \"][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#ffffff\"][vc_column][vc_row_inner equal_height=\"yes\"][vc_column_inner el_class=\"normal-style\"][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]<strong>Need for a local presence: </strong>An implementation challenge that needs to be addressed in order to iterate on the pilot experiment and help it succeed is decreasing the time lags between the first point of contact to in-person onboarding with the card swipe machine and the loan. To avoid such operational delays, it is advisable to work with a local company with a greater field presence than with a well-known company based out of another metropolis but with little field support, as was the case during this pilot. Otherwise, the card swipe company/loan company should partner with a channel partner that should be assigned locally to cover the high customer acquisition cost which must be incurred (by default) for wider reach and larger impact among the segment of merchants who are new to digital payment usage.\r\n\r\n<strong>Lower cost of product:</strong> If such loans could get priority sector lending status, obtaining funds would be easier for an NBFC, making access to credit easier and cheaper.\r\n\r\n<strong>Alternate digital payment solutions:</strong> Current credit products are more inclined towards PoS machine uptake and usage. However, given the rise in use of other digital payment modes such as Unified Payments Interface (UPI), e-wallets and other Aadhaar-based solutions could lead to faster and cheaper adoption among merchants.\r\n\r\n<strong>Simple product structure:</strong> As the pilot results suggest, clearly informing the merchants of the exact qualifying factors for incremental loans will help develop higher trust and better customer relationships for a credit-builder model.\r\n\r\n<strong>Provide digital training and awareness:</strong> Multiple field visits and available data on awareness of credit history or usage of digital payments suggest that small fixed store merchants need substantial handholding, training and awareness to understand fundamental financial concepts, the importance of formal loans, and use of credit history. The experiment results suggest that the small merchants would be better off with expert handholding support and training from their first point of contact, as they would be without operational delays. Further, digital training and awareness building must extend to consumers who shop at these merchant locations, since customer demand is a huge driver in merchant acceptance of digital solutions.[/vc_column_text][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#c9213b\" padding_top=\"75\" padding_bottom=\"75\" inline_style=\"font-style: normal;\"][vc_column][vc_row_inner][vc_column_inner][vc_custom_heading text=\"CONCLUSION\" font_container=\"tag:h2|font_size:26px|text_align:center|color:%23ffffff|line_height:32px\" google_fonts=\"font_family:Roboto%20Condensed%3A300%2C300italic%2Cregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal\" letter_spacing=\"\" el_class=\"normal-style \"][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#ffffff\"][vc_column][vc_row_inner equal_height=\"yes\"][vc_column_inner el_class=\"normal-style\"][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]Credit can potentially act as a hook for usage of digital solutions, provided the effective costs are lower compared to credit from informal sources, and access is speedier. Merchants also need to be provided information on the clear pathway on increase in credit as they continue using the digital facilities. Lenders and payment service providers must present a unified front and offer a superior customer experience to the merchants. Lastly, acceptance of new payment solutions requires end customers to be sensitized equally[/vc_column_text][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#ffffff\"][vc_column][vc_column_text letter_spacing=\"\"]\r\n<p style=\"text-align: left;\"><span style=\"color: #da092b;\">TECHNICAL WRITERS:</span> John Arun and Shubhranka Mondal</p>\r\n<p style=\"text-align: left;\"><span style=\"color: #da092b;\">ACKNOWLEDGEMENTS:</span> The authors would like to thank Jayshree Venkatesan for her expert advice, and CATALYST’s Feet on Street team, for their ground support</p>\r\n[/vc_column_text][kleo_button title=\"Download full report\" href=\"https://cashlesscatalyst.org/wp-content/uploads/2018/11/CH-Learning-Note.pdf\" target=\"_blank\" position=\"center\" size=\"lg\" type=\"boxed-icon\" special=\"no\" icon=\"download\" font_size=\"14px\" letter_spacing=\"\" el_class=\"pkirbtn\" icon_custom_background=\"#d11e3c\" icon_custom_text=\"#ffffff\"][/vc_column][/vc_row][vc_row el_id=\"footer_area\" text_align=\"center\" type=\"image\" bg_position_horizontal=\"center\" enable_parallax=\"false\" padding_top=\"50px\" padding_bottom=\"50px\" bg_image=\"7886\"][vc_column width=\"1/4\"][/vc_column][vc_column width=\"1/2\" offset=\"vc_col-lg-offset-0 vc_col-md-offset-0 vc_col-sm-offset-0\"][vc_single_image image=\"7888\" img_size=\"full\" alignment=\"center\"][vc_column_text text_color=\"#ffffff\" font_size=\"14px\" letter_spacing=\"\" css=\".vc_custom_1484826151396{margin-top: 35px !important;margin-bottom: 5px !important;padding-right: 20px !important;}\"]\r\n<p style=\"text-align: center;\">CATALYST is an initiative seeded by an alliance between the Government of India &amp; USAID, to expand digital payments and financial inclusion in India, especially for small merchants and low-income consumers.</p>\r\n[/vc_column_text][kleo_gap][vc_column_text letter_spacing=\"\" css=\".vc_custom_1484051069491{margin-bottom: 0px !important;}\"]\r\n<p style=\"text-align: center;\">[email-newsletter-plugin]</p>\r\n[/vc_column_text][kleo_icon icon=\"facebook\" href=\"https://www.facebook.com/CashlessCatalyst/\" target=\"_blank\" padding=\"15px\" icon_color=\"#ffffff\"][kleo_icon icon=\"linkedin\" href=\"https://www.linkedin.com/company/13221050?trk=tyah&amp;trkInfo=clickedVertical%3Acompany%2CclickedEntityId%3A13221050%2Cidx%3A2-1-2%2CtarId%3A1476420479247%2Ctas%3Acashless%20catalyst\" target=\"_blank\" padding=\"15px\" icon_color=\"#ffffff\"][kleo_icon icon=\"twitter\" href=\"https://twitter.com/cashlesscatalys\" target=\"_blank\" padding=\"15px\" icon_color=\"#ffffff\"][kleo_icon icon=\"youtube-play\" href=\"https://www.youtube.com/channel/UChuc38_PfawDOu44IfYS4lw\" target=\"_blank\" padding=\"15px\" icon_color=\"#ffffff\"][/vc_column][vc_column width=\"1/4\"][/vc_column][/vc_row]', 'DIGITAL LENDING FOR SMALL MERCHANTS: THE MISSING ROAD TO THE LAST MILE', '', 'inherit', 'closed', 'closed', '', '39421-revision-v1', '', '', '2018-11-21 08:04:09', '2018-11-21 08:04:09', '', 39421, 'https://cashlesscatalyst.org/media/39421-revision-v1/', 0, 'revision', '', 0);
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(39448, 20, '2018-11-20 13:52:57', '2018-11-20 13:52:57', '[vc_row equal_height=\"yes\" content_placement=\"middle\" type=\"image\" enable_parallax=\"false\" parallax_speed=\"0.4\" padding_top=\"110\" padding_bottom=\"0\" bg_image=\"39430\"][vc_column][kleo_gap size=\"100px\"][vc_row_inner][vc_column_inner width=\"1/6\"][/vc_column_inner][vc_column_inner width=\"2/3\"][vc_custom_heading text=\"DIGITAL LENDING FOR SMALL MERCHANTS: THE MISSING ROAD TO THE LAST MILE\" font_container=\"tag:h2|font_size:48px|text_align:center|color:%23ffffff|line_height:54px\" google_fonts=\"font_family:Roboto%20Condensed%3A300%2C300italic%2Cregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal\" letter_spacing=\"\"][/vc_column_inner][vc_column_inner width=\"1/6\"][/vc_column_inner][/vc_row_inner][kleo_gap size=\"140px\"][kleo_gap size=\"50px\"][/vc_column][/vc_row][vc_row equal_height=\"yes\" content_placement=\"middle\" padding_bottom=\"0\"][vc_column width=\"1/2\"][/vc_column][vc_column width=\"1/2\"][vc_row_inner equal_height=\"yes\" content_placement=\"middle\"][vc_column_inner width=\"5/12\"][/vc_column_inner][vc_column_inner width=\"1/3\" css=\".vc_custom_1488531456733{padding-right: 0px !important;}\"][vc_column_text letter_spacing=\"\"][addtoany][/vc_column_text][/vc_column_inner][vc_column_inner width=\"1/4\" css=\".vc_custom_1488531444909{padding-left: 0px !important;}\"][kleo_button title=\"Print this page\" href=\"https://cashlesscatalyst.org/wp-content/uploads/2018/11/CH-Learning-Note.pdf\" target=\"_blank\" style=\"custom\" position=\"left\" size=\"lg\" special=\"no\" border=\"no\" icon=\"print\" font_size=\"16px\" letter_spacing=\"\" el_class=\"grey-icon\" custom_text=\"#d11e3c\"][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#ffffff\"][vc_column][vc_custom_heading text=\"BACKGROUND\" font_container=\"tag:h2|font_size:26px|text_align:left|color:%23383b3b|line_height:32px\" google_fonts=\"font_family:Roboto%20Condensed%3A300%2C300italic%2Cregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal\" letter_spacing=\"\"][vc_row_inner css=\".vc_custom_1537456868816{margin-bottom: 35px !important;}\"][vc_column_inner][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]Ninety-three percent of India’s US$670 billion retail market continues to be unorganized, operating through mom-and-pop, kirana or standalone stores.<sup>1</sup> According to a recent Boston Consulting GroupConfederation of Indian Industry (BCG-CII) report, this sector is projected to double from a US$1.1-1.2 trillion market by 2020, driven by a 70 percent rise in income levels and a 100 million addition in the number of youth entering the labor force.<sup>2</sup> However, despite growth projections, there are several factors that hinder the growth of these informal enterprises which provide livelihood options to nearly 111 million workers,<sup>3</sup> thus forming an important engine for India’s economic growth.\r\n\r\nThe lack of proper infrastructure and technical skills notwithstanding, a pressing factor hindering attainment of scale by informal enterprises is the lack of credit from formal sources at affordable rates of interest. According to an International Finance Corporation (IFC) report, the credit gap for informal enterprises within the Micro, Small and Medium Enterprises (MSME) sector in India was estimated at US$418 billion in 2012-13.<sup>4</sup> Underlying the gap in accessing formal credit is the story of missing applicant credit histories or other parameters of credit worthiness used in traditional appraisal processes by lenders.<sup>5</sup> Under such circumstances, most enterprises resort to informal lenders, despite the high interest rates charged. Reluctance to adopt digital payments further exacerbates this situation, since it is near impossible to convince lenders of credit worthiness in the face of missing information on credit and other transactional histories. Lack of awareness, low capability and unwillingness to try new technologies for fear of failure are some reasons that contribute to this wariness and create a vicious cycle that has been hard to break.\r\n\r\nCATALYST, in its drive to explore the digital readiness of this segment, hypothesized that providing access to a small amount of credit at lower rates could act as a hook for digital payment adoption and usage, which in turn could trigger a positive spiral to access higher amounts of credit. In a preliminary study to understand the financial behavior and borrowing pattern of small businesses, CATALYST conducted a Credit Needs Assessment Survey (CNAS) where 1,140 small fixed store merchants in Jaipur were interviewed in September 2017. The survey showed that 69 percent of the merchants sourced their credit from informal sources such as friends, family and local moneylenders. Merchants expressed dissatisfaction with local moneylenders because they charged an interest rate of over 30 percent per month. But they still tend to prefer informal lenders over formal ones because of ease of access, no requirement of lengthy documentation, and speedy processes.\r\n\r\nArmed with these insights, CATALYST launched the Credit as a Hook pilot in Jaipur in June 2018 for a select set of merchants. The pilot aimed to provide incremental loans through a starter-builder model starting with a small loan that would increase based on usage of digital payments, where the payment footprint would help merchants build their formal credit history. CATALYST hypothesized that, for the  merchants, this would result in larger loans over a period of time at better rates of interest. For lenders, the presence of a digital footprint would provide the means to underwrite loans better and allow them to acquire new customers (i.e., a set of small merchants that was hitherto unserved by formal financial institutions). The initial pre-assessment survey carried out prior to the product launch, CATALYST’s CNAS report, revealed that 92 percent merchants contacted during the survey was aware of digital payment solutions. Of these, 53.5 percent was interested in availing credit through a digital platform with an expectation of quick processing time.\r\n\r\nThe first challenge that CATALYST faced was to convince lenders to provide an initial loan, albeit small, in the absence of a digital payment history. Traditionally, the route to access credit has been via an established digital payment footprint because of the inherent difference in the way payment and credit operates. Payment systems work better when more people use them, and therefore are designed to be more inclusive in nature. Credit, on the other hand, is designed to hedge excessive risks, and therefore is harder to establish as the first step to financial inclusion of the underserved market segment with no credit history.\r\n\r\nA lending model is predicated on profits from taking calculated risks. So, lenders seek to build strong relationships with their customers and get a broad base of information to calculate the exact underlying risk. On the other hand, payment companies are inherently less dependent on understanding customer risk. Payment businesses therefore tend to be more transactional and less relationship-based than lending ones. The quality or depth of individual customer relationships matters less. Instead, the number and breadth of customers and their networks matter more.<sup>6</sup>\r\n\r\nUnderstanding these basic functions of payments and credit is critical to exploring how the two can be linked. Technology and access to customer data play a huge role in leveraging the payment and credit lens to achieve financial inclusion.\r\n\r\nThe CATALYST pilot aimed at precisely this understanding. How can we urge merchants to start using digital solutions, which in turn can help them access credit at better terms?\r\n\r\nWhile the merits of credit are known, research is beginning to show the advantages of digital credit as well. Early evidence from studying M-Shawri<sup>7</sup> in Kenya has shown that uptake of digital loans has helped improve household resilience against shocks and increased the propensity of families to spend on welfare activities such as health and education.<sup>8</sup> While we have little evidence available from similar experiments in India, we expect the positive benefits would be similar.\r\n\r\nWe hope that the following results of CATALYST’s Credit as a Hook pilot reveal the opportunities and challenges of launching a digital payment and loan product bundle for underserved informal sector merchants in India.[/vc_column_text][vc_column_text text_color=\"#757c74\" font_size=\"14px\" letter_spacing=\"\"]<em><sup>1</sup>India’s $670 billion retail market is heading for a dream run, April 16, 2018, Quartz.</em>\r\n\r\n<em><sup>2</sup>Retail Transformation: Changing Your Performance Trajectory, BCG-CII National Retail Summit Report, 2016.</em>\r\n\r\n<em><sup>3</sup>Found: 111 million MSME workers in India as data rules changes, Livemint, November 22, 2017.</em>\r\n\r\n<em><sup>4</sup>MSME Finance Gap, Assessment of the shortfalls and opportunities in financing micro, small and medium enterprises in emerging markets, IFC, 2017.</em>\r\n\r\n<em><sup>5</sup>Research by Entrepreneurial Finance Lab, retrieved from The Hindu Business Line, ‘There is a credit gap of 56% in the MSME sector’, July 2, 2014</em>\r\n\r\n<em><sup>6</sup>Buckley, R. and I.Mas. The coming of age of digital payment as a field of expertise, Journal of Law Technology and Policy, June 2016, Vol.2016.</em>\r\n\r\n<em><sup>7</sup>M-Shwari is a paperless banking service offered through M-Pesa. M-Shwari bank accounts are opened and maintained through mobile phones.</em>\r\n\r\n<em><sup>8</sup>Bharadwaj, P., W. Jack and T. Suri. Can Digital Loans Deliver: Take Up and Impact of Digital Loans in Kenya, 2018 (Working Paper, draft received on special request from T. Suri).</em>\r\n\r\n<em><sup>9</sup>This data set is separate from the earlier CNAS data. With a time lag of eight months, it is often difficult to work with earlier data sets. So, 490 new fixed stores were chosen from six new markets in Jaipur</em>[/vc_column_text][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"image\" bg_position_horizontal=\"center\" enable_parallax=\"false\" parallax_speed=\"0.4\" padding_top=\"150\" padding_bottom=\"150\" bg_image=\"39431\"][vc_column][vc_custom_heading text=\"INSIGHTS FROM THE PILOT\" font_container=\"tag:h2|font_size:26px|text_align:center|color:%23ffffff|line_height:32px\" google_fonts=\"font_family:Roboto%20Condensed%3A300%2C300italic%2Cregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal\" letter_spacing=\"\"][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#ffffff\"][vc_column][vc_row_inner][vc_column_inner][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]Testing the hypothesis involved bringing together a payment provider and a lender — a role that was played by CATALYST. For the pilot, CATALYST partnered with Nupay, a Point of Sale (PoS) device or card swipe machine provider and an early stage startup, and Capital First, a Non Banking Financial Company (NBFC), which agreed to provide term loans to fixed store merchants in Jaipur. The combination of a payment device and loan was offered as a bundle, with the intention of testing the extent to which credit can act as a ‘hook’ to adopt and use digital payments. This combination was created for the purpose of the pilot alone since lenders are unclear of the risks involved in offering a small amount of credit, no matter how small, before they can establish credit history based on transactions on the device provided. Since the combination of partners was arranged by CATALYST for the pilot, CATALYST also had to provide a set of Feet on Street (FoS) for on-the-ground support to roll out the services. The FoS team, trained by CATALYST, provided support in marketing and customer acquisition.\r\n\r\n&nbsp;\r\n\r\n<strong>Product bundle: Capital First and Nupay, a term loan with a card swipe machine</strong>\r\n\r\nProduct bundle details: Capital First (the lender) agreed to provide loans of a ticket size of INR 25,000 to INR 5 lakh at an interest rate of 18 percent to 24 percent annually for a tenure of nine months to 36 months, depending on the ticket size and repayment capacity.\r\n\r\nNupay’s card swipe machine had a monthly rental of INR 350 (~ US$5) plus 18 percent Goods and Service Tax (GST), which was also to be paid by merchants. The lender agreed that merchants would be considered for an incremental loan based on their repayment history observed in the first tranche of the loan, and their digital transaction footprint.\r\n\r\n&nbsp;\r\n\r\n<strong>Project roll-out and findings: digital payment adoption vs. non-adoption</strong>\r\n\r\nDuring the pilot, CATALYST reached out to 409 fixed store merchants across six major markets in Jaipur (Shastri Nagar, Sodala, Durgapura, Khatirpura, Jhotwara and Bani Park).9 These stores have been in business for an average of 10 years and had a median monthly revenue of INR 45,000. Most stores (99 percent) were owned by men; 87 percent was sole proprietorships while a smaller group (13 percent) was managed jointly with other family members. Sixty-five of them were already using a PoS or a card swipe machine and the remaining 344 merchants were given a demo on using a new PoS machine with the help of CATALYST’s FoS team.[/vc_column_text][vc_single_image image=\"39426\" img_size=\"full\" alignment=\"center\"][vc_column_text text_color=\"#757c74\" font_size=\"14px\" letter_spacing=\"\"]<em><sup>9</sup>This data set is separate from the earlier CNAS data. With a time lag of eight months, it is often difficult to work with earlier data sets. So, 490 new fixed stores were chosen from six new markets in Jaipur</em>[/vc_column_text][/vc_column_inner][/vc_row_inner][vc_row_inner css=\".vc_custom_1537937440359{padding-top: 30px !important;}\"][vc_column_inner][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]<strong>Key results from the experiment were:</strong>\r\n<ul>\r\n 	<li>There were eight fixed store merchants who had never used a card swipe machine but eventually adopted digital payment solutions after being trained on card swipe usage by the CATALYST FoS team.</li>\r\n 	<li>The primary reason for adoption was that it would allow them to service a broader customer segment that used (debit/credit) cards to make payments. In other words, the ability to serve a specific customer segment that was familiar with digital solutions was a key driver. This would also result in new customer acquisition over a period of time.</li>\r\n 	<li>Among the merchants who refused to use or adopt a PoS machine, the dominant reason for nonadoption was the absence of customer demand (62 percent, Figure 1). These merchants were unwilling to act as enablers to train customers in using a new digital solution. If the customers asked for the service, they were happy to provide it.</li>\r\n 	<li>The remaining 10 percent (Figure 1) reported the inherent cash stickiness of their business as a major deterrent. Another 2 percent (Figure 1) cited the cost of the machine as a major barrier to accepting digital payments.</li>\r\n</ul>\r\n[/vc_column_text][vc_single_image image=\"39433\" img_size=\"full\" alignment=\"center\"][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]<em>Note: From top right: existing loan usage, source of loan, purpose of loans and awareness about CIBIL scores of 18 merchants who agreed to reveal information about a prior loan.</em>[/vc_column_text][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]While most merchants who were part of the pilot preferred not to share their current loan practices, those who revealed that they had availed a loan (18 out of 409) had done so from a formal source. Fourteen of the 18 were also aware of their credit score (CIBIL) and its related impact on their credit eligibility.\r\n<ul>\r\n 	<li>Only 18 fixed store merchants (4 percent) with an average monthly revenue of INR 90,000 (double the population median of INR 45,000) reported that they had availed of a loan in the past.</li>\r\n 	<li>The average tenure of the loans was two to three years; 17 merchants sourced the loan from banks and one from a Micro Finance Institution (MFI);</li>\r\n 	<li>The purpose for which loans were taken varied from business expansion (10 merchants), household requirements (four merchants) to health emergencies (one merchant). Utility loans such as for two wheelers (three merchants) formed another major category of reasons for taking loans; and</li>\r\n 	<li>The ticket size of the loans taken by the merchants varied from INR 40,000 to INR 9 lakhs.</li>\r\n</ul>\r\n[/vc_column_text][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"image\" bg_color=\"#c9213b\" enable_parallax=\"false\" padding_top=\"150\" padding_bottom=\"150\" inline_style=\"font-style: normal;\" bg_image=\"39439\"][vc_column][vc_row_inner][vc_column_inner][vc_custom_heading text=\"MERCHANTS’ PERCEPTION ON THE BUNDLED PRODUCT\r\n\" font_container=\"tag:h2|font_size:26px|text_align:center|color:%23ffffff|line_height:32px\" google_fonts=\"font_family:Roboto%20Condensed%3A300%2C300italic%2Cregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal\" letter_spacing=\"\" el_class=\"normal-style \"][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#ffffff\" inline_style=\"font-style: normal;\"][vc_column][vc_row_inner][vc_column_inner el_class=\"normal-style \"][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]Perceived vs. real interest in loan: When offered the bundled product of payment device and credit, 25 merchants showed initial interest solely in accessing the loan during their first interaction with the CATALYST FoS team. However, 24 had changed their minds when the lender’s agent approached them after a week, perhaps because merchants are always interested in understanding options for credit but may not avail of it even if they express an interest initially.\r\n\r\nOne merchant who agreed to try the combination of a PoS device and loan had a fixed cloth store in Shastri Nagar market. He wanted a loan of INR 1-2 lakhs. Unfortunately, the request was denied since his residence was located outside the serviceable area set by the lender. This fact was discovered after the processing was done, and resulted in a poor customer experience for the merchant.\r\n\r\n<strong>Why was there a low uptake? </strong>\r\n\r\nThe experiment shows that while there was individual adoption of the card swipe machines, there was little uptake of the bundled product. Technology did seamlessly bind the products together but the communication to merchants was often unclear and did not explain how payment device usage would help them get a loan of higher amount in the future. The reasons this product could not cater to customer expectations or improve customer experience as expected are:\r\n\r\n<strong>Loan structure:</strong> While the lender assured the merchants of a credit-build-up model, the merchants were keen to understand the exact qualifiers for the build-up process, i.e., number and/or value of transactions required to qualify for the next tranche of loans. Additionally, they wanted to know by what percentage the loan amount could grow through increased usage of digital transactions. None of this information was provided to merchants since the lender had not yet thought it through. The product’s value proposition stated in one line by the lender as ‘enhanced loan size for incremental usage of digital payments’ failed to gain the merchants’ trust.\r\n\r\n<strong>Single interface for credit and digital payments:</strong> During the CATALYST pilot, the lending company and the digital payment solution company used two separate applications to onboard customers. For the merchants who saw the two as a single product, it was important for the digital payment solution provider and the lending partner to integrate their solution into one single application for simplicity and usage. The existing process offered poor customer experience because filling out two applications is a time-consuming process.\r\n\r\n<strong>Large time lags:</strong> Loan disbursal followed a lengthy process, i.e., lead generation by field agents (CATALYST FoS team) from an initial interaction, followed by a calling exercise by the credit assessor and then a site verification. This long time period between initial contact and disbursement was a pain point. Additionally, there were delays in disbursing the card swipe machine. Partnering with an early stage startup for PoS machines led to a resource crunch, which resulted in operational delays. The time lag between initial lead generation and delivery of the machine ranged from 15-20 days which was too long a time to retain interest.\r\n\r\n<strong>High cost of on boarding:</strong> The loan offer had a customer onboarding cost plus GST that hiked up the existing rates of interest by 3 to 4 percent so the lending interest rate worked out to be around 30 percent annually. These nuanced details deterred many of the merchants to finally take up the loan despite having shown an initial interest in the loan product.\r\n\r\n<strong>Short tenure of the pilot:</strong> Lastly, one must note that three or four months is too short a time to launch and iterate on a product bundle that includes a loan repayment timeline of nine to 36 months. To understand access and usage of repeat loans, the pilot experiment should essentially be of a much longer tenure.[/vc_column_text][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#373b3c\" padding_top=\"75\" padding_bottom=\"75\" inline_style=\"font-style: normal;\"][vc_column][vc_row_inner][vc_column_inner][vc_custom_heading text=\"RECOMMENDATIONS\" font_container=\"tag:h2|font_size:26px|text_align:center|color:%23ffffff|line_height:32px\" google_fonts=\"font_family:Roboto%20Condensed%3A300%2C300italic%2Cregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal\" letter_spacing=\"\" el_class=\"normal-style \"][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#ffffff\"][vc_column][vc_row_inner equal_height=\"yes\"][vc_column_inner el_class=\"normal-style\"][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]<strong>Need for a local presence: </strong>An implementation challenge that needs to be addressed in order to iterate on the pilot experiment and help it succeed is decreasing the time lags between the first point of contact to in-person onboarding with the card swipe machine and the loan. To avoid such operational delays, it is advisable to work with a local company with a greater field presence than with a well-known company based out of another metropolis but with little field support, as was the case during this pilot. Otherwise, the card swipe company/loan company should partner with a channel partner that should be assigned locally to cover the high customer acquisition cost which must be incurred (by default) for wider reach and larger impact among the segment of merchants who are new to digital payment usage.\r\n\r\n<strong>Lower cost of product:</strong> If such loans could get priority sector lending status, obtaining funds would be easier for an NBFC, making access to credit easier and cheaper.\r\n\r\n<strong>Alternate digital payment solutions:</strong> Current credit products are more inclined towards PoS machine uptake and usage. However, given the rise in use of other digital payment modes such as Unified Payments Interface (UPI), e-wallets and other Aadhaar-based solutions could lead to faster and cheaper adoption among merchants.\r\n\r\n<strong>Simple product structure:</strong> As the pilot results suggest, clearly informing the merchants of the exact qualifying factors for incremental loans will help develop higher trust and better customer relationships for a credit-builder model.\r\n\r\n<strong>Provide digital training and awareness:</strong> Multiple field visits and available data on awareness of credit history or usage of digital payments suggest that small fixed store merchants need substantial handholding, training and awareness to understand fundamental financial concepts, the importance of formal loans, and use of credit history. The experiment results suggest that the small merchants would be better off with expert handholding support and training from their first point of contact, as they would be without operational delays. Further, digital training and awareness building must extend to consumers who shop at these merchant locations, since customer demand is a huge driver in merchant acceptance of digital solutions.[/vc_column_text][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#c9213b\" padding_top=\"75\" padding_bottom=\"75\" inline_style=\"font-style: normal;\"][vc_column][vc_row_inner][vc_column_inner][vc_custom_heading text=\"CONCLUSION\" font_container=\"tag:h2|font_size:26px|text_align:center|color:%23ffffff|line_height:32px\" google_fonts=\"font_family:Roboto%20Condensed%3A300%2C300italic%2Cregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal\" letter_spacing=\"\" el_class=\"normal-style \"][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#ffffff\"][vc_column][vc_row_inner equal_height=\"yes\"][vc_column_inner el_class=\"normal-style\"][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]Credit can potentially act as a hook for usage of digital solutions, provided the effective costs are lower compared to credit from informal sources, and access is speedier. Merchants also need to be provided information on the clear pathway on increase in credit as they continue using the digital facilities. Lenders and payment service providers must present a unified front and offer a superior customer experience to the merchants. Lastly, acceptance of new payment solutions requires end customers to be sensitized equally[/vc_column_text][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#ffffff\"][vc_column][vc_column_text letter_spacing=\"\"]\r\n<p style=\"text-align: left;\"><span style=\"color: #da092b;\">TECHNICAL WRITERS:</span> John Arun and Shubhranka Mondal</p>\r\n<p style=\"text-align: left;\"><span style=\"color: #da092b;\">ACKNOWLEDGEMENTS:</span> The authors would like to thank Jayshree Venkatesan for her expert advice, and CATALYST’s Feet on Street team, for their ground support</p>\r\n[/vc_column_text][kleo_button title=\"Download full report\" href=\"https://cashlesscatalyst.org/wp-content/uploads/2018/11/CH-Learning-Note.pdf\" target=\"_blank\" position=\"center\" size=\"lg\" type=\"boxed-icon\" special=\"no\" icon=\"download\" font_size=\"14px\" letter_spacing=\"\" el_class=\"pkirbtn\" icon_custom_background=\"#d11e3c\" icon_custom_text=\"#ffffff\"][/vc_column][/vc_row][vc_row el_id=\"footer_area\" text_align=\"center\" type=\"image\" bg_position_horizontal=\"center\" enable_parallax=\"false\" padding_top=\"50px\" padding_bottom=\"50px\" bg_image=\"7886\"][vc_column width=\"1/4\"][/vc_column][vc_column width=\"1/2\" offset=\"vc_col-lg-offset-0 vc_col-md-offset-0 vc_col-sm-offset-0\"][vc_single_image image=\"7888\" img_size=\"full\" alignment=\"center\"][vc_column_text text_color=\"#ffffff\" font_size=\"14px\" letter_spacing=\"\" css=\".vc_custom_1484826151396{margin-top: 35px !important;margin-bottom: 5px !important;padding-right: 20px !important;}\"]\r\n<p style=\"text-align: center;\">CATALYST is an initiative seeded by an alliance between the Government of India &amp; USAID, to expand digital payments and financial inclusion in India, especially for small merchants and low-income consumers.</p>\r\n[/vc_column_text][kleo_gap][vc_column_text letter_spacing=\"\" css=\".vc_custom_1484051069491{margin-bottom: 0px !important;}\"]\r\n<p style=\"text-align: center;\">[email-newsletter-plugin]</p>\r\n[/vc_column_text][kleo_icon icon=\"facebook\" href=\"https://www.facebook.com/CashlessCatalyst/\" target=\"_blank\" padding=\"15px\" icon_color=\"#ffffff\"][kleo_icon icon=\"linkedin\" href=\"https://www.linkedin.com/company/13221050?trk=tyah&amp;trkInfo=clickedVertical%3Acompany%2CclickedEntityId%3A13221050%2Cidx%3A2-1-2%2CtarId%3A1476420479247%2Ctas%3Acashless%20catalyst\" target=\"_blank\" padding=\"15px\" icon_color=\"#ffffff\"][kleo_icon icon=\"twitter\" href=\"https://twitter.com/cashlesscatalys\" target=\"_blank\" padding=\"15px\" icon_color=\"#ffffff\"][kleo_icon icon=\"youtube-play\" href=\"https://www.youtube.com/channel/UChuc38_PfawDOu44IfYS4lw\" target=\"_blank\" padding=\"15px\" icon_color=\"#ffffff\"][/vc_column][vc_column width=\"1/4\"][/vc_column][/vc_row]', 'DIGITAL LENDING FOR SMALL MERCHANTS: THE MISSING ROAD TO THE LAST MILE', '', 'inherit', 'closed', 'closed', '', '39421-revision-v1', '', '', '2018-11-20 13:52:57', '2018-11-20 13:52:57', '', 39421, 'https://cashlesscatalyst.org/media/39421-revision-v1/', 0, 'revision', '', 0);
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(39443, 12, '2018-11-20 09:38:22', '2018-11-20 09:38:22', '[vc_row equal_height=\"yes\" content_placement=\"middle\" type=\"image\" enable_parallax=\"false\" parallax_speed=\"0.4\" padding_top=\"110\" padding_bottom=\"0\" bg_image=\"39430\"][vc_column][kleo_gap size=\"100px\"][vc_row_inner][vc_column_inner width=\"1/6\"][/vc_column_inner][vc_column_inner width=\"2/3\"][vc_custom_heading text=\"DIGITAL LENDING FOR SMALL MERCHANTS: THE MISSING ROAD TO THE LAST MILE\" font_container=\"tag:h2|font_size:48px|text_align:center|color:%23ffffff|line_height:54px\" google_fonts=\"font_family:Roboto%20Condensed%3A300%2C300italic%2Cregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal\" letter_spacing=\"\"][/vc_column_inner][vc_column_inner width=\"1/6\"][/vc_column_inner][/vc_row_inner][kleo_gap size=\"140px\"][kleo_gap size=\"50px\"][/vc_column][/vc_row][vc_row equal_height=\"yes\" content_placement=\"middle\" padding_bottom=\"0\"][vc_column width=\"1/2\"][/vc_column][vc_column width=\"1/2\"][vc_row_inner equal_height=\"yes\" content_placement=\"middle\"][vc_column_inner width=\"5/12\"][/vc_column_inner][vc_column_inner width=\"1/3\" css=\".vc_custom_1488531456733{padding-right: 0px !important;}\"][vc_column_text letter_spacing=\"\"][addtoany][/vc_column_text][/vc_column_inner][vc_column_inner width=\"1/4\" css=\".vc_custom_1488531444909{padding-left: 0px !important;}\"][kleo_button title=\"Print this page\" href=\"https://cashlesscatalyst.org/wp-content/uploads/2018/11/CH-Learning-Note.pdf\" target=\"_blank\" style=\"custom\" position=\"left\" size=\"lg\" special=\"no\" border=\"no\" icon=\"print\" font_size=\"16px\" letter_spacing=\"\" el_class=\"grey-icon\" custom_text=\"#d11e3c\"][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#ffffff\"][vc_column][vc_custom_heading text=\"BACKGROUND\" font_container=\"tag:h2|font_size:26px|text_align:left|color:%23383b3b|line_height:32px\" google_fonts=\"font_family:Roboto%20Condensed%3A300%2C300italic%2Cregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal\" letter_spacing=\"\"][vc_row_inner css=\".vc_custom_1537456868816{margin-bottom: 35px !important;}\"][vc_column_inner][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]Ninety-three percent of India’s US$670 billion retail market continues to be unorganized, operating through mom-and-pop, kirana or standalone stores.<sup>1</sup> According to a recent Boston Consulting GroupConfederation of Indian Industry (BCG-CII) report, this sector is projected to double from a US$1.1-1.2 trillion market by 2020, driven by a 70 percent rise in income levels and a 100 million addition in the number of youth entering the labor force.<sup>2</sup> However, despite growth projections, there are several factors that hinder the growth of these informal enterprises which provide livelihood options to nearly 111 million workers,<sup>3</sup> thus forming an important engine for India’s economic growth.\r\n\r\nThe lack of proper infrastructure and technical skills notwithstanding, a pressing factor hindering attainment of scale by informal enterprises is the lack of credit from formal sources at affordable rates of interest. According to an International Finance Corporation (IFC) report, the credit gap for informal enterprises within the Micro, Small and Medium Enterprises (MSME) sector in India was estimated at US$418 billion in 2012-13.<sup>4</sup> Underlying the gap in accessing formal credit is the story of missing applicant credit histories or other parameters of credit worthiness used in traditional appraisal processes by lenders.<sup>5</sup> Under such circumstances, most enterprises resort to informal lenders, despite the high interest rates charged. Reluctance to adopt digital payments further exacerbates this situation, since it is near impossible to convince lenders of credit worthiness in the face of missing information on credit and other transactional histories. Lack of awareness, low capability and unwillingness to try new technologies for fear of failure are some reasons that contribute to this wariness and create a vicious cycle that has been hard to break.\r\n\r\nCATALYST, in its drive to explore the digital readiness of this segment, hypothesized that providing access to a small amount of credit at lower rates could act as a hook for digital payment adoption and usage, which in turn could trigger a positive spiral to access higher amounts of credit. In a preliminary study to understand the financial behavior and borrowing pattern of small businesses, CATALYST conducted a Credit Needs Assessment Survey (CNAS) where 1,140 small fixed store merchants in Jaipur were interviewed in September 2017. The survey showed that 69 percent of the merchants sourced their credit from informal sources such as friends, family and local moneylenders. Merchants expressed dissatisfaction with local moneylenders because they charged an interest rate of over 30 percent per month. But they still tend to prefer informal lenders over formal ones because of ease of access, no requirement of lengthy documentation, and speedy processes.\r\n\r\nArmed with these insights, CATALYST launched the Credit as a Hook pilot in Jaipur in June 2018 for a select set of merchants. The pilot aimed to provide incremental loans through a starter-builder model starting with a small loan that would increase based on usage of digital payments, where the payment footprint would help merchants build their formal credit history. CATALYST hypothesized that, for the  merchants, this would result in larger loans over a period of time at better rates of interest. For lenders, the presence of a digital footprint would provide the means to underwrite loans better and allow them to acquire new customers (i.e., a set of small merchants that was hitherto unserved by formal financial institutions). The initial pre-assessment survey carried out prior to the product launch, CATALYST’s CNAS report, revealed that 92 percent merchants contacted during the survey was aware of digital payment solutions. Of these, 53.5 percent was interested in availing credit through a digital platform with an expectation of quick processing time.\r\n\r\nThe first challenge that CATALYST faced was to convince lenders to provide an initial loan, albeit small, in the absence of a digital payment history. Traditionally, the route to access credit has been via an established digital payment footprint because of the inherent difference in the way payment and credit operates. Payment systems work better when more people use them, and therefore are designed to be more inclusive in nature. Credit, on the other hand, is designed to hedge excessive risks, and therefore is harder to establish as the first step to financial inclusion of the underserved market segment with no credit history.\r\n\r\nA lending model is predicated on profits from taking calculated risks. So, lenders seek to build strong relationships with their customers and get a broad base of information to calculate the exact underlying risk. On the other hand, payment companies are inherently less dependent on understanding customer risk. Payment businesses therefore tend to be more transactional and less relationship-based than lending ones. The quality or depth of individual customer relationships matters less. Instead, the number and breadth of customers and their networks matter more.<sup>6</sup>\r\n\r\nUnderstanding these basic functions of payments and credit is critical to exploring how the two can be linked. Technology and access to customer data play a huge role in leveraging the payment and credit lens to achieve financial inclusion.\r\n\r\nThe CATALYST pilot aimed at precisely this understanding. How can we urge merchants to start using digital solutions, which in turn can help them access credit at better terms?\r\n\r\nWhile the merits of credit are known, research is beginning to show the advantages of digital credit as well. Early evidence from studying M-Shawri<sup>7</sup> in Kenya has shown that uptake of digital loans has helped improve household resilience against shocks and increased the propensity of families to spend on welfare activities such as health and education.<sup>8</sup> While we have little evidence available from similar experiments in India, we expect the positive benefits would be similar.\r\n\r\nWe hope that the following results of CATALYST’s Credit as a Hook pilot reveal the opportunities and challenges of launching a digital payment and loan product bundle for underserved informal sector merchants in India.[/vc_column_text][vc_column_text text_color=\"#757c74\" font_size=\"14px\" letter_spacing=\"\"]<p><em><sup>1</sup>India’s $670 billion retail market is heading for a dream run, April 16, 2018, Quartz.</em></p>\r\n<p><em><sup>2</sup>Retail Transformation: Changing Your Performance Trajectory, BCG-CII National Retail Summit Report, 2016.</em></p>\r\n<p><em><sup>3</sup>Found: 111 million MSME workers in India as data rules changes, Livemint, November 22, 2017.</em></p>\r\n<p><em><sup>4</sup>MSME Finance Gap, Assessment of the shortfalls and opportunities in financing micro, small and medium enterprises in emerging markets, IFC, 2017.</em></p>\r\n<p><em><sup>5</sup>Research by Entrepreneurial Finance Lab, retrieved from The Hindu Business Line, ‘There is a credit gap of 56% in the MSME sector’, July 2, 2014</em></p>\r\n<p><em><sup>6</sup>Buckley, R. and I..Mas. The coming of age of digital payment as a field of expertise, Journal of Law Technology and Policy, June 2016, Vol.2016.</em></p>\r\n<p><em><sup>7</sup>M-Shwari is a paperless banking service offered through M-Pesa. M-Shwari bank accounts are opened and maintained through mobile phones.</em></p>\r\n<p><em><sup>8</sup>Bharadwaj, P., W. Jack and T. Suri. Can Digital Loans Deliver: Take Up and Impact of Digital Loans in Kenya, 2018 (Working Paper, draft received on special request from T. Suri).</em></p>\r\n<p><em><sup>9</sup>This data set is separate from the earlier CNAS data. With a time lag of eight months, it is often difficult to work with earlier data sets. So, 490 new fixed stores were chosen from six new markets in Jaipur</em></p>[/vc_column_text][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"image\" bg_position_horizontal=\"center\" enable_parallax=\"false\" parallax_speed=\"0.4\" padding_top=\"150\" padding_bottom=\"150\" bg_image=\"39431\"][vc_column][vc_custom_heading text=\"INSIGHTS FROM THE PILOT\" font_container=\"tag:h2|font_size:26px|text_align:center|color:%23ffffff|line_height:32px\" google_fonts=\"font_family:Roboto%20Condensed%3A300%2C300italic%2Cregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal\" letter_spacing=\"\"][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#ffffff\"][vc_column][vc_row_inner][vc_column_inner][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]Testing the hypothesis involved bringing together a payment provider and a lender — a role that was played by CATALYST. For the pilot, CATALYST partnered with Nupay, a Point of Sale (PoS) device or card swipe machine provider and an early stage startup, and Capital First, a Non Banking Financial Company (NBFC), which agreed to provide term loans to fixed store merchants in Jaipur. The combination of a payment device and loan was offered as a bundle, with the intention of testing the extent to which credit can act as a ‘hook’ to adopt and use digital payments. This combination was created for the purpose of the pilot alone since lenders are unclear of the risks involved in offering a small amount of credit, no matter how small, before they can establish credit history based on transactions on the device provided. Since the combination of partners was arranged by CATALYST for the pilot, CATALYST also had to provide a set of Feet on Street (FoS) for on-the-ground support to roll out the services. The FoS team, trained by CATALYST, provided support in marketing and customer acquisition.\r\n\r\n&nbsp;\r\n\r\n<strong>Product bundle: Capital First and Nupay, a term loan with a card swipe machine</strong>\r\n\r\nProduct bundle details: Capital First (the lender) agreed to provide loans of a ticket size of INR 25,000 to INR 5 lakh at an interest rate of 18 percent to 24 percent annually for a tenure of nine months to 36 months, depending on the ticket size and repayment capacity.\r\n\r\nNupay’s card swipe machine had a monthly rental of INR 350 (~ US$5) plus 18 percent Goods and Service Tax (GST), which was also to be paid by merchants. The lender agreed that merchants would be considered for an incremental loan based on their repayment history observed in the first tranche of the loan, and their digital transaction footprint.\r\n\r\n&nbsp;\r\n\r\n<strong>Project roll-out and findings: digital payment adoption vs. non-adoption</strong>\r\n\r\nDuring the pilot, CATALYST reached out to 409 fixed store merchants across six major markets in Jaipur (Shastri Nagar, Sodala, Durgapura, Khatirpura, Jhotwara and Bani Park).9 These stores have been in business for an average of 10 years and had a median monthly revenue of INR 45,000. Most stores (99 percent) were owned by men; 87 percent was sole proprietorships while a smaller group (13 percent) was managed jointly with other family members. Sixty-five of them were already using a PoS or a card swipe machine and the remaining 344 merchants were given a demo on using a new PoS machine with the help of CATALYST’s FoS team.[/vc_column_text][vc_single_image image=\"39426\" img_size=\"full\" alignment=\"center\"][vc_column_text text_color=\"#757c74\" font_size=\"14px\" letter_spacing=\"\"]<em><sup>9</sup>This data set is separate from the earlier CNAS data. With a time lag of eight months, it is often difficult to work with earlier data sets. So, 490 new fixed stores were chosen from six new markets in Jaipur</em>[/vc_column_text][/vc_column_inner][/vc_row_inner][vc_row_inner css=\".vc_custom_1537937440359{padding-top: 30px !important;}\"][vc_column_inner][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]<strong>Key results from the experiment were:</strong>\r\n<ul>\r\n	<li>There were eight fixed store merchants who had never used a card swipe machine but eventually adopted digital payment solutions after being trained on card swipe usage by the CATALYST FoS team.</li>\r\n	<li>The primary reason for adoption was that it would allow them to service a broader customer segment that used (debit/credit) cards to make payments. In other words, the ability to serve a specific customer segment that was familiar with digital solutions was a key driver. This would also result in new customer acquisition over a period of time.</li>\r\n	<li>Among the merchants who refused to use or adopt a PoS machine, the dominant reason for nonadoption was the absence of customer demand (62 percent, Figure 1). These merchants were unwilling to act as enablers to train customers in using a new digital solution. If the customers asked for the service, they were happy to provide it.</li>\r\n	<li>The remaining 10 percent (Figure 1) reported the inherent cash stickiness of their business as a major deterrent. Another 2 percent (Figure 1) cited the cost of the machine as a major barrier to accepting digital payments.</li>\r\n</ul>\r\n[/vc_column_text][vc_single_image image=\"39433\" img_size=\"full\" alignment=\"center\"][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]<em>Note: From top right: existing loan usage, source of loan, purpose of loans and awareness about CIBIL scores of 18 merchants who agreed to reveal information about a prior loan.</em>[/vc_column_text][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]While most merchants who were part of the pilot preferred not to share their current loan practices, those who revealed that they had availed a loan (18 out of 409) had done so from a formal source. Fourteen of the 18 were also aware of their credit score (CIBIL) and its related impact on their credit eligibility.\r\n<ul>\r\n	<li>Only 18 fixed store merchants (4 percent) with an average monthly revenue of INR 90,000 (double the population median of INR 45,000) reported that they had availed of a loan in the past.</li>\r\n	<li>The average tenure of the loans was two to three years; 17 merchants sourced the loan from banks and one from a Micro Finance Institution (MFI);</li>\r\n	<li>The purpose for which loans were taken varied from business expansion (10 merchants), household requirements (four merchants) to health emergencies (one merchant). Utility loans such as for two wheelers (three merchants) formed another major category of reasons for taking loans; and</li>\r\n	<li>The ticket size of the loans taken by the merchants varied from INR 40,000 to INR 9 lakhs.</li>\r\n</ul>\r\n[/vc_column_text][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"image\" bg_color=\"#c9213b\" enable_parallax=\"false\" padding_top=\"150\" padding_bottom=\"150\" inline_style=\"font-style: normal;\" bg_image=\"39439\"][vc_column][vc_row_inner][vc_column_inner][vc_custom_heading text=\"MERCHANTS’ PERCEPTION ON THE BUNDLED PRODUCT\r\n\" font_container=\"tag:h2|font_size:26px|text_align:center|color:%23ffffff|line_height:32px\" google_fonts=\"font_family:Roboto%20Condensed%3A300%2C300italic%2Cregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal\" letter_spacing=\"\" el_class=\"normal-style \"][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#ffffff\" inline_style=\"font-style: normal;\"][vc_column][vc_row_inner][vc_column_inner el_class=\"normal-style \"][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]Perceived vs. real interest in loan: When offered the bundled product of payment device and credit, 25 merchants showed initial interest solely in accessing the loan during their first interaction with the CATALYST FoS team. However, 24 had changed their minds when the lender’s agent approached them after a week, perhaps because merchants are always interested in understanding options for credit but may not avail of it even if they express an interest initially.\r\n\r\nOne merchant who agreed to try the combination of a PoS device and loan had a fixed cloth store in Shastri Nagar market. He wanted a loan of INR 1-2 lakhs. Unfortunately, the request was denied since his residence was located outside the serviceable area set by the lender. This fact was discovered after the processing was done, and resulted in a poor customer experience for the merchant.\r\n\r\n<strong>Why was there a low uptake? </strong>\r\n\r\nThe experiment shows that while there was individual adoption of the card swipe machines, there was little uptake of the bundled product. Technology did seamlessly bind the products together but the communication to merchants was often unclear and did not explain how payment device usage would help them get a loan of higher amount in the future. The reasons this product could not cater to customer expectations or improve customer experience as expected are:\r\n\r\n<strong>Loan structure:</strong> While the lender assured the merchants of a credit-build-up model, the merchants were keen to understand the exact qualifiers for the build-up process, i.e., number and/or value of transactions required to qualify for the next tranche of loans. Additionally, they wanted to know by what percentage the loan amount could grow through increased usage of digital transactions. None of this information was provided to merchants since the lender had not yet thought it through. The product’s value proposition stated in one line by the lender as ‘enhanced loan size for incremental usage of digital payments’ failed to gain the merchants’ trust.\r\n\r\n<strong>Single interface for credit and digital payments:</strong> During the CATALYST pilot, the lending company and the digital payment solution company used two separate applications to onboard customers. For the merchants who saw the two as a single product, it was important for the digital payment solution provider and the lending partner to integrate their solution into one single application for simplicity and usage. The existing process offered poor customer experience because filling out two applications is a time-consuming process.\r\n\r\n<strong>Large time lags:</strong> Loan disbursal followed a lengthy process, i.e., lead generation by field agents (CATALYST FoS team) from an initial interaction, followed by a calling exercise by the credit assessor and then a site verification. This long time period between initial contact and disbursement was a pain point. Additionally, there were delays in disbursing the card swipe machine. Partnering with an early stage startup for PoS machines led to a resource crunch, which resulted in operational delays. The time lag between initial lead generation and delivery of the machine ranged from 15-20 days which was too long a time to retain interest.\r\n\r\n<strong>High cost of on boarding:</strong> The loan offer had a customer onboarding cost plus GST that hiked up the existing rates of interest by 3 to 4 percent so the lending interest rate worked out to be around 30 percent annually. These nuanced details deterred many of the merchants to finally take up the loan despite having shown an initial interest in the loan product.\r\n\r\n<strong>Short tenure of the pilot:</strong> Lastly, one must note that three or four months is too short a time to launch and iterate on a product bundle that includes a loan repayment timeline of nine to 36 months. To understand access and usage of repeat loans, the pilot experiment should essentially be of a much longer tenure.[/vc_column_text][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#373b3c\" padding_top=\"75\" padding_bottom=\"75\" inline_style=\"font-style: normal;\"][vc_column][vc_row_inner][vc_column_inner][vc_custom_heading text=\"RECOMMENDATIONS\" font_container=\"tag:h2|font_size:26px|text_align:center|color:%23ffffff|line_height:32px\" google_fonts=\"font_family:Roboto%20Condensed%3A300%2C300italic%2Cregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal\" letter_spacing=\"\" el_class=\"normal-style \"][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#ffffff\"][vc_column][vc_row_inner equal_height=\"yes\"][vc_column_inner el_class=\"normal-style\"][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]<strong>Need for a local presence: </strong>An implementation challenge that needs to be addressed in order to iterate on the pilot experiment and help it succeed is decreasing the time lags between the first point of contact to in-person onboarding with the card swipe machine and the loan. To avoid such operational delays, it is advisable to work with a local company with a greater field presence than with a well-known company based out of another metropolis but with little field support, as was the case during this pilot. Otherwise, the card swipe company/loan company should partner with a channel partner that should be assigned locally to cover the high customer acquisition cost which must be incurred (by default) for wider reach and larger impact among the segment of merchants who are new to digital payment usage.\r\n\r\n<strong>Lower cost of product:</strong> If such loans could get priority sector lending status, obtaining funds would be easier for an NBFC, making access to credit easier and cheaper.\r\n\r\n<strong>Alternate digital payment solutions:</strong> Current credit products are more inclined towards PoS machine uptake and usage. However, given the rise in use of other digital payment modes such as Unified Payments Interface (UPI), e-wallets and other Aadhaar-based solutions could lead to faster and cheaper adoption among merchants.\r\n\r\n<strong>Simple product structure:</strong> As the pilot results suggest, clearly informing the merchants of the exact qualifying factors for incremental loans will help develop higher trust and better customer relationships for a credit-builder model.\r\n\r\n<strong>Provide digital training and awareness:</strong> Multiple field visits and available data on awareness of credit history or usage of digital payments suggest that small fixed store merchants need substantial handholding, training and awareness to understand fundamental financial concepts, the importance of formal loans, and use of credit history. The experiment results suggest that the small merchants would be better off with expert handholding support and training from their first point of contact, as they would be without operational delays. Further, digital training and awareness building must extend to consumers who shop at these merchant locations, since customer demand is a huge driver in merchant acceptance of digital solutions.[/vc_column_text][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#c9213b\" padding_top=\"75\" padding_bottom=\"75\" inline_style=\"font-style: normal;\"][vc_column][vc_row_inner][vc_column_inner][vc_custom_heading text=\"CONCLUSION\" font_container=\"tag:h2|font_size:26px|text_align:center|color:%23ffffff|line_height:32px\" google_fonts=\"font_family:Roboto%20Condensed%3A300%2C300italic%2Cregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal\" letter_spacing=\"\" el_class=\"normal-style \"][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#ffffff\"][vc_column][vc_row_inner equal_height=\"yes\"][vc_column_inner el_class=\"normal-style\"][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"lh22 ptext-justify\"]Credit can potentially act as a hook for usage of digital solutions, provided the effective costs are lower compared to credit from informal sources, and access is speedier. Merchants also need to be provided information on the clear pathway on increase in credit as they continue using the digital facilities. Lenders and payment service providers must present a unified front and offer a superior customer experience to the merchants. Lastly, acceptance of new payment solutions requires end customers to be sensitized equally[/vc_column_text][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#ffffff\"][vc_column][vc_column_text letter_spacing=\"\"]\r\n<p style=\"text-align: left;\"><span style=\"color: #da092b;\">TECHNICAL WRITERS:</span> John Arun and Shubhranka Mondal</p>\r\n<p style=\"text-align: left;\"><span style=\"color: #da092b;\">ACKNOWLEDGEMENTS:</span> The authors would like to thank Jayshree Venkatesan for her expert advice, and CATALYST’s Feet on Street team, for their ground support</p>\r\n\r\n[/vc_column_text][kleo_button title=\"Download full report\" href=\"https://cashlesscatalyst.org/wp-content/uploads/2018/11/CH-Learning-Note.pdf\" target=\"_blank\" position=\"center\" size=\"lg\" type=\"boxed-icon\" special=\"no\" icon=\"download\" font_size=\"14px\" letter_spacing=\"\" el_class=\"pkirbtn\" icon_custom_background=\"#d11e3c\" icon_custom_text=\"#ffffff\"][/vc_column][/vc_row][vc_row el_id=\"footer_area\" text_align=\"center\" type=\"image\" bg_position_horizontal=\"center\" enable_parallax=\"false\" padding_top=\"50px\" padding_bottom=\"50px\" bg_image=\"7886\"][vc_column width=\"1/4\"][/vc_column][vc_column width=\"1/2\" offset=\"vc_col-lg-offset-0 vc_col-md-offset-0 vc_col-sm-offset-0\"][vc_single_image image=\"7888\" img_size=\"full\" alignment=\"center\"][vc_column_text text_color=\"#ffffff\" font_size=\"14px\" letter_spacing=\"\" css=\".vc_custom_1484826151396{margin-top: 35px !important;margin-bottom: 5px !important;padding-right: 20px !important;}\"]\r\n<p style=\"text-align: center;\">CATALYST is an initiative seeded by an alliance between the Government of India &amp; USAID, to expand digital payments and financial inclusion in India, especially for small merchants and low-income consumers.</p>\r\n\r\n[/vc_column_text][kleo_gap][vc_column_text letter_spacing=\"\" css=\".vc_custom_1484051069491{margin-bottom: 0px !important;}\"]\r\n<p style=\"text-align: center;\">[email-newsletter-plugin]</p>\r\n\r\n[/vc_column_text][kleo_icon icon=\"facebook\" href=\"https://www.facebook.com/CashlessCatalyst/\" target=\"_blank\" padding=\"15px\" icon_color=\"#ffffff\"][kleo_icon icon=\"linkedin\" href=\"https://www.linkedin.com/company/13221050?trk=tyah&amp;trkInfo=clickedVertical%3Acompany%2CclickedEntityId%3A13221050%2Cidx%3A2-1-2%2CtarId%3A1476420479247%2Ctas%3Acashless%20catalyst\" target=\"_blank\" padding=\"15px\" icon_color=\"#ffffff\"][kleo_icon icon=\"twitter\" href=\"https://twitter.com/cashlesscatalys\" target=\"_blank\" padding=\"15px\" icon_color=\"#ffffff\"][kleo_icon icon=\"youtube-play\" href=\"https://www.youtube.com/channel/UChuc38_PfawDOu44IfYS4lw\" target=\"_blank\" padding=\"15px\" icon_color=\"#ffffff\"][/vc_column][vc_column width=\"1/4\"][/vc_column][/vc_row]', 'DIGITAL LENDING FOR SMALL MERCHANTS: THE MISSING ROAD TO THE LAST MILE', '', 'inherit', 'closed', 'closed', '', '39421-revision-v1', '', '', '2018-11-20 09:38:22', '2018-11-20 09:38:22', '', 39421, 'https://cashlesscatalyst.org/media/39421-revision-v1/', 0, 'revision', '', 0),
(41158, 0, '2019-04-09 01:42:17', '2019-04-09 01:42:17', 'A new comment on the post \"The view from 10 months in..\" is waiting for your approval\r\nhttps://cashlesscatalyst.org/view-10-months-in/\r\n\r\nAuthor: sandyhr60 (IP: 109.70.100.19, tor-exit-anonymizer-02.appliedprivacy.net)\r\nEmail: lilianazt20@shiro48.downloadism.top\r\nURL: http://porn.backround.instasexyblog.com\r\nComment: \r\nNew super hot photo galleries, daily updated collections\r\nhttp://porn.audtion.xblognetwork.com/?delilah \r\n\r\n email me free porn porn star on tv elder porn video clips milf swinger porn movies ariel pink porn\r\n\r\nApprove it: https://cashlesscatalyst.org/wp-admin/comment.php?action=approve&amp;c=12118#wpbody-content\r\nTrash it: https://cashlesscatalyst.org/wp-admin/comment.php?action=trash&amp;c=12118#wpbody-content\r\nSpam it: https://cashlesscatalyst.org/wp-admin/comment.php?action=spam&amp;c=12118#wpbody-content\r\nCurrently 179 comments are waiting for approval. Please visit the moderation panel:\r\nhttps://cashlesscatalyst.org/wp-admin/edit-comments.php?comment_status=moderated#wpbody-content\r\n', '[Catalyst] Please moderate: \"The view from 10 months in..\"', 'Bad Request(invalid_grant)', 'private', 'closed', 'closed', '', 'catalyst-please-moderate-the-view-from-10-months-in-100', '', '', '2019-04-09 01:42:17', '2019-04-09 01:42:17', '', 0, 'https://cashlesscatalyst.org/postman_sent_mail/catalyst-please-moderate-the-view-from-10-months-in-100/', 0, 'postman_sent_mail', '', 0),
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(39451, 20, '2018-11-20 14:12:40', '2018-11-20 14:12:40', '[vc_row content_placement=\"middle\" inner_container=\"no\" type=\"image\" bg_position_horizontal=\"center\" padding_top=\"96\" padding_bottom=\"96\" bg_image=\"12155\"][vc_column][vc_row_inner][vc_column_inner][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"image\" bg_repeat=\"repeat\" bg_attachment=\"true\" enable_parallax=\"false\" padding_bottom=\"0\" bg_image=\"10448\"][vc_column][vc_wp_custommenu nav_menu=\"63\"][/vc_column][/vc_row][vc_row equal_height=\"yes\" type=\"image\" bg_color=\"#ffffff\" bg_repeat=\"repeat\" bg_attachment=\"true\" enable_parallax=\"false\" padding_top=\"30\" bg_image=\"10448\"][vc_column][vc_row_inner equal_height=\"yes\" gap=\"30\" el_class=\"lnContainer\"][vc_column_inner width=\"1/4\" css=\".vc_custom_1519195448838{margin-bottom: 10px !important;border-bottom-width: 5px !important;padding-right: 0px !important;padding-left: 0px !important;background-color: #ffffff !important;border-bottom-color: #d11e3c !important;border-bottom-style: solid !important;}\"][vc_single_image image=\"39450\" img_size=\"full\" alignment=\"center\" onclick=\"custom_link\" link=\"https://cashlesscatalyst.org/digital-lending-small-merchants-missing-road-last-mile/\"][vc_custom_heading text=\"Digital lending for small merchants: the missing road to the last mile\" font_container=\"tag:h4|font_size:18px|text_align:left|color:%23040707|line_height:24px\" google_fonts=\"font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:500%20bold%20regular%3A500%3Anormal\" letter_spacing=\"\" link=\"url:https%3A%2F%2Fcashlesscatalyst.org%2Fdigital-lending-small-merchants-missing-road-last-mile%2F|||\" el_class=\"lnContainerTitle\" css=\".vc_custom_1542722764189{padding-right: 5% !important;padding-left: 5% !important;}\"][vc_custom_heading text=\"Technical writers: John Arun and Shubhranka Mondal\" font_container=\"tag:h5|font_size:12px|text_align:left|color:%23040707|line_height:18px\" google_fonts=\"font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:400%20regular%3A400%3Anormal\" letter_spacing=\"\" link=\"|||\" el_class=\"lnContainerTitle\" css=\".vc_custom_1542722803475{padding-right: 5% !important;padding-left: 5% !important;}\"][vc_custom_heading text=\"October, 2018\" font_container=\"tag:p|font_size:14px|text_align:left|color:%23a5a5a5|line_height:22px\" google_fonts=\"font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:400%20regular%3A400%3Anormal\" letter_spacing=\"\" css=\".vc_custom_1541402650943{padding-right: 5% !important;padding-bottom: 5% !important;padding-left: 5% !important;}\"][/vc_column_inner][vc_column_inner width=\"1/4\" css=\".vc_custom_1519195482884{margin-bottom: 10px !important;border-bottom-width: 5px !important;padding-right: 0px !important;padding-left: 0px !important;background-color: #ffffff !important;border-bottom-color: #d11e3c !important;border-bottom-style: solid !important;}\"][vc_single_image image=\"38891\" img_size=\"full\" alignment=\"center\" onclick=\"custom_link\" link=\"https://cashlesscatalyst.org/segmenting-low-income-cluster-digital-payment-solutions/\"][vc_custom_heading text=\"Segmenting low-income cluster for digital payment solutions\" font_container=\"tag:h4|font_size:18px|text_align:left|color:%23040707|line_height:24px\" google_fonts=\"font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:500%20bold%20regular%3A500%3Anormal\" letter_spacing=\"\" link=\"url:https%3A%2F%2Fcashlesscatalyst.org%2Fsegmenting-low-income-cluster-digital-payment-solutions%2F|||\" el_class=\"lnContainerTitle\" css=\".vc_custom_1541403176185{padding-right: 5% !important;padding-left: 5% !important;}\"][vc_custom_heading text=\"Technical writers: Deepti Kc\" font_container=\"tag:h5|font_size:12px|text_align:left|color:%23040707|line_height:18px\" google_fonts=\"font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:400%20regular%3A400%3Anormal\" letter_spacing=\"\" link=\"|||\" el_class=\"lnContainerTitle\" css=\".vc_custom_1541403188260{padding-right: 5% !important;padding-left: 5% !important;}\"][vc_custom_heading text=\"October, 2018\" font_container=\"tag:p|font_size:14px|text_align:left|color:%23a5a5a5|line_height:22px\" google_fonts=\"font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:400%20regular%3A400%3Anormal\" letter_spacing=\"\" css=\".vc_custom_1541402650943{padding-right: 5% !important;padding-bottom: 5% !important;padding-left: 5% !important;}\"][/vc_column_inner][vc_column_inner width=\"1/4\" css=\".vc_custom_1519195345948{margin-bottom: 10px !important;border-bottom-width: 5px !important;padding-right: 0px !important;padding-left: 0px !important;background-color: #ffffff !important;border-bottom-color: #d11e3c !important;border-bottom-style: solid !important;}\"][vc_single_image image=\"26507\" img_size=\"full\" alignment=\"center\" onclick=\"custom_link\" link=\"https://cashlesscatalyst.org/digitizing-dairy-b2b-supply-chain/\"][vc_custom_heading text=\"Digitizing Dairy B2B Supply Chain\" font_container=\"tag:h4|font_size:18px|text_align:left|color:%23040707|line_height:24px\" google_fonts=\"font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:500%20bold%20regular%3A500%3Anormal\" letter_spacing=\"\" link=\"url:https%3A%2F%2Fcashlesscatalyst.org%2Fdigitizing-dairy-b2b-supply-chain%2F|||\" el_class=\"lnContainerTitle\" css=\".vc_custom_1537956128919{padding-right: 5% !important;padding-left: 5% !important;}\"][vc_custom_heading text=\"Technical writers: Tunisha Kapoor and Preethi Rao\" font_container=\"tag:h5|font_size:12px|text_align:left|color:%23040707|line_height:18px\" google_fonts=\"font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:400%20regular%3A400%3Anormal\" letter_spacing=\"\" link=\"|||\" el_class=\"lnContainerTitle\" css=\".vc_custom_1537955384156{padding-right: 5% !important;padding-left: 5% !important;}\"][vc_custom_heading text=\"September, 2018\" font_container=\"tag:p|font_size:14px|text_align:left|color:%23a5a5a5|line_height:22px\" google_fonts=\"font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:400%20regular%3A400%3Anormal\" letter_spacing=\"\" css=\".vc_custom_1537523993141{padding-right: 5% !important;padding-bottom: 5% !important;padding-left: 5% !important;}\"][/vc_column_inner][vc_column_inner width=\"1/4\" css=\".vc_custom_1519195533112{margin-bottom: 10px !important;border-bottom-width: 5px !important;padding-right: 0px !important;padding-left: 0px !important;background-color: #ffffff !important;border-bottom-color: #d11e3c !important;border-bottom-style: solid !important;}\"][vc_single_image image=\"26362\" img_size=\"full\" alignment=\"center\" onclick=\"custom_link\" link=\"https://cashlesscatalyst.org/leveragin-gst-for-digital-payments/\"][vc_custom_heading text=\"Leveraging GST for digital payments\" font_container=\"tag:h4|font_size:18px|text_align:left|color:%23040707|line_height:24px\" google_fonts=\"font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:500%20bold%20regular%3A500%3Anormal\" letter_spacing=\"\" link=\"url:https%3A%2F%2Fcashlesscatalyst.org%2Fleveragin-gst-for-digital-payments%2F|||\" el_class=\"lnContainerTitle\" css=\".vc_custom_1537523945584{padding-right: 5% !important;padding-left: 5% !important;}\"][vc_custom_heading text=\"Technical writers: Mandar Kagade, Raghav Katyal, Janak Priyani, and Diksha Singh\" font_container=\"tag:h5|font_size:12px|text_align:left|color:%23040707|line_height:18px\" google_fonts=\"font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:400%20regular%3A400%3Anormal\" letter_spacing=\"\" link=\"|||\" el_class=\"lnContainerTitle\" css=\".vc_custom_1537523972346{padding-right: 5% !important;padding-left: 5% !important;}\"][vc_custom_heading text=\"September, 2018\" font_container=\"tag:p|font_size:14px|text_align:left|color:%23a5a5a5|line_height:22px\" google_fonts=\"font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:400%20regular%3A400%3Anormal\" letter_spacing=\"\" css=\".vc_custom_1537523993141{padding-right: 5% !important;padding-bottom: 5% !important;padding-left: 5% !important;}\"][/vc_column_inner][/vc_row_inner][vc_row_inner equal_height=\"yes\" gap=\"30\"][vc_column_inner width=\"1/4\" css=\".vc_custom_1519195345948{margin-bottom: 10px !important;border-bottom-width: 5px !important;padding-right: 0px !important;padding-left: 0px !important;background-color: #ffffff !important;border-bottom-color: #d11e3c !important;border-bottom-style: solid !important;}\"][vc_single_image image=\"23078\" img_size=\"full\" alignment=\"center\" onclick=\"custom_link\" link=\"https://cashlesscatalyst.org/merchant-perspectives-bhim-experience/\"][vc_custom_heading text=\"Merchant perspectives on the BHIM experience\" font_container=\"tag:h4|font_size:18px|text_align:left|color:%23040707|line_height:24px\" google_fonts=\"font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:500%20bold%20regular%3A500%3Anormal\" letter_spacing=\"\" link=\"url:http%3A%2F%2Fcashlesscatalyst.org%2Fmerchant-perspectives-bhim-experience%2F|||\" el_class=\"lnContainerTitle\" css=\".vc_custom_1530709959894{padding-right: 5% !important;padding-left: 5% !important;}\"][vc_custom_heading text=\"Technical writers: Mandar Kagade, Janak Priyani, Diksha Singh and Raghav Katyal.\" font_container=\"tag:h5|font_size:12px|text_align:left|color:%23040707|line_height:18px\" google_fonts=\"font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:400%20regular%3A400%3Anormal\" letter_spacing=\"\" link=\"|||\" el_class=\"lnContainerTitle\" css=\".vc_custom_1530785894602{padding-right: 5% !important;padding-left: 5% !important;}\"][vc_custom_heading text=\"July 2018\" font_container=\"tag:p|font_size:14px|text_align:left|color:%23a5a5a5|line_height:22px\" google_fonts=\"font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:400%20regular%3A400%3Anormal\" letter_spacing=\"\" css=\".vc_custom_1530709001912{padding-right: 5% !important;padding-bottom: 5% !important;padding-left: 5% !important;}\"][/vc_column_inner][vc_column_inner width=\"1/4\" css=\".vc_custom_1523434485038{margin-bottom: 10px !important;border-bottom-width: 5px !important;padding-right: 0px !important;padding-left: 0px !important;background-color: #ffffff !important;border-bottom-color: #d11e3c !important;border-bottom-style: solid !important;}\"][vc_single_image image=\"13249\" img_size=\"full\" alignment=\"center\" onclick=\"custom_link\" link=\"https://cashlesscatalyst.org/a-small-business-go-to-guide-for-going-cashless\"][vc_custom_heading text=\"A Small Business Go-To Guide for Going Cashless\" font_container=\"tag:h4|font_size:18px|text_align:left|color:%23040707|line_height:24px\" google_fonts=\"font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:500%20bold%20regular%3A500%3Anormal\" letter_spacing=\"\" link=\"url:http%3A%2F%2Fcashlesscatalyst.org%2Fa-small-business-go-to-guide-for-going-cashless|||\" el_class=\"lnContainerTitle\" css=\".vc_custom_1523434075142{padding-right: 5% !important;padding-left: 5% !important;}\"][vc_custom_heading text=\"Technical writers : Sapna Bharath and Gaurav Singhal\" font_container=\"tag:h5|font_size:12px|text_align:left|color:%23040707|line_height:18px\" google_fonts=\"font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:400%20regular%3A400%3Anormal\" letter_spacing=\"\" link=\"|||\" el_class=\"lnContainerTitle\" css=\".vc_custom_1531132318660{padding-right: 5% !important;padding-left: 5% !important;}\"][vc_custom_heading text=\"April, 2018\" font_container=\"tag:p|font_size:14px|text_align:left|color:%23a5a5a5|line_height:22px\" google_fonts=\"font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:400%20regular%3A400%3Anormal\" letter_spacing=\"\" css=\".vc_custom_1523434039462{padding-right: 5% !important;padding-bottom: 5% !important;padding-left: 5% !important;}\"][/vc_column_inner][vc_column_inner width=\"1/4\" css=\".vc_custom_1519195482884{margin-bottom: 10px !important;border-bottom-width: 5px !important;padding-right: 0px !important;padding-left: 0px !important;background-color: #ffffff !important;border-bottom-color: #d11e3c !important;border-bottom-style: solid !important;}\"][vc_single_image image=\"12146\" img_size=\"full\" alignment=\"center\" onclick=\"custom_link\" link=\"https://cashlesscatalyst.org/women-in-ultra-poor-communities/\"][vc_custom_heading text=\"Women in ultra-poor communities &amp; their role in household financial decision making and digital participation\" font_container=\"tag:h4|font_size:18px|text_align:left|color:%23040707|line_height:24px\" google_fonts=\"font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:500%20bold%20regular%3A500%3Anormal\" letter_spacing=\"\" link=\"url:http%3A%2F%2Fcashlesscatalyst.org%2Fwomen-in-ultra-poor-communities%2F|||\" el_class=\"lnContainerTitle\" css=\".vc_custom_1519211203629{padding-right: 5% !important;padding-left: 5% !important;}\"][vc_custom_heading text=\"Technical writers: Maya Durvasula, Mridulya Narasimhan, NIdhi Punmia &amp; Vaisnavi Gnanasekaran\" font_container=\"tag:h5|font_size:12px|text_align:left|color:%23040707|line_height:18px\" google_fonts=\"font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:400%20regular%3A400%3Anormal\" letter_spacing=\"\" link=\"|||\" el_class=\"lnContainerTitle\" css=\".vc_custom_1519212224650{padding-right: 5% !important;padding-left: 5% !important;}\"][vc_custom_heading text=\"February, 2018\" font_container=\"tag:p|font_size:14px|text_align:left|color:%23a5a5a5|line_height:22px\" google_fonts=\"font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:400%20regular%3A400%3Anormal\" letter_spacing=\"\" css=\".vc_custom_1519205277484{padding-right: 5% !important;padding-bottom: 5% !important;padding-left: 5% !important;}\"][/vc_column_inner][vc_column_inner width=\"1/4\" css=\".vc_custom_1523434422317{margin-bottom: 10px !important;border-bottom-width: 5px !important;padding-right: 0px !important;padding-left: 0px !important;background-color: #ffffff !important;border-bottom-color: #d11e3c !important;border-bottom-style: solid !important;}\"][vc_single_image image=\"12152\" img_size=\"full\" alignment=\"center\" onclick=\"custom_link\" link=\"https://cashlesscatalyst.org/how-digitally-ready-are-the-urban-ultra-poor/\"][vc_custom_heading text=\"How digitally ready are the urban ultra-poor?\" font_container=\"tag:h4|font_size:18px|text_align:left|color:%23040707|line_height:24px\" google_fonts=\"font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:500%20bold%20regular%3A500%3Anormal\" letter_spacing=\"\" link=\"url:http%3A%2F%2Fcashlesscatalyst.org%2Fhow-digitally-ready-are-the-urban-ultra-poor%2F|||\" el_class=\"lnContainerTitle\" css=\".vc_custom_1519196000899{padding-right: 5% !important;padding-left: 5% !important;}\"][vc_custom_heading text=\"Technical writers: Mridulya Narasimhan &amp; Nidhi Punmia\" font_container=\"tag:h5|font_size:12px|text_align:left|color:%23040707|line_height:18px\" google_fonts=\"font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:400%20regular%3A400%3Anormal\" letter_spacing=\"\" link=\"|||\" el_class=\"lnContainerTitle\" css=\".vc_custom_1519212249177{padding-right: 5% !important;padding-left: 5% !important;}\"][vc_custom_heading text=\"February, 2018\" font_container=\"tag:p|font_size:14px|text_align:left|color:%23a5a5a5|line_height:22px\" google_fonts=\"font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:400%20regular%3A400%3Anormal\" letter_spacing=\"\" css=\".vc_custom_1519205377288{padding-right: 5% !important;padding-bottom: 5% !important;padding-left: 5% !important;}\"][/vc_column_inner][/vc_row_inner][vc_row_inner equal_height=\"yes\" gap=\"30\"][vc_column_inner width=\"1/4\" css=\".vc_custom_1537524096448{margin-bottom: 10px !important;border-bottom-width: 5px !important;padding-right: 0px !important;padding-left: 0px !important;background-color: #ffffff !important;border-bottom-color: #d11e3c !important;border-bottom-style: solid !important;}\"][vc_single_image image=\"10808\" img_size=\"full\" alignment=\"center\" onclick=\"custom_link\" link=\"https://cashlesscatalyst.org/catalyst-blog/catalysts-digital-payment-journey-jaipur-first-stop-barkat-nagar/\"][vc_custom_heading text=\"Catalyst\'s digital payment journey in jaipur first stop - Barkat Nagar\" font_container=\"tag:h4|font_size:18px|text_align:left|color:%23040707|line_height:24px\" google_fonts=\"font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:500%20bold%20regular%3A500%3Anormal\" letter_spacing=\"\" link=\"url:http%3A%2F%2Fcashlesscatalyst.org%2Fcatalyst-blog%2Fcatalysts-digital-payment-journey-jaipur-first-stop-barkat-nagar%2F|||\" el_class=\"lnContainerTitle\" css=\".vc_custom_1519195492063{padding-right: 5% !important;padding-left: 5% !important;}\"][vc_custom_heading text=\"Technical writer: Sapna Bharath\" font_container=\"tag:h5|font_size:12px|text_align:left|color:%23040707|line_height:18px\" google_fonts=\"font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:400%20regular%3A400%3Anormal\" letter_spacing=\"\" link=\"|||\" el_class=\"lnContainerTitle\" css=\".vc_custom_1519212273062{padding-right: 5% !important;padding-left: 5% !important;}\"][vc_custom_heading text=\"July, 2017\" font_container=\"tag:p|font_size:14px|text_align:left|color:%23a5a5a5|line_height:22px\" google_fonts=\"font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:400%20regular%3A400%3Anormal\" letter_spacing=\"\" css=\".vc_custom_1519205296777{padding-right: 5% !important;padding-bottom: 5% !important;padding-left: 5% !important;}\"][/vc_column_inner][vc_column_inner width=\"1/4\" css=\".vc_custom_1541408971675{margin-bottom: 10px !important;border-bottom-width: 5px !important;padding-right: 0px !important;padding-left: 0px !important;background-color: #ffffff !important;border-bottom-color: #dd3333 !important;border-bottom-style: solid !important;}\"][vc_single_image image=\"10470\" img_size=\"full\" alignment=\"center\" onclick=\"custom_link\" link=\"https://cashlesscatalyst.org/catalyst-blog/decoding-jaipur-digital-payments-landscape/\"][vc_custom_heading text=\"Decoding Jaipur’s Digital Payments Landscape\" font_container=\"tag:h4|font_size:18px|text_align:left|color:%23040707|line_height:24px\" google_fonts=\"font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:500%20bold%20regular%3A500%3Anormal\" letter_spacing=\"\" link=\"url:http%3A%2F%2Fcashlesscatalyst.org%2Fcatalyst-blog%2Fdecoding-jaipur-digital-payments-landscape%2F|||\" el_class=\"lnContainerTitle\" css=\".vc_custom_1519195501591{padding-right: 5% !important;padding-left: 5% !important;}\"][vc_custom_heading text=\"Technical writer: Vinaina Suri\" font_container=\"tag:h5|font_size:12px|text_align:left|color:%23040707|line_height:18px\" google_fonts=\"font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:400%20regular%3A400%3Anormal\" letter_spacing=\"\" link=\"|||\" el_class=\"lnContainerTitle\" css=\".vc_custom_1519212423207{padding-right: 5% !important;padding-left: 5% !important;}\"][vc_custom_heading text=\"May, 2017\" font_container=\"tag:p|font_size:14px|text_align:left|color:%23a5a5a5|line_height:22px\" google_fonts=\"font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:400%20regular%3A400%3Anormal\" letter_spacing=\"\" css=\".vc_custom_1519205312907{padding-right: 5% !important;padding-bottom: 5% !important;padding-left: 5% !important;}\"][/vc_column_inner][vc_column_inner width=\"1/4\" css=\".vc_custom_1537956108157{margin-bottom: 10px !important;border-bottom-width: 5px !important;padding-right: 0px !important;padding-left: 0px !important;background-color: #ffffff !important;border-bottom-color: #dd3333 !important;border-bottom-style: solid !important;}\"][vc_single_image image=\"12190\" img_size=\"full\" alignment=\"center\" onclick=\"custom_link\" link=\"https://cashlesscatalyst.org/india-stack/\"][vc_custom_heading text=\"India Stack\" font_container=\"tag:h4|font_size:18px|text_align:left|color:%23040707|line_height:24px\" google_fonts=\"font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:500%20bold%20regular%3A500%3Anormal\" letter_spacing=\"\" link=\"url:http%3A%2F%2Fcashlesscatalyst.org%2Findia-stack%2F|||\" el_class=\"lnContainerTitle\" css=\".vc_custom_1519195545508{padding-right: 5% !important;padding-left: 5% !important;}\"][vc_custom_heading text=\"Technical writer: Catalyst &amp; Dalberg Social Advisors\" font_container=\"tag:h5|font_size:12px|text_align:left|color:%23040707|line_height:18px\" google_fonts=\"font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:400%20regular%3A400%3Anormal\" letter_spacing=\"\" link=\"|||\" el_class=\"lnContainerTitle\" css=\".vc_custom_1521211013662{padding-right: 5% !important;padding-left: 5% !important;}\"][vc_custom_heading text=\"January, 2017\" font_container=\"tag:p|font_size:14px|text_align:left|color:%23a5a5a5|line_height:22px\" google_fonts=\"font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:400%20regular%3A400%3Anormal\" letter_spacing=\"\" css=\".vc_custom_1519211213311{padding-right: 5% !important;padding-bottom: 5% !important;padding-left: 5% !important;}\"][/vc_column_inner][vc_column_inner width=\"1/4\" css=\".vc_custom_1537954927172{margin-bottom: 10px !important;border-bottom-width: 5px !important;padding-right: 0px !important;padding-left: 0px !important;background-color: #ffffff !important;border-bottom-color: #dd3333 !important;border-bottom-style: solid !important;}\"][vc_single_image image=\"12149\" img_size=\"full\" alignment=\"center\" onclick=\"custom_link\" link=\"https://cashlesscatalyst.org/alternative-lending/\"][vc_custom_heading text=\"Alternative Lending\" font_container=\"tag:h4|font_size:18px|text_align:left|color:%23040707|line_height:24px\" google_fonts=\"font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:500%20bold%20regular%3A500%3Anormal\" letter_spacing=\"\" link=\"url:http%3A%2F%2Fcashlesscatalyst.org%2Falternative-lending%2F|||\" el_class=\"lnContainerTitle\" css=\".vc_custom_1519195884538{padding-right: 5% !important;padding-left: 5% !important;}\"][vc_custom_heading text=\"Technical writer: Dalberg Social Advisors\" font_container=\"tag:h5|font_size:12px|text_align:left|color:%23040707|line_height:18px\" google_fonts=\"font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:400%20regular%3A400%3Anormal\" letter_spacing=\"\" link=\"|||\" el_class=\"lnContainerTitle\" css=\".vc_custom_1519212314365{padding-right: 5% !important;padding-left: 5% !important;}\"][vc_custom_heading text=\"January, 2017\" font_container=\"tag:p|font_size:14px|text_align:left|color:%23a5a5a5|line_height:22px\" google_fonts=\"font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:400%20regular%3A400%3Anormal\" letter_spacing=\"\" css=\".vc_custom_1519205362026{padding-right: 5% !important;padding-bottom: 5% !important;padding-left: 5% !important;}\"][/vc_column_inner][/vc_row_inner][vc_row_inner equal_height=\"yes\" gap=\"30\"][vc_column_inner width=\"1/4\" css=\".vc_custom_1537524096448{margin-bottom: 10px !important;border-bottom-width: 5px !important;padding-right: 0px !important;padding-left: 0px !important;background-color: #ffffff !important;border-bottom-color: #d11e3c !important;border-bottom-style: solid !important;}\"][vc_single_image image=\"12148\" img_size=\"full\" alignment=\"center\" onclick=\"custom_link\" link=\"https://cashlesscatalyst.org/digital-kirana/\"][vc_custom_heading text=\"Digital Kirana\" font_container=\"tag:h4|font_size:18px|text_align:left|color:%23040707|line_height:24px\" google_fonts=\"font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:500%20bold%20regular%3A500%3Anormal\" letter_spacing=\"\" link=\"url:http%3A%2F%2Fcashlesscatalyst.org%2Fdigital-kirana%2F|||\" el_class=\"lnContainerTitle\" css=\".vc_custom_1519195812190{padding-right: 5% !important;padding-left: 5% !important;}\"][vc_custom_heading text=\"Technical writer: Dalberg Social Advisors\" font_container=\"tag:h5|font_size:12px|text_align:left|color:%23040707|line_height:18px\" google_fonts=\"font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:400%20regular%3A400%3Anormal\" letter_spacing=\"\" link=\"|||\" el_class=\"lnContainerTitle\" css=\".vc_custom_1519212314365{padding-right: 5% !important;padding-left: 5% !important;}\"][vc_custom_heading text=\"January, 2017\" font_container=\"tag:p|font_size:14px|text_align:left|color:%23a5a5a5|line_height:22px\" google_fonts=\"font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:400%20regular%3A400%3Anormal\" letter_spacing=\"\" css=\".vc_custom_1519205352303{padding-right: 5% !important;padding-bottom: 5% !important;padding-left: 5% !important;}\"][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row el_id=\"footer_area\" text_align=\"center\" type=\"image\" bg_position_horizontal=\"center\" enable_parallax=\"false\" padding_top=\"50px\" padding_bottom=\"50px\" bg_image=\"9937\"][vc_column width=\"1/4\"][/vc_column][vc_column width=\"1/2\" offset=\"vc_col-lg-offset-0 vc_col-md-offset-0 vc_col-sm-offset-0\"][vc_single_image image=\"7888\" img_size=\"full\" alignment=\"center\"][vc_column_text text_color=\"#ffffff\" font_size=\"14px\" letter_spacing=\"\" css=\".vc_custom_1526058044979{margin-top: 35px !important;margin-bottom: 5px !important;padding-right: 20px !important;}\"]\r\n<p style=\"text-align: center;\">CATALYST is an initiative funded by USAID under the mSTAR Program, through funding provided to FHI 360. Housed within IFMR LEAD, the initiative aims to expand digital payments and financial inclusion in India, especially for small merchants and low-income consumers.</p>\r\n[/vc_column_text][kleo_gap][vc_column_text letter_spacing=\"\" css=\".vc_custom_1484051069491{margin-bottom: 0px !important;}\"]\r\n<p style=\"text-align: center;\">[email-newsletter-plugin]</p>\r\n[/vc_column_text][kleo_icon icon=\"facebook\" href=\"https://www.facebook.com/CashlessCatalyst/\" target=\"_blank\" padding=\"15px\" icon_color=\"#ffffff\"][kleo_icon icon=\"linkedin\" href=\"https://www.linkedin.com/company/13221050?trk=tyah&amp;trkInfo=clickedVertical%3Acompany%2CclickedEntityId%3A13221050%2Cidx%3A2-1-2%2CtarId%3A1476420479247%2Ctas%3Acashless%20catalyst\" target=\"_blank\" padding=\"15px\" icon_color=\"#ffffff\"][kleo_icon icon=\"twitter\" href=\"https://twitter.com/cashlesscatalys\" target=\"_blank\" padding=\"15px\" icon_color=\"#ffffff\"][kleo_icon icon=\"youtube-play\" href=\"https://www.youtube.com/channel/UChuc38_PfawDOu44IfYS4lw\" target=\"_blank\" padding=\"15px\" icon_color=\"#ffffff\"][/vc_column][vc_column width=\"1/4\"][/vc_column][/vc_row]', 'Catalyst Publications', '', 'inherit', 'closed', 'closed', '', '12122-revision-v1', '', '', '2018-11-20 14:12:40', '2018-11-20 14:12:40', '', 12122, 'https://cashlesscatalyst.org/media/12122-revision-v1/', 0, 'revision', '', 0);
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(39452, 20, '2018-11-20 14:13:47', '2018-11-20 14:13:47', '[vc_row content_placement=\"middle\" inner_container=\"no\" type=\"image\" bg_position_horizontal=\"center\" padding_top=\"96\" padding_bottom=\"96\" bg_image=\"12155\"][vc_column][vc_row_inner][vc_column_inner][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"image\" bg_repeat=\"repeat\" bg_attachment=\"true\" enable_parallax=\"false\" padding_bottom=\"0\" bg_image=\"10448\"][vc_column][vc_wp_custommenu nav_menu=\"63\"][/vc_column][/vc_row][vc_row equal_height=\"yes\" type=\"image\" bg_color=\"#ffffff\" bg_repeat=\"repeat\" bg_attachment=\"true\" enable_parallax=\"false\" padding_top=\"30\" bg_image=\"10448\"][vc_column][vc_row_inner equal_height=\"yes\" gap=\"30\" el_class=\"lnContainer\"][vc_column_inner width=\"1/4\" css=\".vc_custom_1519195448838{margin-bottom: 10px !important;border-bottom-width: 5px !important;padding-right: 0px !important;padding-left: 0px !important;background-color: #ffffff !important;border-bottom-color: #d11e3c !important;border-bottom-style: solid !important;}\"][vc_single_image image=\"39450\" img_size=\"full\" alignment=\"center\" onclick=\"custom_link\" link=\"https://cashlesscatalyst.org/digital-lending-small-merchants-missing-road-last-mile/\"][vc_custom_heading text=\"Digital lending for small merchants: the missing road to the last mile\" font_container=\"tag:h4|font_size:18px|text_align:left|color:%23040707|line_height:24px\" google_fonts=\"font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:500%20bold%20regular%3A500%3Anormal\" letter_spacing=\"\" link=\"url:https%3A%2F%2Fcashlesscatalyst.org%2Fdigital-lending-small-merchants-missing-road-last-mile%2F|||\" el_class=\"lnContainerTitle\" css=\".vc_custom_1542722764189{padding-right: 5% !important;padding-left: 5% !important;}\"][vc_custom_heading text=\"Technical writers: John Arun and Shubhranka Mondal\" font_container=\"tag:h5|font_size:12px|text_align:left|color:%23040707|line_height:18px\" google_fonts=\"font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:400%20regular%3A400%3Anormal\" letter_spacing=\"\" link=\"|||\" el_class=\"lnContainerTitle\" css=\".vc_custom_1542722803475{padding-right: 5% !important;padding-left: 5% !important;}\"][vc_custom_heading text=\"November, 2018\" font_container=\"tag:p|font_size:14px|text_align:left|color:%23a5a5a5|line_height:22px\" google_fonts=\"font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:400%20regular%3A400%3Anormal\" letter_spacing=\"\" css=\".vc_custom_1542723317626{padding-right: 5% !important;padding-bottom: 5% !important;padding-left: 5% !important;}\"][/vc_column_inner][vc_column_inner width=\"1/4\" css=\".vc_custom_1519195482884{margin-bottom: 10px !important;border-bottom-width: 5px !important;padding-right: 0px !important;padding-left: 0px !important;background-color: #ffffff !important;border-bottom-color: #d11e3c !important;border-bottom-style: solid !important;}\"][vc_single_image image=\"38891\" img_size=\"full\" alignment=\"center\" onclick=\"custom_link\" link=\"https://cashlesscatalyst.org/segmenting-low-income-cluster-digital-payment-solutions/\"][vc_custom_heading text=\"Segmenting low-income cluster for digital payment solutions\" font_container=\"tag:h4|font_size:18px|text_align:left|color:%23040707|line_height:24px\" google_fonts=\"font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:500%20bold%20regular%3A500%3Anormal\" letter_spacing=\"\" link=\"url:https%3A%2F%2Fcashlesscatalyst.org%2Fsegmenting-low-income-cluster-digital-payment-solutions%2F|||\" el_class=\"lnContainerTitle\" css=\".vc_custom_1541403176185{padding-right: 5% !important;padding-left: 5% !important;}\"][vc_custom_heading text=\"Technical writers: Deepti Kc\" font_container=\"tag:h5|font_size:12px|text_align:left|color:%23040707|line_height:18px\" google_fonts=\"font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:400%20regular%3A400%3Anormal\" letter_spacing=\"\" link=\"|||\" el_class=\"lnContainerTitle\" css=\".vc_custom_1541403188260{padding-right: 5% !important;padding-left: 5% !important;}\"][vc_custom_heading text=\"October, 2018\" font_container=\"tag:p|font_size:14px|text_align:left|color:%23a5a5a5|line_height:22px\" google_fonts=\"font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:400%20regular%3A400%3Anormal\" letter_spacing=\"\" css=\".vc_custom_1541402650943{padding-right: 5% !important;padding-bottom: 5% !important;padding-left: 5% !important;}\"][/vc_column_inner][vc_column_inner width=\"1/4\" css=\".vc_custom_1519195345948{margin-bottom: 10px !important;border-bottom-width: 5px !important;padding-right: 0px !important;padding-left: 0px !important;background-color: #ffffff !important;border-bottom-color: #d11e3c !important;border-bottom-style: solid !important;}\"][vc_single_image image=\"26507\" img_size=\"full\" alignment=\"center\" onclick=\"custom_link\" link=\"https://cashlesscatalyst.org/digitizing-dairy-b2b-supply-chain/\"][vc_custom_heading text=\"Digitizing Dairy B2B Supply Chain\" font_container=\"tag:h4|font_size:18px|text_align:left|color:%23040707|line_height:24px\" google_fonts=\"font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:500%20bold%20regular%3A500%3Anormal\" letter_spacing=\"\" link=\"url:https%3A%2F%2Fcashlesscatalyst.org%2Fdigitizing-dairy-b2b-supply-chain%2F|||\" el_class=\"lnContainerTitle\" css=\".vc_custom_1537956128919{padding-right: 5% !important;padding-left: 5% !important;}\"][vc_custom_heading text=\"Technical writers: Tunisha Kapoor and Preethi Rao\" font_container=\"tag:h5|font_size:12px|text_align:left|color:%23040707|line_height:18px\" google_fonts=\"font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:400%20regular%3A400%3Anormal\" letter_spacing=\"\" link=\"|||\" el_class=\"lnContainerTitle\" css=\".vc_custom_1537955384156{padding-right: 5% !important;padding-left: 5% !important;}\"][vc_custom_heading text=\"September, 2018\" font_container=\"tag:p|font_size:14px|text_align:left|color:%23a5a5a5|line_height:22px\" google_fonts=\"font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:400%20regular%3A400%3Anormal\" letter_spacing=\"\" css=\".vc_custom_1537523993141{padding-right: 5% !important;padding-bottom: 5% !important;padding-left: 5% !important;}\"][/vc_column_inner][vc_column_inner width=\"1/4\" css=\".vc_custom_1519195533112{margin-bottom: 10px !important;border-bottom-width: 5px !important;padding-right: 0px !important;padding-left: 0px !important;background-color: #ffffff !important;border-bottom-color: #d11e3c !important;border-bottom-style: solid !important;}\"][vc_single_image image=\"26362\" img_size=\"full\" alignment=\"center\" onclick=\"custom_link\" link=\"https://cashlesscatalyst.org/leveragin-gst-for-digital-payments/\"][vc_custom_heading text=\"Leveraging GST for digital payments\" font_container=\"tag:h4|font_size:18px|text_align:left|color:%23040707|line_height:24px\" google_fonts=\"font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:500%20bold%20regular%3A500%3Anormal\" letter_spacing=\"\" link=\"url:https%3A%2F%2Fcashlesscatalyst.org%2Fleveragin-gst-for-digital-payments%2F|||\" el_class=\"lnContainerTitle\" css=\".vc_custom_1537523945584{padding-right: 5% !important;padding-left: 5% !important;}\"][vc_custom_heading text=\"Technical writers: Mandar Kagade, Raghav Katyal, Janak Priyani, and Diksha Singh\" font_container=\"tag:h5|font_size:12px|text_align:left|color:%23040707|line_height:18px\" google_fonts=\"font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:400%20regular%3A400%3Anormal\" letter_spacing=\"\" link=\"|||\" el_class=\"lnContainerTitle\" css=\".vc_custom_1537523972346{padding-right: 5% !important;padding-left: 5% !important;}\"][vc_custom_heading text=\"September, 2018\" font_container=\"tag:p|font_size:14px|text_align:left|color:%23a5a5a5|line_height:22px\" google_fonts=\"font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:400%20regular%3A400%3Anormal\" letter_spacing=\"\" css=\".vc_custom_1537523993141{padding-right: 5% !important;padding-bottom: 5% !important;padding-left: 5% !important;}\"][/vc_column_inner][/vc_row_inner][vc_row_inner equal_height=\"yes\" gap=\"30\"][vc_column_inner width=\"1/4\" css=\".vc_custom_1519195345948{margin-bottom: 10px !important;border-bottom-width: 5px !important;padding-right: 0px !important;padding-left: 0px !important;background-color: #ffffff !important;border-bottom-color: #d11e3c !important;border-bottom-style: solid !important;}\"][vc_single_image image=\"23078\" img_size=\"full\" alignment=\"center\" onclick=\"custom_link\" link=\"https://cashlesscatalyst.org/merchant-perspectives-bhim-experience/\"][vc_custom_heading text=\"Merchant perspectives on the BHIM experience\" font_container=\"tag:h4|font_size:18px|text_align:left|color:%23040707|line_height:24px\" google_fonts=\"font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:500%20bold%20regular%3A500%3Anormal\" letter_spacing=\"\" link=\"url:http%3A%2F%2Fcashlesscatalyst.org%2Fmerchant-perspectives-bhim-experience%2F|||\" el_class=\"lnContainerTitle\" css=\".vc_custom_1530709959894{padding-right: 5% !important;padding-left: 5% !important;}\"][vc_custom_heading text=\"Technical writers: Mandar Kagade, Janak Priyani, Diksha Singh and Raghav Katyal.\" font_container=\"tag:h5|font_size:12px|text_align:left|color:%23040707|line_height:18px\" google_fonts=\"font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:400%20regular%3A400%3Anormal\" letter_spacing=\"\" link=\"|||\" el_class=\"lnContainerTitle\" css=\".vc_custom_1530785894602{padding-right: 5% !important;padding-left: 5% !important;}\"][vc_custom_heading text=\"July 2018\" font_container=\"tag:p|font_size:14px|text_align:left|color:%23a5a5a5|line_height:22px\" google_fonts=\"font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:400%20regular%3A400%3Anormal\" letter_spacing=\"\" css=\".vc_custom_1530709001912{padding-right: 5% !important;padding-bottom: 5% !important;padding-left: 5% !important;}\"][/vc_column_inner][vc_column_inner width=\"1/4\" css=\".vc_custom_1523434485038{margin-bottom: 10px !important;border-bottom-width: 5px !important;padding-right: 0px !important;padding-left: 0px !important;background-color: #ffffff !important;border-bottom-color: #d11e3c !important;border-bottom-style: solid !important;}\"][vc_single_image image=\"13249\" img_size=\"full\" alignment=\"center\" onclick=\"custom_link\" link=\"https://cashlesscatalyst.org/a-small-business-go-to-guide-for-going-cashless\"][vc_custom_heading text=\"A Small Business Go-To Guide for Going Cashless\" font_container=\"tag:h4|font_size:18px|text_align:left|color:%23040707|line_height:24px\" google_fonts=\"font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:500%20bold%20regular%3A500%3Anormal\" letter_spacing=\"\" link=\"url:http%3A%2F%2Fcashlesscatalyst.org%2Fa-small-business-go-to-guide-for-going-cashless|||\" el_class=\"lnContainerTitle\" css=\".vc_custom_1523434075142{padding-right: 5% !important;padding-left: 5% !important;}\"][vc_custom_heading text=\"Technical writers : Sapna Bharath and Gaurav Singhal\" font_container=\"tag:h5|font_size:12px|text_align:left|color:%23040707|line_height:18px\" google_fonts=\"font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:400%20regular%3A400%3Anormal\" letter_spacing=\"\" link=\"|||\" el_class=\"lnContainerTitle\" css=\".vc_custom_1531132318660{padding-right: 5% !important;padding-left: 5% !important;}\"][vc_custom_heading text=\"April, 2018\" font_container=\"tag:p|font_size:14px|text_align:left|color:%23a5a5a5|line_height:22px\" google_fonts=\"font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:400%20regular%3A400%3Anormal\" letter_spacing=\"\" css=\".vc_custom_1523434039462{padding-right: 5% !important;padding-bottom: 5% !important;padding-left: 5% !important;}\"][/vc_column_inner][vc_column_inner width=\"1/4\" css=\".vc_custom_1519195482884{margin-bottom: 10px !important;border-bottom-width: 5px !important;padding-right: 0px !important;padding-left: 0px !important;background-color: #ffffff !important;border-bottom-color: #d11e3c !important;border-bottom-style: solid !important;}\"][vc_single_image image=\"12146\" img_size=\"full\" alignment=\"center\" onclick=\"custom_link\" link=\"https://cashlesscatalyst.org/women-in-ultra-poor-communities/\"][vc_custom_heading text=\"Women in ultra-poor communities &amp; their role in household financial decision making and digital participation\" font_container=\"tag:h4|font_size:18px|text_align:left|color:%23040707|line_height:24px\" google_fonts=\"font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:500%20bold%20regular%3A500%3Anormal\" letter_spacing=\"\" link=\"url:http%3A%2F%2Fcashlesscatalyst.org%2Fwomen-in-ultra-poor-communities%2F|||\" el_class=\"lnContainerTitle\" css=\".vc_custom_1519211203629{padding-right: 5% !important;padding-left: 5% !important;}\"][vc_custom_heading text=\"Technical writers: Maya Durvasula, Mridulya Narasimhan, NIdhi Punmia &amp; Vaisnavi Gnanasekaran\" font_container=\"tag:h5|font_size:12px|text_align:left|color:%23040707|line_height:18px\" google_fonts=\"font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:400%20regular%3A400%3Anormal\" letter_spacing=\"\" link=\"|||\" el_class=\"lnContainerTitle\" css=\".vc_custom_1519212224650{padding-right: 5% !important;padding-left: 5% !important;}\"][vc_custom_heading text=\"February, 2018\" font_container=\"tag:p|font_size:14px|text_align:left|color:%23a5a5a5|line_height:22px\" google_fonts=\"font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:400%20regular%3A400%3Anormal\" letter_spacing=\"\" css=\".vc_custom_1519205277484{padding-right: 5% !important;padding-bottom: 5% !important;padding-left: 5% !important;}\"][/vc_column_inner][vc_column_inner width=\"1/4\" css=\".vc_custom_1523434422317{margin-bottom: 10px !important;border-bottom-width: 5px !important;padding-right: 0px !important;padding-left: 0px !important;background-color: #ffffff !important;border-bottom-color: #d11e3c !important;border-bottom-style: solid !important;}\"][vc_single_image image=\"12152\" img_size=\"full\" alignment=\"center\" onclick=\"custom_link\" link=\"https://cashlesscatalyst.org/how-digitally-ready-are-the-urban-ultra-poor/\"][vc_custom_heading text=\"How digitally ready are the urban ultra-poor?\" font_container=\"tag:h4|font_size:18px|text_align:left|color:%23040707|line_height:24px\" google_fonts=\"font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:500%20bold%20regular%3A500%3Anormal\" letter_spacing=\"\" link=\"url:http%3A%2F%2Fcashlesscatalyst.org%2Fhow-digitally-ready-are-the-urban-ultra-poor%2F|||\" el_class=\"lnContainerTitle\" css=\".vc_custom_1519196000899{padding-right: 5% !important;padding-left: 5% !important;}\"][vc_custom_heading text=\"Technical writers: Mridulya Narasimhan &amp; Nidhi Punmia\" font_container=\"tag:h5|font_size:12px|text_align:left|color:%23040707|line_height:18px\" google_fonts=\"font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:400%20regular%3A400%3Anormal\" letter_spacing=\"\" link=\"|||\" el_class=\"lnContainerTitle\" css=\".vc_custom_1519212249177{padding-right: 5% !important;padding-left: 5% !important;}\"][vc_custom_heading text=\"February, 2018\" font_container=\"tag:p|font_size:14px|text_align:left|color:%23a5a5a5|line_height:22px\" google_fonts=\"font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:400%20regular%3A400%3Anormal\" letter_spacing=\"\" css=\".vc_custom_1519205377288{padding-right: 5% !important;padding-bottom: 5% !important;padding-left: 5% !important;}\"][/vc_column_inner][/vc_row_inner][vc_row_inner equal_height=\"yes\" gap=\"30\"][vc_column_inner width=\"1/4\" css=\".vc_custom_1537524096448{margin-bottom: 10px !important;border-bottom-width: 5px !important;padding-right: 0px !important;padding-left: 0px !important;background-color: #ffffff !important;border-bottom-color: #d11e3c !important;border-bottom-style: solid !important;}\"][vc_single_image image=\"10808\" img_size=\"full\" alignment=\"center\" onclick=\"custom_link\" link=\"https://cashlesscatalyst.org/catalyst-blog/catalysts-digital-payment-journey-jaipur-first-stop-barkat-nagar/\"][vc_custom_heading text=\"Catalyst\'s digital payment journey in jaipur first stop - Barkat Nagar\" font_container=\"tag:h4|font_size:18px|text_align:left|color:%23040707|line_height:24px\" google_fonts=\"font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:500%20bold%20regular%3A500%3Anormal\" letter_spacing=\"\" link=\"url:http%3A%2F%2Fcashlesscatalyst.org%2Fcatalyst-blog%2Fcatalysts-digital-payment-journey-jaipur-first-stop-barkat-nagar%2F|||\" el_class=\"lnContainerTitle\" css=\".vc_custom_1519195492063{padding-right: 5% !important;padding-left: 5% !important;}\"][vc_custom_heading text=\"Technical writer: Sapna Bharath\" font_container=\"tag:h5|font_size:12px|text_align:left|color:%23040707|line_height:18px\" google_fonts=\"font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:400%20regular%3A400%3Anormal\" letter_spacing=\"\" link=\"|||\" el_class=\"lnContainerTitle\" css=\".vc_custom_1519212273062{padding-right: 5% !important;padding-left: 5% !important;}\"][vc_custom_heading text=\"July, 2017\" font_container=\"tag:p|font_size:14px|text_align:left|color:%23a5a5a5|line_height:22px\" google_fonts=\"font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:400%20regular%3A400%3Anormal\" letter_spacing=\"\" css=\".vc_custom_1519205296777{padding-right: 5% !important;padding-bottom: 5% !important;padding-left: 5% !important;}\"][/vc_column_inner][vc_column_inner width=\"1/4\" css=\".vc_custom_1541408971675{margin-bottom: 10px !important;border-bottom-width: 5px !important;padding-right: 0px !important;padding-left: 0px !important;background-color: #ffffff !important;border-bottom-color: #dd3333 !important;border-bottom-style: solid !important;}\"][vc_single_image image=\"10470\" img_size=\"full\" alignment=\"center\" onclick=\"custom_link\" link=\"https://cashlesscatalyst.org/catalyst-blog/decoding-jaipur-digital-payments-landscape/\"][vc_custom_heading text=\"Decoding Jaipur’s Digital Payments Landscape\" font_container=\"tag:h4|font_size:18px|text_align:left|color:%23040707|line_height:24px\" google_fonts=\"font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:500%20bold%20regular%3A500%3Anormal\" letter_spacing=\"\" link=\"url:http%3A%2F%2Fcashlesscatalyst.org%2Fcatalyst-blog%2Fdecoding-jaipur-digital-payments-landscape%2F|||\" el_class=\"lnContainerTitle\" css=\".vc_custom_1519195501591{padding-right: 5% !important;padding-left: 5% !important;}\"][vc_custom_heading text=\"Technical writer: Vinaina Suri\" font_container=\"tag:h5|font_size:12px|text_align:left|color:%23040707|line_height:18px\" google_fonts=\"font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:400%20regular%3A400%3Anormal\" letter_spacing=\"\" link=\"|||\" el_class=\"lnContainerTitle\" css=\".vc_custom_1519212423207{padding-right: 5% !important;padding-left: 5% !important;}\"][vc_custom_heading text=\"May, 2017\" font_container=\"tag:p|font_size:14px|text_align:left|color:%23a5a5a5|line_height:22px\" google_fonts=\"font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:400%20regular%3A400%3Anormal\" letter_spacing=\"\" css=\".vc_custom_1519205312907{padding-right: 5% !important;padding-bottom: 5% !important;padding-left: 5% !important;}\"][/vc_column_inner][vc_column_inner width=\"1/4\" css=\".vc_custom_1537956108157{margin-bottom: 10px !important;border-bottom-width: 5px !important;padding-right: 0px !important;padding-left: 0px !important;background-color: #ffffff !important;border-bottom-color: #dd3333 !important;border-bottom-style: solid !important;}\"][vc_single_image image=\"12190\" img_size=\"full\" alignment=\"center\" onclick=\"custom_link\" link=\"https://cashlesscatalyst.org/india-stack/\"][vc_custom_heading text=\"India Stack\" font_container=\"tag:h4|font_size:18px|text_align:left|color:%23040707|line_height:24px\" google_fonts=\"font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:500%20bold%20regular%3A500%3Anormal\" letter_spacing=\"\" link=\"url:http%3A%2F%2Fcashlesscatalyst.org%2Findia-stack%2F|||\" el_class=\"lnContainerTitle\" css=\".vc_custom_1519195545508{padding-right: 5% !important;padding-left: 5% !important;}\"][vc_custom_heading text=\"Technical writer: Catalyst &amp; Dalberg Social Advisors\" font_container=\"tag:h5|font_size:12px|text_align:left|color:%23040707|line_height:18px\" google_fonts=\"font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:400%20regular%3A400%3Anormal\" letter_spacing=\"\" link=\"|||\" el_class=\"lnContainerTitle\" css=\".vc_custom_1521211013662{padding-right: 5% !important;padding-left: 5% !important;}\"][vc_custom_heading text=\"January, 2017\" font_container=\"tag:p|font_size:14px|text_align:left|color:%23a5a5a5|line_height:22px\" google_fonts=\"font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:400%20regular%3A400%3Anormal\" letter_spacing=\"\" css=\".vc_custom_1519211213311{padding-right: 5% !important;padding-bottom: 5% !important;padding-left: 5% !important;}\"][/vc_column_inner][vc_column_inner width=\"1/4\" css=\".vc_custom_1537954927172{margin-bottom: 10px !important;border-bottom-width: 5px !important;padding-right: 0px !important;padding-left: 0px !important;background-color: #ffffff !important;border-bottom-color: #dd3333 !important;border-bottom-style: solid !important;}\"][vc_single_image image=\"12149\" img_size=\"full\" alignment=\"center\" onclick=\"custom_link\" link=\"https://cashlesscatalyst.org/alternative-lending/\"][vc_custom_heading text=\"Alternative Lending\" font_container=\"tag:h4|font_size:18px|text_align:left|color:%23040707|line_height:24px\" google_fonts=\"font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:500%20bold%20regular%3A500%3Anormal\" letter_spacing=\"\" link=\"url:http%3A%2F%2Fcashlesscatalyst.org%2Falternative-lending%2F|||\" el_class=\"lnContainerTitle\" css=\".vc_custom_1519195884538{padding-right: 5% !important;padding-left: 5% !important;}\"][vc_custom_heading text=\"Technical writer: Dalberg Social Advisors\" font_container=\"tag:h5|font_size:12px|text_align:left|color:%23040707|line_height:18px\" google_fonts=\"font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:400%20regular%3A400%3Anormal\" letter_spacing=\"\" link=\"|||\" el_class=\"lnContainerTitle\" css=\".vc_custom_1519212314365{padding-right: 5% !important;padding-left: 5% !important;}\"][vc_custom_heading text=\"January, 2017\" font_container=\"tag:p|font_size:14px|text_align:left|color:%23a5a5a5|line_height:22px\" google_fonts=\"font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:400%20regular%3A400%3Anormal\" letter_spacing=\"\" css=\".vc_custom_1519205362026{padding-right: 5% !important;padding-bottom: 5% !important;padding-left: 5% !important;}\"][/vc_column_inner][/vc_row_inner][vc_row_inner equal_height=\"yes\" gap=\"30\"][vc_column_inner width=\"1/4\" css=\".vc_custom_1537524096448{margin-bottom: 10px !important;border-bottom-width: 5px !important;padding-right: 0px !important;padding-left: 0px !important;background-color: #ffffff !important;border-bottom-color: #d11e3c !important;border-bottom-style: solid !important;}\"][vc_single_image image=\"12148\" img_size=\"full\" alignment=\"center\" onclick=\"custom_link\" link=\"https://cashlesscatalyst.org/digital-kirana/\"][vc_custom_heading text=\"Digital Kirana\" font_container=\"tag:h4|font_size:18px|text_align:left|color:%23040707|line_height:24px\" google_fonts=\"font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:500%20bold%20regular%3A500%3Anormal\" letter_spacing=\"\" link=\"url:http%3A%2F%2Fcashlesscatalyst.org%2Fdigital-kirana%2F|||\" el_class=\"lnContainerTitle\" css=\".vc_custom_1519195812190{padding-right: 5% !important;padding-left: 5% !important;}\"][vc_custom_heading text=\"Technical writer: Dalberg Social Advisors\" font_container=\"tag:h5|font_size:12px|text_align:left|color:%23040707|line_height:18px\" google_fonts=\"font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:400%20regular%3A400%3Anormal\" letter_spacing=\"\" link=\"|||\" el_class=\"lnContainerTitle\" css=\".vc_custom_1519212314365{padding-right: 5% !important;padding-left: 5% !important;}\"][vc_custom_heading text=\"January, 2017\" font_container=\"tag:p|font_size:14px|text_align:left|color:%23a5a5a5|line_height:22px\" google_fonts=\"font_family:Roboto%3A100%2C100italic%2C300%2C300italic%2Cregular%2Citalic%2C500%2C500italic%2C700%2C700italic%2C900%2C900italic|font_style:400%20regular%3A400%3Anormal\" letter_spacing=\"\" css=\".vc_custom_1519205352303{padding-right: 5% !important;padding-bottom: 5% !important;padding-left: 5% !important;}\"][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row el_id=\"footer_area\" text_align=\"center\" type=\"image\" bg_position_horizontal=\"center\" enable_parallax=\"false\" padding_top=\"50px\" padding_bottom=\"50px\" bg_image=\"9937\"][vc_column width=\"1/4\"][/vc_column][vc_column width=\"1/2\" offset=\"vc_col-lg-offset-0 vc_col-md-offset-0 vc_col-sm-offset-0\"][vc_single_image image=\"7888\" img_size=\"full\" alignment=\"center\"][vc_column_text text_color=\"#ffffff\" font_size=\"14px\" letter_spacing=\"\" css=\".vc_custom_1526058044979{margin-top: 35px !important;margin-bottom: 5px !important;padding-right: 20px !important;}\"]\r\n<p style=\"text-align: center;\">CATALYST is an initiative funded by USAID under the mSTAR Program, through funding provided to FHI 360. Housed within IFMR LEAD, the initiative aims to expand digital payments and financial inclusion in India, especially for small merchants and low-income consumers.</p>\r\n[/vc_column_text][kleo_gap][vc_column_text letter_spacing=\"\" css=\".vc_custom_1484051069491{margin-bottom: 0px !important;}\"]\r\n<p style=\"text-align: center;\">[email-newsletter-plugin]</p>\r\n[/vc_column_text][kleo_icon icon=\"facebook\" href=\"https://www.facebook.com/CashlessCatalyst/\" target=\"_blank\" padding=\"15px\" icon_color=\"#ffffff\"][kleo_icon icon=\"linkedin\" href=\"https://www.linkedin.com/company/13221050?trk=tyah&amp;trkInfo=clickedVertical%3Acompany%2CclickedEntityId%3A13221050%2Cidx%3A2-1-2%2CtarId%3A1476420479247%2Ctas%3Acashless%20catalyst\" target=\"_blank\" padding=\"15px\" icon_color=\"#ffffff\"][kleo_icon icon=\"twitter\" href=\"https://twitter.com/cashlesscatalys\" target=\"_blank\" padding=\"15px\" icon_color=\"#ffffff\"][kleo_icon icon=\"youtube-play\" href=\"https://www.youtube.com/channel/UChuc38_PfawDOu44IfYS4lw\" target=\"_blank\" padding=\"15px\" icon_color=\"#ffffff\"][/vc_column][vc_column width=\"1/4\"][/vc_column][/vc_row]', 'Catalyst Publications', '', 'inherit', 'closed', 'closed', '', '12122-revision-v1', '', '', '2018-11-20 14:13:47', '2018-11-20 14:13:47', '', 12122, 'https://cashlesscatalyst.org/media/12122-revision-v1/', 0, 'revision', '', 0),
(39453, 20, '2018-11-21 07:49:00', '2018-11-21 07:49:00', '[vc_row full_height=\"yes\" equal_height=\"yes\" content_placement=\"middle\" text_align=\"center\" type=\"image\" bg_position_horizontal=\"center\" enable_parallax=\"false\" padding_top=\"110\" padding_bottom=\"0\" bg_image=\"39413\"][vc_column][kleo_gap size=\"100px\"][vc_row_inner][vc_column_inner][vc_custom_heading text=\"DEVELOPING BUSINESS MODELS FOR MASS DIGITAL PAYMENTS IN INDIA\" font_container=\"tag:h2|font_size:48px|text_align:center|color:%23ffffff|line_height:54px\" google_fonts=\"font_family:Roboto%20Condensed%3A300%2C300italic%2Cregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal\" letter_spacing=\"\"][/vc_column_inner][/vc_row_inner][kleo_gap size=\"130px\"][/vc_column][/vc_row][vc_row equal_height=\"yes\" content_placement=\"middle\" type=\"color\" bg_color=\"#ffffff\" padding_top=\"10\" padding_bottom=\"0\"][vc_column width=\"1/2\"][/vc_column][vc_column width=\"1/2\"][vc_row_inner equal_height=\"yes\" content_placement=\"middle\"][vc_column_inner width=\"5/12\" css=\".vc_custom_1504265033147{padding-right: 0px !important;}\"][/vc_column_inner][vc_column_inner width=\"1/3\" css=\".vc_custom_1504265063058{padding-left: 0px !important;}\"][vc_column_text letter_spacing=\"\"][addtoany][/vc_column_text][/vc_column_inner][vc_column_inner width=\"1/4\" css=\".vc_custom_1504265782417{padding-right: 0px !important;padding-left: 0px !important;}\"][kleo_button title=\"Print this page\" href=\"https://cashlesscatalyst.org/wp-content/uploads/2018/11/Developing-Business-Models-1.pdf\" target=\"_blank\" style=\"custom\" position=\"left\" size=\"lg\" special=\"no\" border=\"no\" icon=\"print\" font_size=\"16px\" letter_spacing=\"\" el_class=\"grey-icon\" custom_text=\"#d11e3c\"][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"image\" padding_top=\"50\" padding_bottom=\"50\" bg_image=\"7841\"][vc_column][vc_row_inner][vc_column_inner][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"ptext-justify lh22\"]Developing business models for mass digital payments in a diverse country like India is a challenging task. It requires multi-stakeholder coordination to understand ‘adoption and acceptance’ challenges, develop and optimize innovative solutions and business models, answer the key question for merchants and consumers (what’s in it for me?), and consider future actions. But, above all, there is a need to design an easy-to-use digital payments interface that can cater to the needs and financial capabilities of the last mile target population.\r\n\r\nCATALYST, as a multi-stakeholder initiative, followed an ecosystem approach to identify and operationalize business models relevant to the Jaipur market. We selected Jaipur as the target geography, given the existing infrastructure to support digital uptake such as availability of power supply, internet connectivity,  penetration of mobile phones, along with the general appetite and interest among locals to learn more about digital payments.\r\n\r\nIn recent times, the success of business models has been based on creating flexible value webs as opposed to static value chains. This means that the roles and responsibilities of players in the business model are not necessarily linear, rigid, and well-defined from the start, but evolve during the course of the engagement.\r\n\r\nWe took inputs and guidance from the Government of Rajasthan, private sector organizations such as banks, fintech solution partners, merchant community and their distributors, and consumer households. While creating a blueprint for business models for mass digital payments, we had to keep in mind the requirements and contributions of these stakeholders.[/vc_column_text][/vc_column_inner][/vc_row_inner][vc_single_image image=\"39376\" img_size=\"full\" alignment=\"center\"][/vc_column][/vc_row][vc_row type=\"image\" padding_top=\"50\" padding_bottom=\"50\"][vc_column][vc_row_inner css=\".vc_custom_1542359333513{border-bottom-width: 25px !important;}\"][vc_column_inner][vc_custom_heading text=\"Payment digitization: the business use case\" font_container=\"tag:h2|font_size:26px|text_align:center|color:%23d11e3c|line_height:32px\" google_fonts=\"font_family:Roboto%20Condensed%3A300%2C300italic%2Cregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal\" css_animation=\"fadeIn\" letter_spacing=\"\"][/vc_column_inner][/vc_row_inner][vc_row_inner equal_height=\"yes\" content_placement=\"top\" css=\".vc_custom_1542359399750{padding-top: 30px !important;}\"][vc_column_inner][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"ptext-justify lh22\"]As part of the value web of stakeholders contributing to widescale digital payment ecosystems, the solution provider who creates and runs the application should connect with both consumers and merchants. Secondly, the solution provider needs to achieve a critical mass of consumer uptake for the merchant to adopt the solution and, in turn, consumer uptake will be driven by merchant persuasion.  This dual edged sword makes it complicated for the solution provider to create a successful business model. There is also a need to match the business logic of the solution partner with that of other actors in the ecosystem who are key drivers of the model. Therefore, among the most important issues in creating sustainable business models in digital payment services is how to create value for consumers, and who to include in the value network.\r\n\r\nIn Jaipur, CATALYST helped solution partners to address these two major issues. We followed an ecosystem approach to support mechanisms such as creation of market linkages, governmental support, collection of ongoing field insights and advice on critical operational challenges. Following are the key questions that need to be answered to constitute a successful business model in mass digital payments based on our experience of working with solution partners on the ground in Jaipur since mid-2016:\r\n<ol>\r\n 	<li><strong>Who is the user?</strong> <em>Identification of the target segment and creating a niche or a ‘one-size-fit-all’ solution and customizing to specific segments</em>: One can choose to follow either of these routes for market acquisition.</li>\r\n 	<li><strong>Can the user self-onboard?</strong> <em>Assisted do-it-yourself for the Indian context</em>: Not just the rural but the urban poor too need handholding support to embrace technical evolutions. A fully automated system will not work in the Indian context. The solution provider should engage the merchant as the assisting agent and the focal point to nudge consumer adoption.</li>\r\n 	<li><strong>What are the hooks and ladders?</strong> <em>Levers to support scalability</em>: One thing that stood out from all our field insights is that digital payments alone cannot be a sustainable proposition. Alternate hooks such as credit, savings or incentives for uptake are necessary to encourage participation.</li>\r\n 	<li><strong>Where do we start?</strong> <em>B2B as a precursor to C2B</em>: Other very important drivers for merchants to volunteer to onboard consumers on digital payments are distributor buy-in and backing. A value proposition that has worked in different value chains such as FMCG, pharma and dairy in Jaipur is the digitization of B2B payments which invariably pushes the merchant to also encourage digital payments downwards in the value chain.</li>\r\n 	<li><strong>Why work with the government?</strong>  <em>Its blessing is an advantage if not a necessity</em>: It is clearly advantageous to have government support for the solution propagated. The best way to ensure that the ultimate consumer trusts the payment solution is if the government attests it.</li>\r\n 	<li><strong>What is the value proposition?</strong> <em>Consumer and/or merchant needs to see the value</em>: Ultimately the consumer is king and needs to see value in the solution beyond the freebies provided.  Merchants, on the other hand, need to make business sense of the whole proposition and ensure that going digital is profitable in order to engage the consumers. The solution partner needs to continuously engage with the merchants to make sure they understand this value.</li>\r\n 	<li><strong>Who are the partners?</strong> <em>Alignment of stakeholders in the ‘value web’ is key for value creation and scalability</em>: All stakeholders need to be aligned to the central value proposition of the solution provider and there should be clarity on each stakeholder’s return on investment.</li>\r\n</ol>\r\n[/vc_column_text][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"image\" padding_top=\"50\" padding_bottom=\"50\" bg_image=\"7841\"][vc_column][vc_row_inner css=\".vc_custom_1542359342440{border-bottom-width: 25px !important;}\"][vc_column_inner][vc_custom_heading text=\"From the CATALYST Incubator program \" font_container=\"tag:h2|font_size:26px|text_align:center|color:%23d11e3c|line_height:32px\" google_fonts=\"font_family:Roboto%20Condensed%3A300%2C300italic%2Cregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal\" css_animation=\"fadeIn\" letter_spacing=\"\"][/vc_column_inner][/vc_row_inner][vc_row_inner equal_height=\"yes\" content_placement=\"middle\" css=\".vc_custom_1542359410127{padding-top: 30px !important;}\"][vc_column_inner][vc_single_image image=\"39371\" img_size=\"large\" alignment=\"center\"][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"ptext-justify lh22\"]One of our partners in the Incubator program, PayNearby, has developed a full-fledged Aadhaar-based payment solution which converts any retail business into a micro ATM and payments solutions partner. While the primary earnings of the retailers come from the existing business, consumers are offered the option to make digital payments rather than pay in cash as they did traditionally.\r\n\r\nLet’s take the case of a photocopy shop. The primary income comes from photocopying and, possibly, a few add-on services such as binding, ticket booking, and so on. An additional service such as a digital payment solution, which has facilities like domestic money transfers, Aadhaar-based cash in and out, bills payments, etc., requires no major new infrastructure support (apart from a low cost biometric device which is provided free if a threshold of transactions are achieved) and can start within an hour of onboarding, facilitates extra income and converts merchants into Digital Pradhans.\r\n\r\nAnother case is that of our partner Fingpay which provides Aadhaar Enabled Payment Solutions (AEPS) for the last mile customer. It has successfully onboarded micro finance clients on its platform. In a typical scenario of a Microfinance Institution (MFI) model, borrowers, usually from joint liability groups or self-help groups, pay their monthly dues to the field agent in cash or through the group leader. However, with the Fingpay solution they will be able to transfer funds with just a biometric reading (AEPS). This use case has been the driver of this business case. While there are challenges due to connectivity and transaction failure, the value proposition considerably overrides the technical issues which are resolved due to measures undertaken by all stakeholders involved.[/vc_column_text][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"image\" padding_top=\"50\" padding_bottom=\"50\"][vc_column][vc_row_inner css=\".vc_custom_1542359350051{border-bottom-width: 25px !important;}\"][vc_column_inner][vc_custom_heading text=\"The digital journey forward\" font_container=\"tag:h2|font_size:26px|text_align:center|color:%23d11e3c|line_height:32px\" google_fonts=\"font_family:Roboto%20Condensed%3A300%2C300italic%2Cregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal\" css_animation=\"fadeIn\" letter_spacing=\"\"][/vc_column_inner][/vc_row_inner][vc_row_inner equal_height=\"yes\" content_placement=\"middle\" css=\".vc_custom_1542359421165{padding-top: 30px !important;}\"][vc_column_inner][vc_column_text text_color=\"#383b3b\" font_size=\"16px\" letter_spacing=\"\" el_class=\"ptext-justify lh22\"]As we have observed from our field experiments, there are pertinent use cases whose relevance needs to be mapped, based on the target segments. The advancement and acceptance of digital solutions by different user groups will escalate when larger players include them into their core systems and create an easy access environment for end users. While there is an inherent need to provide financial access to every corner of the country, it requires support from larger financial institutions to take advantage of the innovation that has already been tested and leverage it to reach scale.[/vc_column_text][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row equal_height=\"yes\" content_placement=\"middle\" type=\"color\" bg_color=\"#ffffff\" padding_top=\"10px\" padding_bottom=\"10px\"][vc_column width=\"1/2\"][/vc_column][vc_column width=\"1/2\"][vc_row_inner equal_height=\"yes\" content_placement=\"middle\"][vc_column_inner width=\"5/12\"][/vc_column_inner][vc_column_inner width=\"1/3\" css=\".vc_custom_1504265268713{padding-left: 0px !important;}\"][vc_column_text letter_spacing=\"\"][addtoany][/vc_column_text][/vc_column_inner][vc_column_inner width=\"1/4\" css=\".vc_custom_1504265795099{padding-right: 0px !important;padding-left: 0px !important;}\"][kleo_button title=\"Print this page\" href=\"https://cashlesscatalyst.org/wp-content/uploads/2018/11/Developing-Business-Models-1.pdf\" target=\"_blank\" style=\"custom\" position=\"left\" size=\"lg\" special=\"no\" border=\"no\" icon=\"print\" font_size=\"16px\" letter_spacing=\"\" el_class=\"grey-icon\" custom_text=\"#d11e3c\"][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row content_placement=\"middle\" type=\"color\" bg_color=\"#ffffff\" padding_top=\"5\" padding_bottom=\"5\"][vc_column][vc_row_inner][vc_column_inner width=\"1/2\"][vc_column_text letter_spacing=\"\"][starbox id=21][/vc_column_text][/vc_column_inner][vc_column_inner width=\"1/2\"][vc_column_text letter_spacing=\"\"][starbox id=22][/vc_column_text][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row el_id=\"footer_area\" disable_element=\"yes\" front_status=\"draft\" text_align=\"center\" type=\"image\" bg_position_horizontal=\"center\" enable_parallax=\"false\" column_gap=\"no\" padding_top=\"70px\" padding_bottom=\"50px\" margin_top=\"0px\" bg_image=\"9937\"][vc_column width=\"1/4\"][/vc_column][vc_column width=\"1/2\" offset=\"vc_col-lg-offset-0 vc_col-md-offset-0 vc_col-sm-offset-0\"][vc_single_image image=\"7888\" img_size=\"full\" alignment=\"center\"][vc_column_text text_color=\"#ffffff\" font_size=\"14px\" letter_spacing=\"\" css=\".vc_custom_1484826151396{margin-top: 35px !important;margin-bottom: 5px !important;padding-right: 20px !important;}\"]\r\n<p style=\"text-align: center;\">CATALYST is an initiative seeded by an alliance between the Government of India &amp; USAID, to expand digital payments and financial inclusion in India, especially for small merchants and low-income consumers.</p>\r\n[/vc_column_text][kleo_gap][vc_column_text letter_spacing=\"\" css=\".vc_custom_1484051069491{margin-bottom: 0px !important;}\"]\r\n<p style=\"text-align: center;\">[email-newsletter-plugin]</p>\r\n[/vc_column_text][kleo_icon icon=\"facebook\" href=\"https://www.facebook.com/CashlessCatalyst/\" target=\"_blank\" padding=\"15px\" icon_color=\"#ffffff\"][kleo_icon icon=\"linkedin\" href=\"https://www.linkedin.com/company/13221050?trk=tyah&amp;trkInfo=clickedVertical%3Acompany%2CclickedEntityId%3A13221050%2Cidx%3A2-1-2%2CtarId%3A1476420479247%2Ctas%3Acashless%20catalyst\" target=\"_blank\" padding=\"15px\" icon_color=\"#ffffff\"][kleo_icon icon=\"twitter\" href=\"https://twitter.com/cashlesscatalys\" target=\"_blank\" padding=\"15px\" icon_color=\"#ffffff\"][kleo_icon icon=\"youtube-play\" href=\"https://www.youtube.com/channel/UChuc38_PfawDOu44IfYS4lw\" target=\"_blank\" padding=\"15px\" icon_color=\"#ffffff\"][/vc_column][vc_column width=\"1/4\"][/vc_column][/vc_row]', 'Developing Business Models for Mass Digital Payments in India', 'Developing business models for mass digital payments in a diverse country like India is a challenging task. It requires multi-stakeholder coordination to understand ‘adoption and acceptance’ challenges, develop and optimize innovative solutions and business models, answer the key question for merchants and consumers (what’s in it for me?), and consider future actions. ', 'inherit', 'closed', 'closed', '', '39336-revision-v1', '', '', '2018-11-21 07:49:00', '2018-11-21 07:49:00', '', 39336, 'https://cashlesscatalyst.org/media/39336-revision-v1/', 0, 'revision', '', 0);
INSERT INTO `in_posts` (`ID`, `post_author`, `post_date`, `post_date_gmt`, `post_content`, `post_title`, `post_excerpt`, `post_status`, `comment_status`, `ping_status`, `post_password`, `post_name`, `to_ping`, `pinged`, `post_modified`, `post_modified_gmt`, `post_content_filtered`, `post_parent`, `guid`, `menu_order`, `post_type`, `post_mime_type`, `comment_count`) VALUES
(40366, 23, '2019-02-06 09:38:49', '2019-02-06 09:38:49', '[vc_row equal_height=\"yes\" content_placement=\"middle\" type=\"image\" enable_parallax=\"false\" parallax_speed=\"0.4\" padding_top=\"110\" padding_bottom=\"0\" bg_image=\"26460\"][vc_column][kleo_gap size=\"100px\"][vc_row_inner][vc_column_inner width=\"1/6\"][/vc_column_inner][vc_column_inner width=\"2/3\"][vc_custom_heading text=\"Digitizing Dairy B2B Supply Chain: Experience from the Field\n\" font_container=\"tag:h2|font_size:48px|text_align:center|color:%23ffffff|line_height:54px\" google_fonts=\"font_family:Roboto%20Condensed%3A300%2C300italic%2Cregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal\" letter_spacing=\"\"][/vc_column_inner][vc_column_inner width=\"1/6\"][/vc_column_inner][/vc_row_inner][kleo_gap size=\"140px\"][kleo_gap size=\"50px\"][/vc_column][/vc_row][vc_row equal_height=\"yes\" content_placement=\"middle\" padding_bottom=\"0\"][vc_column width=\"1/2\"][/vc_column][vc_column width=\"1/2\"][vc_row_inner equal_height=\"yes\" content_placement=\"middle\"][vc_column_inner width=\"5/12\"][/vc_column_inner][vc_column_inner width=\"1/3\" css=\".vc_custom_1488531456733{padding-right: 0px !important;}\"][vc_column_text letter_spacing=\"\"][addtoany][/vc_column_text][/vc_column_inner][vc_column_inner width=\"1/4\" css=\".vc_custom_1488531444909{padding-left: 0px !important;}\"][kleo_button title=\"Print this page\" href=\"https://cashlesscatalyst.org/wp-content/uploads/2018/09/Dairy-Learning-Note.pdf\" target=\"_blank\" style=\"custom\" position=\"left\" size=\"lg\" special=\"no\" border=\"no\" icon=\"print\" font_size=\"16px\" letter_spacing=\"\" el_class=\"grey-icon\" custom_text=\"#d11e3c\"][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=\"color\" bg_color=\"#ffffff\" padding_top=\"0\"][vc_column][vc_row_inner][vc_column_inner][vc_custom_heading text=\"Background\" font_container=\"tag:h2|font_size:26px|text_align:left|color:%23383b3b|line_height:32px\" google_fonts=\"font_family:Roboto%20Condensed%3A300%2C300italic%2Cregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal\" letter_spacing=\"\"][vc_column_text letter_spacing=\"\"]For most households in India, buying milk is part of the daily morning ritual. Usually, someone from the household buys milk and other essentials, and makes payment in cash. There are a number of stakeholders in the dairy supply chain including farmers, dairy cooperatives, distributors, and dairy booth owners. In Jaipur, the dairy board — Saras Dairy — is the apex institution that anchors this supply chain.\n\nA small value daily purchase use case such as milk could be an ideal case to potentially bring large-scale behavior change from cash to digital, impacting every strata of the Indian population.\n\nIn order to promote digital payments in Jaipur, Catalyst identified sectors that impact a large population base, opportunities to improve operational efficiency of the supply chain, and strong value propositions for a sustainable business case for digital payments. Based on these parameters, the dairy supply chain was identified as a potential pilot use case and we started initial discussions with Saras Dairy in Jaipur. They ensure milk supply via around 60 distributors and through a vast network of retailers in the city that includes 750 small dairy booths and 4,000 small retail shops.\n\n[/vc_column_text][vc_custom_heading text=\"Milk supply and payments\" font_container=\"tag:h2|font_size:26px|text_align:left|color:%23383b3b|line_height:32px\" google_fonts=\"font_family:Roboto%20Condensed%3A300%2C300italic%2Cregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal\" letter_spacing=\"\"][vc_column_text letter_spacing=\"\"]In order to streamline milk supply, Saras has divided the city into zones with around 60 retailers in one zone and one distributor assigned with the responsibility of supply and payments collection from these booths/shops. The distributors are assigned zones based on a bidding process, wherein the margins quoted by them per liter of milk is one of the parameters for selection.\n\nThe diagram below is a snapshot of the dairy supply and payments cycle:\n\n[/vc_column_text][vc_empty_space][/vc_column_inner][/vc_row_inner][vc_row_inner][vc_column_inner][vc_single_image image=\"26459\" img_size=\"full\" alignment=\"center\"][/vc_column_inner][/vc_row_inner][vc_empty_space][vc_row_inner][vc_column_inner][vc_column_text letter_spacing=\"\"]For each zone, the distributors usually have 1-2 employees who manage the supply and one trusted employee for payments collection from the retailers. When talking to the retailers and distributors, we realized that this supply cycle operates like a well-oiled machine with each stakeholder playing their part efficiently. On the other hand, while the payments cycle is also well established, we realized there are a number of challenges existing in the current system that digital payments could potentially solve.\n\nThough the supply cycle is twice in a day, payment is collected just once – cumulated for the previous evening and next morning’s supply. Thus, it is a daily payment cycle from booth to distributor and to the dairy. However, while booth to distributor payments are majorly in cash, Saras accepts payments from distributors only through bank transfers or cheques. This means the distributor needs to digitize the cash that s/he collects. Additionally, this payment needs to be made to Saras Dairy by 12 pm every day.\n\nDistributors usually have trusted employees for cash collection. The process starts at 9 or 10 am in the morning and can go on until the afternoon in some cases. Retailers often do not have access to surplus cash and need the morning sales to make up this daily payment. Sometimes the cash collection employee may need to visit the retailer more than once to collect the payments. This collected cash is then counted, reconciled, and deposited in the distributor’s bank account in order to make the payment to Saras Dairy.\n\nThe distributor also needs to manage his books and maintains a record of these payments. There could be cases of minor outstanding amounts for certain retailers, which would need to be accounted for in subsequent collections. Sometimes there are changes made to the order sheet during the supply route if some retailers require more or less than their order. In such cases, these changes also need to be accounted for in the payments.\n\nSome distributors rely on register entries that could be prone to manual errors while others maintain digital records. Even in the case of digital record keeping, the details need to be manually entered into the system by a dedicated employee post the cash collection process. This is a manually intensive task but provides an overview of the payments status and also helps keep a track of part payments or delayed payments.\n\nAnother aspect of concern in such a manual process is the risk involved. The cash collection agent is perennially under risk of assault when s/he is required to carry huge amounts of cash through a recurrent route. There was, in fact, a real-time case of assault of a dairy cash collection agent by gunfire during the month of January 2018 in Jaipur, which gave an impetus to our digital payments drive in this supply chain.\n\n[/vc_column_text][vc_custom_heading text=\"Could digital payments be the solution?\" font_container=\"tag:h2|font_size:26px|text_align:left|color:%23383b3b|line_height:32px\" google_fonts=\"font_family:Roboto%20Condensed%3A300%2C300italic%2Cregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal\" letter_spacing=\"\"][vc_column_text letter_spacing=\"\"]After evaluating this payment structure, adoption of digital payments seemed to be beneficial for the distributor. In an ideal scenario, one in which all retailers in a particular zone go digital, the distributor would no longer need to send an employee for cash collection. Reconciliation and follow-ups could be done sitting in the office. In depositing such large amounts of cash, the distributor also incurs cash deposit charges, which are around 0.3 percent taking the total cost of operating in cash to 0.5 percent after including employee and travel costs. This is a huge cost when compared to their current razor thin profit margin of 1.5 percent. Since their outward payments to Saras requires digital money it would be beneficial to convert their in-flow to digital as well.\n\nIn order for digital payments to create actual value for the distributor, just payments would not be sufficient and instant bank-to-bank transfer with real-time payments tracking and automated reconciliation would need to go along with it. Theoretically, the distributor stands to gain from adopting a digital payment solution, saving not only on costs associated with cash and reduction of risk but also in terms of increasing efficiency from digital collections and automated reconciliation. However, this needed to be tested. In order to test this hypothesis, Catalyst designed a pilot with one distributor in Jaipur to digitize B2B payments from retailers in their network.\n\n[/vc_column_text][vc_custom_heading text=\"The intervention design and handholding\" font_container=\"tag:h2|font_size:26px|text_align:left|color:%23383b3b|line_height:32px\" google_fonts=\"font_family:Roboto%20Condensed%3A300%2C300italic%2Cregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal\" letter_spacing=\"\"][vc_column_text letter_spacing=\"\"]The first step was identifying possible solution types that could be applicable to this use case. Any retailer-to-distributor solution needed to be an instant bank-to-bank transfer, keeping in mind the daily payments requirement. Considering three distinct features – remote payment option, digital invoice (for retailer and distributor), and costing – UPI was identified as the most appropriate solution. Possible solution partners were identified by Catalyst and the shortlisted candidates presented their solution to the distributor. A solution provider, Paybee, was selected based on meetings and in consultation with the distributor. The decision was based on solution readiness, ease of use, costing, and investment by the solution provider. After the solution selection, it was important to design a strategy for adoption, therefore a shop-to-shop adoption drive was started by\n\nthe solution provider. In order to build trust with the solution as well as the solution provider, one of the distributor’s employees went along with the solution provider’s team for the initial introductions. The solution provider ensured that the retailers who were interested in adopting the solution were given thorough onboarding instructions and hand-holding was provided for an initial few transactions to ensure they were comfortable with using the solution.\n\nThe hard copy invoice shared by the distributor in the morning and traditionally used by the supply team was required to be digitized by the solution provider and sent out to the retailers for making payments. The pilot was initially started with one distributor and extended to others as the pilot progressed.\n\nWhile there are enough benefits of going digital for the distributor, the retailer\'s story was still unclear in terms of our pitch for adoption. Our assumption was that retailers might be averse to behavior change and might prefer the status quo even if it may have challenges. However, the retailers were largely positive and many agreed to try it out, which was a welcome development.\n\n[/vc_column_text][vc_custom_heading text=\"Solution acceptability \" font_container=\"tag:h2|font_size:26px|text_align:left|color:%23383b3b|line_height:32px\" google_fonts=\"font_family:Roboto%20Condensed%3A300%2C300italic%2Cregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal\" letter_spacing=\"\"][vc_column_text letter_spacing=\"\"]Though only around 10 percent of the retailers who adopted the solution became active users, it was interesting to see that the retailers who started actively using the solution largely continued paying through the app and did not go back to cash. Some of the factors that influenced the retailers to adopt the solution include: no cost burden on retailers, transparency in invoicing, push from the distributor, and the assistance provided by the solution provider in completing any banking formalities for successful adoption. While earlier the transactions between the distributor and retailer had a paper trail and sometimes there were disputes in payments as well, with the adoption of the digital solution all records of invoices as well as payments were available digitally to both parties; thus minimizing errors and providing referable supporting documents. One of the other benefits of going digital as quoted by the retailers was the lack of physical interaction with the distributor’s employees; as sometimes the cash collection agents made multiple visits or came to collect payments during high footfall periods thus inconveniencing the retailers. With digital payments, they now had the freedom to pay at their convenience – provided it was within the stipulated time period.\n\nThe solution provider also tweaked their application as they progressed through the pilot such as adding a feature of having multiple logins for the distributor’s employees to keep track of payments but at the same time limiting their access to functions. Another upgrade was to include a call feature to make it easy for the team following up on the payments.\n\n[/vc_column_text][vc_empty_space][/vc_column_inner][/vc_row_inner][vc_row_inner][vc_column_inner width=\"1/12\"][/vc_column_inner][vc_column_inner width=\"1/6\"][vc_single_image image=\"26217\" img_size=\"full\" alignment=\"center\"][/vc_column_inner][vc_column_inner width=\"1/6\"][vc_single_image image=\"26219\" img_size=\"full\" alignment=\"center\"][/vc_column_inner][vc_column_inner width=\"1/6\"][vc_single_image image=\"26220\" img_size=\"full\" alignment=\"center\"][/vc_column_inner][vc_column_inner width=\"1/6\"][vc_single_image image=\"26221\" img_size=\"full\" alignment=\"center\"][/vc_column_inner][vc_column_inner width=\"1/6\"][vc_single_image image=\"26222\" img_size=\"full\" alignment=\"center\"][/vc_column_inner][vc_column_inner width=\"1/12\"][/vc_column_inner][/vc_row_inner][vc_empty_space][vc_row_inner][vc_column_inner][vc_custom_heading text=\"Critical challenges\" font_container=\"tag:h2|font_size:26px|text_align:left|color:%23383b3b|line_height:32px\" google_fonts=\"font_family:Roboto%20Condensed%3A300%2C300italic%2Cregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal\" letter_spacing=\"\"][vc_column_text letter_spacing=\"\"]No change comes without its share of challenges and our pilot was no different. During initial discussions with distributors and retailers, potential pain-points were identified. One of the major issues was the daily payments cycle with the added criteria of being time-bound. Other challenges to adoption included lack of smartphones, inactive bank accounts, no debit cards, and lack of mobile phones linked to bank accounts. While these issues did come up, wherever possible they were resolved on a case-by-case basis with the support provided by the solution provider to get a debit card, linking of mobile number to a bank account, or even opening bank accounts. However, since some of these were bank-related issues, the resolution took some time.\n\nThe other big challenge was related to access to digital money. While retailers were largely positive about trying out this digital payment solution, they indicated their lack of access to digital cash as one of the major issues. Our pilot essentially transferred the burden of cash digitization from the distributor to the retailers.\n\nThe retailers also only have access to cash as customers pay in cash for their purchases. Traditionally, the retailer does not see the need to deposit the cash in his bank as all the distributors take payments in cash. Thus, most retailers do not keep sufficient balance in their bank accounts. They are neither accustomed to nor need to visit banks frequently. While in the long run, this behavior change would build the retailer’s banking as well as digital payments history – potentially making them eligible for loans and subsequently other benefits associated with financial inclusion – in the absence of any immediately visible incentives, this behavior change could be challenging.\n\nMorning hours are the high footfall period for these retailers; and since they usually operate alone, expecting them to leave their store to deposit cash in their banks every day is not a feasible solution. The distance to the bank branch and long lines add to the time loss. Undertaking this on a daily basis will transfer the undue burden to the retailers. And without their cooperation, digital payments uptake along the supply chain is bound to fail.\n\nApart from the above challenges, Paybee also faced certain operational issues in the process of digitizing invoices. As usual practice, during manual processing of invoice and payments, small deviations in the stock purchase were manually adjusted on a day-to-day basis by the retailers and distributor sales agents. However, after digitization, these operational adjustments were not possible. Also, digitization largely brought down any scope for unscrupulous practices in the supply chain, which was not much appreciated by some stakeholders.\n\n[/vc_column_text][vc_custom_heading text=\"Potential solutions for retailer cash digitization\" font_container=\"tag:h2|font_size:26px|text_align:left|color:%23383b3b|line_height:32px\" google_fonts=\"font_family:Roboto%20Condensed%3A300%2C300italic%2Cregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal\" letter_spacing=\"\"][vc_column_text letter_spacing=\"\"]In order to digitize the retailer to distributor payments in the dairy supply chain, the issue of cash digitization needed to be resolved. While the sustainable solution is to digitize payments throughout the supply chain, i.e. from consumer to retailer (C2B) and from retailer to distributor (B2B), thus move cash entirely out of the system. This requires transformational behavioral change, which is beyond the scope and tenure of this pilot. Thus, an interim sustainable solution was essential. Taking a cue from other sectors, where cash collection takes place regularly, a third\n\nsolution namely, the Business Correspondent (BC) model was evaluated. BCs are agents who operate on behalf of the bank, providing limited banking services to merchants or consumers. Within the BC model there could be two modes of operation. Under the first mode, these BCs could be located at nearby stores, which means the retailer would have to go to the BC’s location and deposit money. While this method is simpler than bank visits (as the distance traveled transaction time would be lower) it still does not resolve the issue of the retailer having to close shop to make this trip.\n\nThe other option is that the BC could visit the retailer’s booth, collect the cash, and instantly deposit it in his or her account. The solution provider had discussions with many banks and agencies to explore the potential partnerships and implementation options.\n\nAlthough a traditional digital solution provider would typically provide pure payments and subsequent reconciliation solutions and related value additions, in this case, they went a step further and took on this additional responsibility to put in place an effective cash digitization mechanism for retailers. This new role was operationally intensive and came with its share of risks associated with cash. However, being able to showcase the benefits of going digital as well as testing the solution itself was critical at this stage.\n\n[/vc_column_text][vc_custom_heading text=\"The next stage\" font_container=\"tag:h2|font_size:26px|text_align:left|color:%23383b3b|line_height:32px\" google_fonts=\"font_family:Roboto%20Condensed%3A300%2C300italic%2Cregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal\" letter_spacing=\"\"][vc_column_text letter_spacing=\"\"]Undertaking the cash collection was operationally intensive for the solution provider and could be challenging when it came to scaling up. In order to test the cash collection mechanism, the solution provider began the process informally with around 6 retailers. They needed to have a dedicated trusted employee undertake cash collection every day for these retailers, which took anywhere between 1.5-2 hours. Additionally, the costs associated with the BC model were not sustainable, keeping in mind the margins of the stakeholders involved.\n\nDuring this time, the solution provider began engagements with a second distributor, who was keen to go digital. The solution provider began the adoption drive in a similar manner with one change – they would not undertake cash collection for the retailers but attempt to gain a retailer base without providing this assistance. Again, to our surprise, there were early adopters who agreed to test the solution; some even visiting the banks multiple times in a week to make deposits. However, the banks levied cash deposit charges to these retailers, which they were not willing to bear. At this juncture, Saras Dairy came out with an agreement with one of the banks in Jaipur to open zero balance accounts for the dairy retailers without any charges on cash deposits. Some retailers agreed to open their account at this bank. However, the process was sometimes time-consuming.\n\n[/vc_column_text][vc_custom_heading text=\"Consumer payments: a broken link\" font_container=\"tag:h2|font_size:26px|text_align:left|color:%23383b3b|line_height:32px\" google_fonts=\"font_family:Roboto%20Condensed%3A300%2C300italic%2Cregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal\" letter_spacing=\"\"][vc_column_text letter_spacing=\"\"]In an ideal scenario, to pay the distributor digitally, the retailer should receive digital money from his consumers. Unfortunately, owing to the low margins as well as the ticket size of the transaction, the possible solutions are limited and achieving a critical mass of consumers paying digitally would be an uphill task. Behavior change is a slow process and as is seen from other sectors as well, complete digital in-flow is not likely, as a major proportion of transactions would still be in cash. In order to understand the kind of solution that would suit this high-frequency, low-value use case, Catalyst is designing a few small pilots for this segment. One of the solutions is UPI, given the retailers comfort with using this for the distributor payments as well as the bank-to-bank instant transfer feature. Other solutions being tested include biometric (Aadhar-based) payments and providing digital credit records or ‘Kaatha’. We hope that these short experiments will provide a greater understanding of the type of solution suitable for this use case as well as insights into ultimately digitizing the entire dairy supply chain.\n\n[/vc_column_text][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row padding_top=\"0px\"][vc_column][kleo_button title=\"Download full report\" href=\"https://cashlesscatalyst.org/wp-content/uploads/2018/09/Dairy-Learning-Note.pdf\" target=\"_blank\" position=\"center\" size=\"lg\" type=\"boxed-icon\" special=\"no\" icon=\"download\" font_size=\"14px\" letter_spacing=\"\" el_class=\"pkirbtn\" icon_custom_background=\"#d11e3c\" icon_custom_text=\"#ffffff\"][/vc_column][/vc_row][vc_row el_id=\"footer_area\" text_align=\"center\" type=\"image\" bg_position_horizontal=\"center\" enable_parallax=\"false\" padding_top=\"50px\" padding_bottom=\"50px\" bg_image=\"7886\"][vc_column width=\"1/4\"][/vc_column][vc_column width=\"1/2\" offset=\"vc_col-lg-offset-0 vc_col-md-offset-0 vc_col-sm-offset-0\"][vc_single_image image=\"7888\" img_size=\"full\" alignment=\"center\"][vc_column_text text_color=\"#ffffff\" font_size=\"14px\" letter_spacing=\"\" css=\".vc_custom_1484826151396{margin-top: 35px !important;margin-bottom: 5px !important;padding-right: 20px !important;}\"]\n<p style=\"text-align: center;\">CATALYST is an initiative seeded by an alliance between the Government of India &amp; USAID, to expand digital payments and financial inclusion in India, especially for small merchants and low-income consumers.</p>\n[/vc_column_text][kleo_gap][vc_column_text letter_spacing=\"\" css=\".vc_custom_1484051069491{margin-bottom: 0px !important;}\"]\n<p style=\"text-align: center;\">[email-newsletter-plugin]</p>\n[/vc_column_text][kleo_icon icon=\"facebook\" href=\"https://www.facebook.com/CashlessCatalyst/\" target=\"_blank\" padding=\"15px\" icon_color=\"#ffffff\"][kleo_icon icon=\"linkedin\" href=\"https://www.linkedin.com/company/13221050?trk=tyah&amp;trkInfo=clickedVertical%3Acompany%2CclickedEntityId%3A13221050%2Cidx%3A2-1-2%2CtarId%3A1476420479247%2Ctas%3Acashless%20catalyst\" target=\"_blank\" padding=\"15px\" icon_color=\"#ffffff\"][kleo_icon icon=\"twitter\" href=\"https://twitter.com/cashlesscatalys\" target=\"_blank\" padding=\"15px\" icon_color=\"#ffffff\"][kleo_icon icon=\"youtube-play\" href=\"https://www.youtube.com/channel/UChuc38_PfawDOu44IfYS4lw\" target=\"_blank\" padding=\"15px\" icon_color=\"#ffffff\"][/vc_column][vc_column width=\"1/4\"][/vc_column][/vc_row]', 'Digitizing Dairy B2B Supply Chain', '', 'inherit', 'closed', 'closed', '', '26211-autosave-v1', '', '', '2019-02-06 09:38:49', '2019-02-06 09:38:49', '', 26211, 'https://cashlesscatalyst.org/media/26211-autosave-v1/', 0, 'revision', '', 0),
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