Purchases from the neighbourhood grocer form a substantial chunk of every family’s budget — even amidst the growing presence of larger retail chains and electronic stores.

According to industry estimates, there are about 21 million merchants/grocery/mom-and-pop stores in the country. Only a fraction — an abysmal one million merchants — have a point-of-sale (PoS) terminals that allow you to swipe your card and make the payment electronically. The rest take the payment in cash — and therein lies an enormous opportunity for both banks and merchants to go digital.

If the opportunity is so great, what’s stopping the industry from ramping up PoS machines, you might wonder. Well, there are problems of connectivity in remote locations, where phones or even ATMs/VSATs don’t often work. Besides, the infrastructure cost involved makes it unaffordable for many small grocers.

For some, cash is still king, never mind the advantages that digital payments offer. Whatever the reason, the poor penetration of PoS machines and the dominance of cash in payment transactions highlight one of the challenges that remain in ensuring greater participation in the digital revolution.

YES Bank, as part of its digital strategy, has decided to take on this challenge and is currently experimenting with a project that will alter the merchant acquisition business landscape if it succeeds. The bank has tied up with a Bengaluru-based start-up called Ultracash (incubated by a company called Ubona Technologies) to offer a mobile-based solution — with a potential to leapfrog a generation and move to a card-less payment.

Ritesh Pai, Senior President and Country Head, Digital Banking, YES Bank, said that Ultracash is helping them convert the merchant’s phone itself into an acceptance device. That saves the merchant and the bank all the associated overhead costs.

Both merchant and customer have to download the Ultracash app on their phones. After the customer completes his purchase, the merchant keys in the mobile number of the customer and sends him the bill.

On that basis, the customer has to key in a one-time password and just bring the mobile in proximity to the merchant’s phone. The money is transferred through ultra high frequency sound wave technology. The customer doesn’t part with his device and there is no compromise on security.

Ritesh said that this solution is being piloted across 850 merchants in Bengaluru for the last few months and it is seeing good throughput. What do the merchants feel? Ritesh says the reception has been positive because they get their money instantly — as against a day or more that it takes to get the money under the conventional route.

The solution is built on the Immediate Payment Service (IMPS) platform of the National Payments Corporation of India (NPCI). Besides, the acquisition cost is low as the merchant has to pay only ₹1.50 per transaction whereas he would have to part with 1.8 per cent of the transaction amount in the case of regular PoS machines.

As Ritesh explains, “ I am not going to the Big Bazaar, Life Style or Shoppers Stop with this solution, but the small stores who will not be eligible for such PoS facilities from the conventional big banks.

“These are not very high-end guys; they work in limited geographies. I am not going to burden them with too many overheads, PoS machines, monthly rentals, etc. And I am giving them instant credit to their current account. So they have everything to gain and nothing to lose.”

The next couple of months will reveal if the solution is going to be as disruptive as it seems.

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