PayUPaisa brings a middleman solution for e-commerce

Currently, more than 60% transactions happen through cash on delivery, involving high transaction cost

Indian e-commerce companies, struggling with high costs on the cash-on-delivery platform, may now explore another payment mode. PayUPaisa, a payment gateway company, has introduced the option of ‘release on delivery’.

Currently, 60 per cent transactions are carried through cash on delivery, which involves high transaction costs.

In the release-on-delivery format, an escrow account with an authorised bank is to be placed between the merchant and the end user. The payment would be made once the buyer asked PayUPaisa to release the payment, said Nitin Gupta, chief executive of PayUPaisa, at the launch of the platform on Thursday. In case of no response from the consumer, payments are released to the merchants by default. (RELEASE ON DELIVERY)

As service fee, the company will charge merchants 2.9 per cent of the cost of transaction. Experts say for a merchant, the cost of cash on delivery is eight-10 per cent of the transaction cost.

Earlier, PayUPaisa had launched a pilot project with 50 merchants. Now, it expects to extend this about 100 merchants in three years.

PayUPaisa.com is a subsidiary of Naspers. The company is a leading player in online payments and has Zomato, Snapdeal, Jabong, etc, as its subscribers.

Reserve Bank of India guidelines in this regard say a nodal account with a scheduled bank is required and it has to be ensured payments to merchants are released on time, said a company official. “We have always followed these (guidelines),” said Shailaz Nag, chief operating officer of the company.

All innovations in e-commerce are welcome and if this idea could shift a certain percentage of buyers from cash-on-delivery to release-on-delivery, it could bring a change, said Nikhil Rungta, chief business officer of e-commerce company Yebhi.com.

Experts say a lot will depend on the kind of services offered and the ease of solving disputes.

PayUPaisa employs about 200 people and expects to generate revenue of about $6 million in a year, through release-on-delivery. Last year, the company had recorded transactions worth $2 billion.