Sifting Through The Payment Gateway Maze in India (Part 1)

(Guest blog by Sibi Gnanasundaram)

Gateway of India

Gateway of India (cc) Kiran SRK

India has been going through a period of rapid economic expansion in the last decade. While most aspects of India have grown exponentially, internet and e-commerce seemed to lag behind until recently. An explosion of internet usage, especially mobile Internet, has caused many new entrepreneurs to focus on technology startups instead of traditional businesses. We have seen this first hand in the growth of websites such as Flipkart.com, Redbus.in, and MakeMyTrip.com.

The explosion of new companies and technologies in India must mean that the ease of doing business has improved astronomically, right? There are an infinite number of opportunities, but the climate makes it extremely difficult to do anything efficiently or easily. India’s “Ease of Doing Business” Rank in 2014 is 134 (out of 189), in between Yemen and Ecuador. India’s “Starting a Business” rank is an even more pathetic 179. India is ranked somewhat respectably only in “Getting Credit” and “Protecting Investors” (Source: IFC & World Bank “Doing Business: Measuring Business Regulations“). Looking at historical figures, India has actually done worse from where they were in 2006, when the ranking was a still abysmal 116.

So why all the background info before we get to the specific topic of Payment gateways? Payment gateways are a very difficult part of getting your startup running in India, but you need to know the context. The payment gateways in India are known to be very unreliable (high failure rates while customers try to pay). They reject some cards outright (not good from a service standpoint). It took more time for us to get the bank accounts and payment gateway set up than putting together the whole website for our crowdfunding startup. Since lack of online info was one of the impediments, I am sharing our research here in the hope that it will help others who may be searching for a payment gateway.

The most important factors to consider when selecting a payment gateway are 1) what features do you want, especially what types of payments you want to accept? 2) how much are you willing to pay up front? and 3) what percentage you are willing to bear as a fee for each transaction? A few years ago, many of these payment gateway websites seemed to have been hastily put together with lots of reliability and security problems. Due to the higher demand of gateways after the explosion of tech startups in India, many newer payment-processing companies have popped up. This has definitely improved customer service, payment gateway user interface, and overall experience. However, there is still a long way to go.

The differences between the gateways themselves are quite confusing. Some work with only Indian cards or bank accounts, some only work with specific banks, some with only specific cards, some work with credit cards but not debit cards. Some are good overall but are very hesitant to work with startups. It is all very confusing, but see the embedded spreadsheet below for a comparison that attempts to make sense of it all. Also, check out http://payment.guru where there is a payment gateway feature comparison wizard.

So let’s get to the Payment gateways themselves…(to be continued in Part 2)!

(This blog post is written by Sibi Gnanasundaram, who co-founded a (now defunct) crowdfunding startup in India for creative projects. The views expressed above are his own. We are sharing it in Appropriate IT’s blog in an attempt to aggregate materials that would be useful for two of our areas of work – youth and tech entrepreneurship.)

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