Thread by @pranaveight

When a one year old startup in India’s hyper-competitive payments space claims to now 50% of all off-line UPI transactions, it’s time to dive in. So here’s a thread on BharatPe: /1

BharatPe lets small merchants like shopkeepers, street food vendors, tea sellers etc. accept payments on any UPI app like PhonePe, Google Pay, PayTM etc. without needing to download those apps. /2

In August they had 1.5 million merchants and expected to do $84 - $97m in monthly transactions (source:the-ken.com/story/bharatpe…) /3

Now, there’s inherently nothing unique about providing a single QR code for UPI payments — this level of interoperability is baked into UPI. /4

BharatPe asks merchants for their mobile number, account number and ifsc code to generate a VPA (virtual payment address) on behalf of the merchant and encoding that in the QR code as shown in this training video made for their field agents -
/5

They also provide merchants an app to track their transactions. Again, nothing really novel here. At best, this seems like just another wedge into the India’s large merchant services market. /6

PayTM and the wallet apps have been here for years and khata apps OKCredit and Khatabook seem like the next wave of well-funded startups entering the space. /7

So what has BharatPe done differently that’s lead to it’s mercurial rise? They’ve been very savvy and efficient with merchant acquisition. /8

In this podcast (h/t @sehaj23) Founder Ashneer Grover says the first thing BharatPe did was hire 3000 field agents to on-board merchants.
open.spotify.com/episode/7JQwaZ…
/9

Paying them Rs. 20-30k per month, they’re able to acquire merchants with a CAC of around Rs. 200 or $3. According to Ashneer, most Indian startups don’t have the appetite to manage a field salesforce. /10

They’ve also used mass advertising very early on, paying Salman Khan $1.6 million to endorse BharatPe. For the record, I actually think this ad is quite well done. /11

Their name is helping too. ‘BharatPe’ has strong recognition and recall with merchants, who sometimes think it’s a government scheme or government-owned company! h/t to @sehaj23 again for this fascinating insight. /12

Merchants do not pay transaction fees with BharatPe, and Ashneer maintains that fee-based business models will never be viable in India. So how do they plan on making money? Lending, of course ;) . And this is where their prospects start to look shaky in my opinion /13

They plan on making small ticket loans to merchants underwritten by their BharatPe transaction data delivered through directly via offers in the app. They also have plans to sell insurance, invoice discounting and other services down the line. /14

These are not defensible business models. The lowest cost of capital wins the lending game in the long run and their ability to underwrite will be driven by merchant retention rates. /15

B2B marketplace companies are better placed to deliver Invoice discounting. I don’t know enough about insurance to comment, but it *feels* not very defensible. /16

But they seem to be collecting a lot of valuable physical data about the merchant. The same training video shows they collect the precise address, name, type of business and photos of the store when on-boarding the merchant. They could build a nice business monetizing this /17

Regardless, if you're into fintech, BharatPe is definitely one to watch. And their founder seems to have no delusions about the fight he’s got on his hands. That same article in the Ken ends with this quote - “I have an ability to tire people out more than they can tire me out.”