🚚 Fintech + Logistics= Match Made in Heaven?
The payment aggregator and payment gateway space is getting too crowded. Here's how one player is trying to stand out!
With new fintech firms cropping up everyday, the need to diversify and do something different has become very important.
And 1Pay knows the importance of this very well.
Which is why it is not just happy being a payment aggregator, it also wants to solve logistical issues for India's transportation sector.
Wondering why? ReadOn!
🤔 What is A Payment Aggregator?
If you are an e-commerce business or any business dealing with digital payments, payment aggregators are your best friends.
They save you the hassle of dealing with multiple banks, payment gateways and other companies.
With a payment aggregator, you don't have to set up a separate bank account for different transactions.
The payment aggregator has one master account that accepts any and all kinds of payments (no discrimination) and then transfers all this money into your account.
Easy peasy, no?
These aggregators charge you a transaction fee and/or setup fee, but they save you so much hassle.
Now, even though payment aggregators have existed for a long time, a new RBI rule made it mandatory for payment aggregators to get a license from it.
So far, only a few like Razorpay, PineLabs, Stripe and 1Pay have managed to get this license.
But even with these few aggregators there is tough competition.
Hence the need for 1Pay to diversify. And to that it is getting into the FASTag business.
🧐 What Are FASTags?
FASTags are magical cards that allow you to escape toll booths.
They kinda work like debit/credit cards which are scanned anytime you pass a toll booth. And the toll is deducted automatically from your registered bank account or prepaid wallet.
These FASTags have now become mandatory for four-wheelers. If your car or truck doesn't have a FASTag, you will have to pay double the toll.
But why were these FASTags needed?
Well, because they eliminate the traffic jam at toll booths. No longer waiting for the other car to pay their toll, all the vehicles can just zoom past the booth and pay their toll automatically.
This has increased productivity by 130%.
But the problem is that setting up these FASTags, managing them, and dealing with incorrect toll calculations has become a major problem for truck fleets and other transportation companies.
🧠 1Pay’s Strategy
Here's where 1Pay comes in. It wants to facilitate the FASTag process for logistics and transportation companies.
Because 1Pay cannot issue FASTags (only banks can do that), it has tied up with banks like HDFC and Saraswat for the purpose.
It handles the customer side of things, while banks just have to pass the FASTag paperwork.
Both split the 1.5% commission that FASTag issuers get on the toll which is collected through the tags.
This is a win-win for everyone. You see, banks have to deal with a lot of customers for a lot of things. This takes at least one responsibility off their heads.
Customers also get to deal with dedicated 1Pay officials, whose only job is to deal with their problems.
And 1Pay gets a cut of their money plus valuable data. Huh?
A lot of delivery companies with small truck fleets face a lack of credit. And because they are usually paid after they deliver their cargo, they can't accept long-distance delivery orders.
That's because they only have limited capital, which can fill a certain amount of fuel. So, their delivery radius is restricted and so is their growth. If the sector got more credit, they could grow much faster.
However, most of their deals are informal, so they lack a credit history. But FASTag travel information along with other bills could highlight the amount of business that these truckers conduct, probably making them eligible for credit.
Basically, these FASTags can do what QR codes are doing for small grocery stores.
So, all the FASTag data can come handy for 1Pay, as it can sell it to its partner banks or other lenders.
Okay, but what does 1Pay do for these companies now?
Well, it gives them 24/7 FASTag assistance, makes managing different FASTags on different vehicles easier, ensures there is no double deduction of toll (saving a lot of time for these businesses), facilitates easy recharge of FASTags, and also allows seamless fuel and parking payments.
For e-commerce businesses with their own delivery fleets, partnering with 1Pay would make a lot of sense because it can fulfill all their needs.
1Pay's customer base currently includes over 31,000 fleet owners and its market share in the FASTag space has been rising steadily (grew from 3.77% in FY20-21 to 4.33% in FY22).
Currently 75% of 1Pay's revenue comes from the FASTag business.
However, the company faces serious competition from others like Blackbuck, which is catering to truck fleets with less than 20 trucks (which is a huge market in India).
What's more, Transport Minister Nitin Gadkari recently announced that FASTags could soon become obsolete with automatic payments now happening through a satellite.
So, 1Pay may have to diversify further to remain in the game.
Do you think it's a wise move for the company to bet on logistics and transportation?
⚡In a line: Payments aggregator 1Pay is choosing to diversify to carve a special niche for itself in a competitive space.
💡Quick question: Do you think more fintech companies should take this approach?
Share this with your friends via WhatsApp or Twitter and help them declutter news from noise! See you tomorrow :)
You can also listen to our stories. Catch it on Spotify, Apple Podcast, Amazon Music, Google Podcasts, Gaana or Jio Saavn.
If you are coming here for the very first time: Don’t forget to join us on WhatsApp to get daily updates! 👇