Payment Integration Options for Startups in India

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Payment Integration Option

Payment Integration Options

In the Chennai Open Coffee Club meeting on 3rd July we discussed about Payment Integration options for startups in India and monetization ideas for websites. Following up on the discussion I have compiled our discussion notes on Payment Gateways along with few references.

The access to a market is defined by the ability to collect payments from the customers in a particular geography. This is more pronounced in the context of SaaS applications and other web based offerings.

For those of us operating out of India, the options to collect payment are also restricted by our choice of where company is officially registered.

Summary of post for quick reading:

Freelancer, not registered as company, but you would like to test waters and monetize a product:

Try PayPal Standard Pro; has premium plan option to get started without a merchant account.

  • Withdrawing in INR incurs additional exchange rate charges. Use your USD money in PayPal wisely for your operational expenses and withdraw only what is necessary.
  • Indian debit cards do not work (PayPal does not accept cards on which they can’t apply charge backs). 

Business registered as a Private Limited Company in India:

Recurring billing / Subscription Billing

  • Limited options available. Recurring billing via credit cards in India, due to 2-step authentication mandated by RBI.
  • Some solutions are available to bill customers via ECS mandate. Not flexible; Not attractive option for SaaS companies; Lack of trust from customers to allow withdrawal from account.
  • As suggested by one of the commenters in this blog (Vagmi Mudumbai) FastSpring provides  recurring billing options without a merchant account. But the price is little steep – 8.9% with $15 USD for wire transfer.

One-time-payments

  • Payment gateways like CCAvenue, EBS, DirecPay, HDFC’s Gateway, ICICI’s PaySeal etc., are available.
  • One-time cost and percentage per transaction is very steep, unless your volume is high.

Business registered as a C-Corp in USA:

Recurring billing / Subscription Billing

  • Braintree Payments – as one-stop-shop. Other vendors are also available.
  • Chargify, Recurly, Spreedly, CheddarGetter etc., provide specialised recurring billing service with option to switch gateways.
  • Using these services takes away need to build a billing module in your applicaton and reduces PCI compliance scope.
  • PayPal, Amazon Flexi Pay, Google Checkout are also options to consider, though they lack in some flexibility to upgrade/downgrade, offer limited period discounts, metered billing etc., easily.

One-time-payments

  • Plenty of options available. Check out Feefighters to get a quote on best deal that suits your business.

Detailed Post to read when you get time:

Registering your company:

Here is the link to an amazing blog by Girish from Freshdesk on the process of setting up your start up registered in USA.

In our case we used Delaware Inc as our agent to register as a C-Corporation and they are very responsive. We considered our choice to register in India as a Private Limited or as C-Corp in Delaware and went with C-Corp option to start with and will consider registering as Private Limited company after 4 months for our business.

Few watch outs for C-Corp registration:

Factor in the annual franchise taxyou will need to pay the state of Delaware, whether you make any profit or not. If you exceed 5,000 share minimum your tax could be approx. $450 USD based on the par value calculation method provided you have no profit to show and you have less than 20 million shares. This is recurring expense apart from the one-time payment of $650 USD you will need for incorporation.

  • Chat with your agent before incorporating your company to get all your questions answered. You can engage via live chat and ask questions, to get all your questions answered. Ameding your incorporation document with state to authorize for additional shares etc., will cost you more (~$700 USD). So I would suggest you to consider your options carefully. .

For ease of reading I will restrict to the usage of terms “C-Corp” for companies registered outside India and “Pvt Ltd” for companies registered in India, though you do have several options to register in India and abroad.

I am trying to collate the inputs gathered in the OCC discussion and the options suggested below are not exhaustive. Please do explore other competitive products available in market (say google checkout) etc., that fits your business needs. Also speak to a qualified Chartered Accountant / Lawyer for specific advice and I am neither. Just sharing our experiences as we build our startup. It will be great if you could share your experiences.

Payment Integration Options

Freelancer, not registered as company, but you would like to test waters and monetize a product:

PayPal has two different solutions – PayPal Standard and PayPal Payments Pro (for merchants).

For customers in US, EU and some other countries this may be a popular option. If you also targeting Indian consumers, there are fewer registered PayPal users and the option to pay via credit card without PayPal account is not so intuitive. Besides factor in the currency exchange rate involved on top of the standard ratesif you would like to withdraw the money.

I understand from Souvik Roy (http://www.thankubot.com/) that he uses a premium account which is similar to a merchant account for freelancers. But Indian debit cards do not seem to work on PayPal. If any of you have different experience, please share your inputs.

Business registered as a Private Limited Company in India:

If you a start up and registered as a Pvt Ltd company the options seem limited (please do share your experiences).

1. Recurring billing / Subscription Billing:

 If you are a SaaS company that needs to charge your customers on recurring basis your options of seamless integration with a payment gateway is almost nil at this point of time.

Almost all payment gateways in India are insisting on using their hosted payment pages with very limited or no API integration layer to support recurring billing model. Reserve Bank of India (RBI) regulation mandates use of VBV and One-Time-Password for each transaction using credit card.

This 2-step authentication mandated by RBI is applicable to the transactions via the payment gateways (and in turn merchant accounts) in India. You can use the same credit card with a service outside India (say github or google) and they can charge your India based credit card on recurring basis monthly/quarterly without requiring you to authenticate again.

If you are an established business with 3 years+ track record or $3million or more in transaction, then there may be more options. But we are restricting the context of this discussion to start ups.

Chargify claims they also support Indian merchants via partner, but not much detail is available. I tried reaching out to PaymentExpress and in turn their partner in India Merchant-Solutions. But merchant solutions responded back that they provide merchant accounts for only those with minimum 3 years of business presence. (Share your experiences if you have additional information).  

As suggested by one of the commenters in this blog (Vagmi Mudumbai) FastSpring provides recurring billing options without a merchant account. But the price is little steep – 8.9% with $15 USD for wire transfer.

 2. One-time payments:

 If you need to collect money without having to store customer’s card information, then you avail a merchant account and payment gateway integration from companies like CCAvenue, EBS, DirecPay, HDFC Payment Gateway or ICICI Merchant Services.

The charges for one-time setup fee ranges from Rs. 7,000/- upto even Rs. 75,000/-. And depending on setup fee paid the percentage charges per transaction varies between 3% to 7%. The charges are pretty steep compared to options outside the country. There is also a yearly maintenance charge.

The other challenge is the drop-off rates of various payment gateways i.e, failures to complete the payment transaction from the time customer clicked on “Pay” on your website, due to any number of reasons. For a comprehensive list of reliable payment gateways in India, refer the IRCTC (railway reservation) website that provides this statistics monthly.

Plus you could also get PayPal Payments Pro if you are primarily targeting users outside India. 

Business registered as a C-Corp in USA:

You need a bank account in USA (refer Freshdesk blog for details). You could get a merchant account separately from any merchant bank or go with the merchant account provider suggested by your chosen payment gateway.

1. Recurring billing / Subscription Billing:

 On the top of the list is BrainTreePayments, who adopt portability standards, great customer support and a one-stop-shop. They even offer a bundled solution with payment gateway, merchant account (via partners) and a recurring billing solution. Braintree also serves merchants registered outside USA but their cut-off is minimum $3 million USD transaction per year. (Shameless plug: this is where we intend to position ChargeBee - to address the needs of Indian market as well as compete worldwide, as a one-stop-shop with amazing customer support).

Apart from this there are multiple options including Recurly, Chargify, Spreedly, CheddarGetter. They all have transparent pricing and provide recurring billing / subscription management solution, so you do not have to build a complex billing solution in your web application. You can integrate with their website using their hosted pages or via some cool API. Some of these even provide staging option to test your changes with your application before taking them live.

Using these services takes away need to build a billing module as part of your application and reduces PCI compliance scope by as much as 90%. Will discuss more on PCI compliance scope and its relevance for merchants in another blog.

It is amazing to note how much innovation is happening in this space outside India. It is a sorry state of affairs with Indian payment gateways that do not have robust API integration or great customer support.

PayPal, Amazon Flexible Payment Services, Google Checkout are also options worth considering, though they lack the flexibility of easy upgrade/downgrade of plans, dunning management, multiple payment gateway support etc., provided by others. But these could be relatively cost effective. But do note the risks of having to call up your customer to update about failed transaction and asking them to enter card details again etc.,

2. One-time Payments:

 There are plethora of options. Apart from the services mentioned above several payment gateway options are available. Consider using Feefighters to compare merchant account services and get a quote.

In the subsequent blog, we can discuss about PCI Compliance, using Vault (or CIM as referred by some gateways) and Merchant account options for startups.

Please use the comment box below to post your thoughts.

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Posted on July 6, 2011

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  • Anand Gupta
  • Anand Gupta

    thanks for the post & have a nice journey :)

  • Augustus

    If you have a C-corp and use a US based gateway, won’t your Indian customers be charged in US dollars? If that is the case, wouldn’t the customer be charged additional charge for making a international purchase, by the bank issuing the customer’s credit card?

  • Krish Subramanian

    @Augustus, You are right. It is another drawback. Customer incurs additional exchange rate charge on credit card for any non-INR purchase.

  • Augustus

    A related question. The consumer loans in India seem to be able to direct debit the customer’s bank account in a recurring fashion. Is something like this possible for recurring SaaS billing? in other words, what does it take to be able to directly debit the customer’s bank account?

  • Krish Subramanian

    @Augustus, Interesting question. I had just edited my post to include it. Yes ECS (Electronic Clearing Service) is an option, which is provided by some of these gateways for recurring charges. However, it lacks the flexibility required for SaaS application as the solution is too rigid. Besides there is a lack of trust factor on the part of customers. Nevertheless, it is an option to explore for certain businesses.The alternate option could be giving control of payment to customers themselves, through something like Billdesk.com. But this requires more thought to explore this option.

  • shiv kumar agrawal

    this is the Best blog ever seen by me… could you please recommend me the best payment gateway for our business operating in India. we are Orissa based company soon going to launch a new online business.

  • shiv kumar agrawal

    please email me the recommendation.

  • Krish Subramanian

    Thanks Shiv Kumar. I could not locate your email id. Please drop me a mail at krish [ at] chargebee.com and we can chat about this.

  • Magesh

    Nice Post! Thanks for sharing it

  • crozzfire

    I had recently stumbled upon http://money2paypal.in/ . Seems like this is the best way to add cash to your paypal account in case if your account is not linked with a credit card. Normally, when there is insuficient balance in paypal, it pulls the remainder from the credit card linked. But many a times a when a credit card is not linked (in case of foreign debit cards, Virtual Credit cards etc) it will fail. Has anyone used this service before ?

  • apu

    How does one join the Chennai Open Coffee Club or request an invite? The Ning page says, ‘by invitation only’.

  • Ram

    How about bank transfers advantages/disadvantages. Any heads up on charges for transaction within India and overseas transaction will be helpful.

  • Krish Subramanian

    @apu, You can subscribe to OCC via google groups, to participate in discussions and also get notified about meetings. @Ram, I am trying to gather information on the topics you have mentioned. I will be sure to keep you posted, based on experiences of different startups.

  • Vagmi Mudumbai

    You must look at http://saasy.com/. We are using it for our product http://keeprecruiting.com/. Their charges are a little steep 8.9% per transaction and a $15 wire transfer fee without any sort of an upfront fee. But it still works out cheaper in the short run as an alternative to incorporating in the US. I am in the final leg of integrating this payment gateway with our application. I will blog about it once done on Dharanasoft’s blog (http://blog.dharanasoft.com/).

  • albertalbs

    We are expecting competitive application for payment gateway. But in Chargebee, I have to depend on another Payment Gateway. ! :(

  • Krish Subramanian

    @albertalbs, at this point of time, we are on the same side with dependency on existing players and I understand your predicament. (In my case, we are integrators working with 3rd parties like gateways, banks etc.,). We’ll be sure to work out the best possible ways to remain competitive in terms of pricing, the best customer support and features. I think that is definitely a promise we can keep. And we want to make it simpler for customers to reach out to one place to get everything. We will get there. Till then, I am as open as you are in sharing the possible options currently in market and to make the best use of it for our businesses.

  • Krish Subramanian

    @Vagmi Mudumbai, Thanks for the suggestion. Glad there is a good alternative available though at a steep price. Have included your suggestion in the blog.

  • Ram

    This sounds interesting. Any feedback from people who used their service will be appreciated. http://transecute.com

  • Sundarram P V

    Great post! People have always been bitching about the state of payment gateways(india). High time someone took the problem on its head.Anyone who has ever used EBS / ccavenue has never been happy.Their API and integration sucks. The worst is the drop off rate. The whole user experience sucks.Their charges for a crappy service is too undeserving.Are there any RBI regulations to become a payment gateway. The whole ecommerce scene here could do well with someone with a super clean API & excellent reliability(60-80% wont cut it).P.S.: I am just as guilty of bitching & doing nothing about it.

  • websnacker

    Went the US company route years ago but great to see some upward traction in the online payment scene in India finally! EBS, CC Avenue and the rest all suck. PayPal cheats. So, I hope ChargeBee is not just one more old wine in a new bottle.

  • Rajandran

    Checked with HDFC Bank. Its seems they are providing gateway for their account current account holders at free of cost and there are no one time setup fee and also per transaction charges are as low as 2%. No Idea how far this is true and also they mentioned they wont accept international transaction as you need special license to proceed that. I guess in that case paypal comes to rescue.Any better way of doing it?

  • Krish Subramanian

    Thanks for the comment Rajendran. I am going to make the switch to HDFC Bank and will definitely check with them. This could be for high value customers. If they do provide an option without setup fee and at such low rates that is great.

  • Joseph Jude

    Is it necessary to obtain IEC code for any of these options? Specifically if I go with paypal to test waters, should I still go for IEC code? – Thx

  • albertalbs

    @Joseph Jude: Even though if we have IEC code PayPal won’t allow any Indian merchants for selling in online. We need to open a PayPal account from some other countries that serves merchant services. For example: Sri Lanka, Maldives, United States, etc. Currently India is the only growing country suffering in Internet payments. Our neighborhood countries do not have these types of difficulties.

  • Krish Subramanian

    @albertalbs Not sure I understand you correctly. Did you mean you can’t sell using PayPal within India?

  • albertalbs

    @Krish: Yes I processed one payment via PayPal from one India resident; PayPal reversed the payment and told it is not allowed in India. At the same time I processed payment form one of my Sri Lankan friend and it is added to my balance.

  • albertalbs

    @Krish: Yes. Using PayPal an Indian merchant cannot sell it to same Indian customers. At the same time; An US merchant can sell it to Indian customers in USD. Hope you got my point.

  • Krish Subramanian

    Right. PayPal transactions are allowed only for buyers from outside India and not within India. And you can’t retain money as PayPal balance & use it for buying other services. RBI stepped in to make these changes as it opens up a loop hole in their perspective.To answer Joseph Jude’s question, yes you should get IEC to use PayPal. And PayPal in Indian context can only be used to sell to customers abroad (and you are an exporter).

  • Arun

    Very informative blog Krish. I am in the process of initiating a service export company. Could you send me more details about, how to go about gateway for charging international cutomers like from US/ UK? I need the following info1. Activation charge2. Annual maintenance fee3. Payment cycle4. Security5. Transaction fee6. Chargeback

  • http://indiainternet.in/ecommerce/payment-gateway.php gyanindia

    As compare to CCAvenue, EBS is more reliable, less expensive Payment gateway in India, I REALLY recommend EBS…

    http://indiainternet.in/ecommerce/payment-gateway.php

  • chrisnw

    For Indian based companies are there any RBI / FEMA and Income Tax rules and regulations to be followed while using this service.
    eg. This is as the company will be charging customers in USD and routing the money to an Indian Bank.

  • cbkrish

    @chrisnw This particular discussion is more informative about taxes applicable for Indian SAAS businesses: http://hackerstreet.in/item?id=25106

  • Charan J

    EBS is a pioneer payment gateway provider in india, who is associated with multiple acquiring Banks for providing Payment Gateway services to offer Master, Visa, Diners, AMEX, JCB, PAYPAL, EMI OPTIONS, Net Banking & Cash Card brands on a single platform. Our offices are spread out in the Metros of Mumbai, Jaipur, Delhi, Hyderabad, Banglore, Ahmedabad & Chennai and a network of associates span across the country, for easy reach and to provide personal attention, service and consultation. Please feel free to call on 9828 999 663 or Drop a mail to charan@ebs.in.

  • Nancy

    For Indian Startups I will suggest fethr, Zaakpay or best Citruspay.

    - All of them have lesser than 3% transaction fee.
    - Almost no (or minimal) setup fee.
    - No AMC.
    - Good customer and technical support.

    Some more points worth considering..
    - Zaakpay has 2 steps payment process.
    - Citrus has one step payment process.
    - Zaakpay as well as Citrus have Mobile payment options.
    - Fethr is a startup.

    - Nancy
    Working at http://Socktail.com (Find All Stores at One Place)


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