For the past few years there has been some innovation in “payment gateways” e.g. BNPL (credit at the PG check-out page), LazyPay (i.e. an aggregator of PGs to improve acceptance rate) and a bunch of back-end plumbing (which users don’t see)
However, the concept of the payment gateway has NOT changed; this is where UPI Setu is an interesting product ⤵️
(1) “UPI” is a payment mechanism for multiple use-cases
- One-time transfer
- Recurring payments (e-mandate)
- Lein (for credit)
- Contingent payment (for IPO allotments)
Note: All of these payment functionalities can be supported by any PG for non-UPI payment methods as well (e.g. Credit Card, Debit Card etc)
(2) Setu has taken the UPI rails and decomposed it into primitives for developers:
- Flash (for QR payments)
- Recur (for subscription payments)
- Reserve and OneShot (for contingent UPI payments)
(3) How is this different from a PG? 🤷♂️
- Most PG providers in India have the RBI Payments Aggregator (PA) license; this lets them acquire a merchant (website) and partner to offer payment options (the check-out page)
- Setu is a “switch” approved by National Payments Corporation Of India (NPCI); which means it has deep integrations with NPCI & the UPI rails
- UPI Setu will enable only UPI payments whereas other PGs enable ALL types of payment options
(4) Why (or when) would this be better than a PG? 🧠
- For specific use-cases: e.g. a SEBI registered broker blocking client funds for an IPO application (this is done ONLY via UPI)
- IF the end users prefer / skew towards UPI: e.g. for companies focusing on MSMEs selling to individuals, the preferred mode of payment is UPI (due to zero MDR)
(5) Big picture here for Setu ⭐
- They’re attempting to build a developer platform of choice for embedding UPI into workflows or ERPs for enterprises and high growth startups
- In an ideal world, you’d see more workflows be built on UPI rails e.g. loyalty programs, subscriptions, click to buy ads etc
In June 2022, Pine Labs acquired Setu → this is a product where Setu & Pine Labs are collaborating closely; Pine Labs is the 1st customer of UPI Setu (owing to its huge MSME merchant base) and the banking partner is Axis Bank.
Even a decade after doing some groundbreaking work on UPI, Nikhil Kumar continues to rock 🙌
➡️Setu has always been a bit of a pioneer on all things FinTech, India Stack & developer experience → they offered a WhatsApp based FD booking flow 4 years before FDs become cool.
hashtagstartups hashtagindia hashtagfintech
This post was originally shared by Rahul Mathur on Linkedin.