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Money lending abstract concept vector illustration.

Embedded Credit – A great lever for B2B e-commerce platforms

Merchants & retailers rely on credit to run and grow their businesses and expand their customer base. Easy access to credit, facilitated by embedded finance, enables merchants to purchase more stock, widen their product portfolio, respond to fluctuating demand, buy high-value SKUs (which could be slow-moving), and increase the space and assets in their store. Embedded Finance has shown to double the Average Order Value and Customer Lifetime Value for B2B E-Commerce platforms, depending on the sector (whitegoods, groceries, pharma, apparel, etc). 

Embedded Credit is basically when non-financial companies offer their customers access to credit through their technology platform. Popular examples in India are Khatabook, Arzooo etc. who are facilitating working capital loans to their partner merchants/retailers. Embedded finance also enables banks, insurers, and wealth management companies to form valuable partnerships to distribute their products and services. According to one Forrester report 2020, embedded finance is touted to be a USD 7 trillion opportunity globally by 2030.

Very few merchants are approved for loans by formal channels and have to acquire credit from informal sources. Such credit is either too small to have an impact or offered at terms that don’t facilitate their growth in the long term. B2B E-Commerce platforms that have the ability to offer credit can relieve these bottlenecks for merchants and unlock growth for both, their merchants and themselves.


So how do B2B e-commerce platforms facilitate embedded credit?


Digital platforms catering to merchants and distributors can offer tailored credit products in-context at the point of demand creation on their platform. Few examples of fintechs operating in this space and facilitating embedded credit options are retail-tech Arzooo, Accounting-tech Khatabook to name a few. Please find an illustrative flow chart for better understanding.



 Advantages for all the parties involved 


Lender Partner
B2B E-commerce Marketplace
Retailer Partner
  • Gets access to increase the portfolio of disbursals via B2B e-comm partner
  • Streamlined pipeline of leads who have fund requirement
  • Open up new revenue streams
  • B2B e-comm partner provides risk sharing
  • Facilitates lines of credit through mobile app 
  • Helps increase wallet share from retailer
  • Increase retailer retention
  • Become a preferred supplier to retailers
  • Access to working capital loans through mobile app
  • Helps merchants better manage cash flows for SKU purchase & other business related expenses with flexible repayment plans


The key in this scenario is to provide tailored credit products as part of the digital platform.


Line of Credit  
  Merchant Cash Advance  
  Working Capital Loans
Fulfil demand hikes due to seasonality & festivals Merchants can meet their short-term liquidity requirements from lender partners wherein the lender partner settles the outstanding invoice amount with the supplier Avail working capital loans from lender partners of the B2B platform to meet contingencies, better manage cash flows & expand their business


Why Embedded Finance?


Embedded Finance Infrastructure natively enables credit for all merchants within a B2B E-Commerce platform. It handles the end-to-end lending flow, including the customer journey, loan offer generation, lender partnerships, and third-party integrations, repayment etc.


Digital lending platform
Increased approval Rates
Best Loan Offers
Customised Credit products
Intuitive UI/UX for each stage of the loan lifecycle – loan application, post-approval & post disbursal. The loan application process is completely mobile app native. Embedded Finance combines lending expertise, alternative data writing and data from the B2B e-comm platform to credit score & underwrite merchants & approve more disbursals. Embedded Finance connects digital platforms to a large and diverse lender network which ensures that your merchants get the best loan offers and have a high probability of being approved. Embedded Finance enables platforms to innovate, evolve & tailor credit products to serve the various use-cases of customers in deep collaboration with the anchor platform.


In conclusion


Ultimately, Embedded Finance enables digital platforms to leverage their unique position to help their merchants. It empowers B2B E-Commerce businesses to innovate for their customers, offer effective credit products, and provide credit to customers who otherwise wouldn’t be able to access it. This sharply accelerates their own growth and the growth of their retail partners.

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Will the internet-free digital payments UPI Lite take off in India?

What is UPI Lite?


The National Payments Corporation of India (NPCI) is working on a new solution called UPI Lite that will allow small digital payments to be made without the need for an active internet connection. The RBI announced on January 5 that digital payments of up to 200 could be made without an internet connection.


How does it work?


UPI Lite will allow feature phone users to use their phones to connect to UPI networks and make digital payments directly from their bank accounts. There are currently two key solutions being evaluated. The first is a SIM Overlay, while the second is a software-provisioned solution that will use Over-the-Air (OTA) updates.


SIM Overlay is a technique that extends a phone’s SIM card’s capabilities, allowing payments and other services to be completed even when there is no data connection. On the other hand, OTA will deliver the solution straight to the device’s firmware.


Users will be required to create a 4-digit or a 6-digit pin, depending on the protocols implemented by their banks. Payments made via the SIM overlay technique will be routed through the NPCI’s UPI system to servers operated by the NPCI, and transactions will then take place over the standard UPI network. Instead of using the internet, the entire procedure will run over SMS networks.


How does it affect the Indian ecosystem?


Since the demonetisation of banknotes in 2016, India has experienced a surge in digital payments. According to a survey, tier-II and -III cities in India accounted for more than half of all online transactions in the quarter ending March 2021. In villages and towns, though, cash still reigns supreme.


According to an industry expert, an alternative, secure, low-cost mode of payments with a near-cash-like characteristic will be provided by small value offline mode for digital payments, improving consumer confidence as a preferred option for small retail payments. It has the potential to promote various creative retail payment use cases, such as tickets, product bundling and non-standardised pricing.


Given that feature phones still account for half of the market, this will improve payments in areas where internet penetration is low.


This is not the first time the NPCI has attempted to promote offline payments in rural areas. In 2012, it launched UPI-led offline payments over Unstructured Supplementary Service Data (USSD) networks. However, due to SMS charges, it failed to take off in a large way. 

According to NPCI data, the USSD system was used for transactions worth 1.21 lakh in 2021. Around 83 banks were using the USSD system as of December 2021.

If NPCI’s current experiments go as planned, about 350 million feature phone users in India will be able to make digital payments without the need for an internet connection.

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Union Budget 2022 laid the foundation and gave a blueprint of the economy for the next 25 years – from India at 75 to India at 100, with the focus on fast-tracking the economy, providing opportunities to businesses, and creating six million new jobs.


Among the range of significant announcements, the reforms on Digital currency finally caught everyone’s attention.


With the tremendous increase in transactions of virtual digital assets worldwide, the Indian Government in the Budget 2022 has proposed to launch digital rupee by the central bank in FY 2022-23. It also plans to tax income from digital asset transfers at 30%.


The introduction of these reforms clearly is a big boost to the digital economy. The government providing the basic infrastructure and rails for CBDC will lead to a more efficient and cheaper currency management system. All this will eventually lead to elimination of cash to a great extent and promote all such digital assets in future.


Further to increase its adoption in future, the regulatory authorities should incentivize players/stakeholders in the payments ecosystem for building the required infrastructure.

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CBDC: Analyzing the nascent experience in China, Nigeria, and Sweden

The Reserve Bank of India (RBI) will debut the Digital Rupee in the Financial Year 2022-23, according to the Hon’ble Finance Minister of India’s Union Budget Speech on February 1, 2022. Meanwhile, China’s e-Yuan, currently in pilot mode, had its global premiere at the Beijing Winter Olympics 2022 when most foreign athletes got to experience a Central Bank Digital Currency (CBDC) for the first time. However, the Bahamas and Nigeria were among the first to establish CBDCs. Given that recent economic sanctions against Russia have granted governments additional reasons to implement alternative payment systems, such as CBDCs, it’s more vital than ever to understand and evaluate the experience of a few countries that are already ahead of the curve.



Source: https://www.atlanticcouncil.org/cbdctracker/


But, before we go any further, you need to familiarize yourself with what a CBDC is, as well as its pros and cons – read up on our previous blog post. Additionally, a few key terms can help in laying the groundwork:

  • Possible Use Cases: A CBDC can be issued for either Retail purposes, implying that it can be used for all transactions by the public, or Wholesale, suggesting that it can only be used for bank-to-bank transactions and settlement. A Wholesale CBDC is expected to improve efficiency in large-value interbank settlements while also being programmable. A Retail CBDC is projected to promote a far broader cause of financial inclusion, bolster digital economies, and improve the efficiency of retail payment systems.
  • Architecture: A CBDC can have one of three legal structures:
Payment Facilitators Direct Liability of
Central Bank Financial Intermediaries
Central Bank Direct CBDC NA
Financial Intermediaries Hybrid CBDC Synthetic CBDC


A Direct CBDC may cause financial disintermediation because commercial banks and non-banks will have no participation in its operation, but a Synthetic CBDC may limit monetary policy permeability and increase the risk of financial instability. A hybrid CBDC, on the contrary, is based on a time-tested paradigm in which both the central bank and financial intermediaries play active roles in the delivery of financial services while also promoting innovation.

  • Infrastructure: Depending on how the security and verification aspects of transactions are defined, a CBDC can be built on a centrally controlled database or distributed ledger technology, which saw a breakthrough with crypto assets.
  • Access: A CBDC can be accessed and used to make payments using either an account-based system, similar to our bank accounts, or digital tokens, which are more like physical cash. A fundamental distinction between the two is that, unlike an account-based CBDC, a digital token can retain the anonymity of cash.


Any central bank would strive to support the advantages of both physical cash (anonymity, settlement upon payment) and electronic payment systems (low cost, efficient and difficult to counterfeit), regardless of which mix of the above is chosen to construct a CBDC.

Let’s look at what it’s been like on the ground. We chose three countries to highlight out of the many that are experimenting with CBDC: China because it was the first to publicly announce its CBDC ambitions and has covered a lot of ground; Nigeria, because it is the largest country by population to have formally launched its CBDC; and Sweden, because of its unique objectives and differentiated design.


China’s e-CNY (under pilot):


Use Case Architecture Infrastructure Access
Retail Hybrid CBDC Centralized Management Account-based

China started working on the CBDC in 2014 and has been testing e-CNY pilots in cities across the country since December 2019. Given the early start and China’s stated desire to promote Yuan internationalization, it was widely assumed that e-CNY would hasten the process. However, all such speculations were dispelled by the People’s Bank of China’s (PBOC) research paper, which was published in July 2021. It said categorically that e-CNY is intended to “bolster the domestic economy, promote financial inclusion and make monetary and payment systems more efficient”. Meanwhile, e-CNY had been successfully tested across several use cases aligned with its objectives. By the end of June 2021, e-CNY transaction volume had already clocked 70.75 million, with a total value of RMB 34.5 billion (~$5.4 billion)!

Some distinguishing features of the e-CNY system are:

  • Allows those without bank accounts to enjoy basic financial services
  • Supports offline payments
  • Supports ‘managed anonymity’ despite embracing an ‘account-based’ access model – small-value payments are expected to be anonymous

According to PBOC, e-CNY will now be tested across a broader range of use cases, involving all relevant stakeholders in the ecosystem. Prior to the commercial debut, it will expand its research on the influence of e-CNY on monetary policy and financial stability. Furthermore, China is taking an active part in the worldwide CBDC standard-setting, having joined the Multiple CBDC Bridge (mCBDC) headed by the BIS Innovation Hub, where it is jointly exploring various CBDC possibilities with other central banks.


Nigeria’s eNaira (launched):


Use Case Architecture Infrastructure Access
Retail Hybrid CBDC Distributed Ledger Technology Account-based

Nigeria’s CBDC, eNaira, was launched with much fanfare in October 2021. While the project is still in its infancy, news reports suggest that the initial enthusiasm has waned. Nonetheless, its motivations for introducing eNaira are similar to those of other emerging nations that are likely to be keeping a close eye on the currency’s success. The following are some of the motivations:

  • Promoting financial inclusion – While a bank account is required to use eNaira in the first phase, the second phase is planned to eliminate the requirement
  • Reduce the amount of cash in circulation and, consequently, the cost of processing cash — the eNaira will contain all the characteristics of cash, such as direct claims on the central bank, no interest payable, and so on
  • Enabling direct welfare payout to citizens — eNaira’s account-based capabilities enable welfare funds to be delivered directly to recipients without the risk of theft
  • Increasing tax collection – As the economy becomes more organized as physical cash is phased out, tax revenues are likely to rise
  • Facilitating diaspora remittances — eNaira is supposed to be a more efficient, secure, and cost-effective way to send money back home

In the first phase, eNaira was launched with a few basic functionalities. Depending on input from eNaira users and regular calibration of perceived threats from typical CBDC issues, the Central Bank of Nigeria is projected to gradually introduce many more functions to meet its core objectives.


Sweden’s eKrona (under pilot): 


Use Case Architecture Infrastructure Access
Retail Hybrid CBDC Distributed Ledger Technology Digital Token

While financial inclusion is a driving force behind e-CNY and eNaira, eKrona is being created to solve a different problem: the decline in cash usage! Yes, the Riksbank, Sweden’s central bank, recognizes that the decline in cash may limit its direct role in the payments ecosystem, making its goal of fostering a secure and efficient payment system more difficult. As a result, the Riksbank started testing eKrona in a closed system with simulated participants (intermediaries like commercial banks), end-users, and payment instruments in 2020. The first part of the pilot’s findings was positive, indicating that digital tokens appear to enhance cash use and hence improve Riksbank’s direct role in controlling the money supply. The Riksbank, nevertheless, recognizes that the pilot must now go on to the next stage, in which it intends to:

  • Integrate with systems of actual participants
  • Create an offline function so that digital tokens can be exchanged without the need for a network
  • Test out various options by storing tokens and their keys in different ways that can be used for a variety of purposes
  • Evaluate and improve the eKrona network’s performance and scalability

The ecosystem of a CBDC will be newly established and will act as an alternative to the existing electronic payment infrastructure, which is a common benefit of having one. The ramifications of the CBDC for monetary policy, financial stability, and financial disintermediation, on the other hand, are still uncertain. Even the legal aspects of a CBDC, which is neither whole cash nor equivalent to a deposit in a bank account, as well as data governance mechanisms, must be thoroughly examined before its use grows.


We’ll keep a close eye (with a magnifying glass!) on the various central banks’ evolving experiences. For the time being, we eagerly anticipate the RBI’s next steps on the Digital Rupee, which will detail its objectives, design elements, and commercial launch timeline.



CBDCs: an opportunity for the monetary system –  https://www.bis.org/publ/arpdf/ar2021e3.htm

Progress of Research & Development of E-CNY in China – http://www.pbc.gov.cn/en/3688110/3688172/4157443/4293696/2021071614584691871.pdf

eNaira Design Paper – https://www.enaira.gov.ng/about/design

E-krona pilot phase 1 – https://www.riksbank.se/en-gb/payments–cash/e-krona/e-krona-reports/e-krona-pilot-phase-1-report-3/



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Payments in Metaverse

What is Metaverse?


Metaverse is a parallel online world enabling users to create their own virtual worlds, early onset of Metaverse came in 2003 with Second Life. Second Life was and is an online multimedia platform allowing users to create an avatar for themselves and have a second life in an online virtual world.


Since the prominence of cryptos and blockchain, Metaverse has seen a resurrection. Often described as the first web 3.0 application, wherein users can create avatars in virtual worlds, socialize, shop, bank, play, and do business. To sum “A shared 3D virtual reality world where people play, socialize, work and buy/sell goods and services”


Why is Metaverse important?


Some of the most important voices have this to say about Metaverse.


“An internet you’re inside of, rather than just looking at” – Mark Zuckerberg, Facebook


“The Metaverse is a massively scaled and interoperable network of real-time rendered 3D virtual worlds which can be experienced synchronously and persistently by an effectively unlimited number of users, and with continuity of data, such as identity, history, entitlements, objects, communications, and payments” – Matthew Ball, Metaverse expert

To sum Metaverse has the potential to be “The NextGen Internet”


How does it affect us?


Metaverse has taken baby steps in defining how we:



  • Multiplayer online games with Virtual Reality etc
  • Multiplayer with friends, family, or even strangers
  • Interactive Gameplay – no more predefined storyline


  • Interact with friends, family, colleagues, and strangers via VR, AR
  • Attend Social Event – Create Social events, even marriages
  • New age tourism – boomed during the COVID, VR enhanced real-time tours of some of the best-known places across countries
  • Virtual Activities – VR enhanced Treasure Hunt, etc with Friends and Family


  • Meetings and Team building – Interact with colleagues via VR, and AR across time zones
  • Skilling, training, and workshops – VR enabled training modules for softer to finer skills
  • Distance Assistance – Get help from colleagues in the virtual office
  • Business Development – Customers and Businesses are operating in Metaverse, why should newer businesses not pitch for business deals in Metaverse itself


  • Purchase – Purchase Virtual items for virtual self, home, office, and business
  • Window Shopping and Business Expos – Customers and Businesses both are in Metaverse, selling and buying
  • Marketing and Advertising – With Millennials living life in Metaverse, businesses are forced to market and advertise themselves in the Metaverse or they will be left out of the mindspace. JP Morgan has recently launched themselves in Metaverse

So what about payments in Metaverse?


The Metaverse is an estimated $758 billion opportunity by 2026 as per Report Linker Feb 22, 2022. So, people not only have fun in Metaverse but they are doing real businesses and creating wealth in Metaverse. New world should have new payment rails to conduct businesses.


Many platforms rely on traditional payment methods and in-game tokens, but crypto is gaining traction.


Traditional platforms use traditional payment methods like VISA/Mastercard cards etc. They also use in-game tokens (but limited to online gaming space use-case) given they are not accepted at other businesses in Metaverse. Blockchain-based platforms transaction is via cryptocurrencies via platform tokens (e.g. Mana for Decentraland, Sand for Sandbox), that can be bought and swapped on exchanges for other major cryptocurrencies like BTC/ETH, hence they are more interoperable, and easier to withdraw.


One of the key benefits of crypto payments in the metaverse is that they are borderless. Users and businesses can send and receive payments from anywhere in the world with minimal transaction costs and no wait time.


Non-fungible tokens (NFTs) are also gaining popularity as a form of payment. NFTs are digital assets created on blockchain platforms like Ethereum and EOS and are often used as tokens of ownership for digital assets like land, art, and collectibles that are unique. Like cryptocurrencies, NFTs can be easily transferred between users via P2P or exchange-based systems.


To sum it up, Metaverse is a new and exciting opportunity and will need new payment methods which are still evolving. Will it be a fad or a robust business, only the future will tell, but it’s definitely worth exploring.

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Digital wallet abstract concept vector illustration.

What is PPI? How can a business benefit from PPI?

PPI stands for Prepaid Payment Instrument, PPI is a method that facilitates the purchase of goods and services against the value stored on such instruments. The value stored on such instruments represents the value paid for the holder, by cash, by debit to a bank account, or by credit card.


The prepaid instruments can be issued as smart cards, magnetic stripe cards, internet accounts, online wallets, mobile accounts, mobile wallets, paper vouchers, and any such instruments used to access the prepaid amount.

Some of the common examples of PPIs include Paytm and Gpay, gift cards, and debit or credit cards. In today’s piece, we take a look at three types of prepaid payment instruments.

  • Closed System PPIs
  • Semi-Close System PPIs
  • Open system PPIs

Closed System PPIs:

These are PPIs issued by an entity for facilitating the purchase of goods and services from that entity only. No cash withdrawals are permitted. These instruments cannot be used for payment or settlement for third-party services. The issuance and operation of such instruments are not classified as a payment system and do not require approval/authorization from the RBI.


Semi-Closed PPIs

These are PPIs issued by banks (approved by RBI) and non-banks (authorized by RBI) for purchase of goods and services, including financial services, remittance facilities, etc., for use at a group of clearly identified merchant locations/establishments which have a specific contract with the issuer (or contract through a payment aggregator/payment gateway) to accept the PPIs as payment instruments. These instruments do not also permit cash withdrawal, irrespective of whether they are issued by banks or non-banks.


Open System PPIs

These are PPIs issued by banks (approved by RBI) for use at any merchant for the purchase of goods and services, including financial services, remittance facilities, etc. Cash withdrawal at ATMs / Points of Sale (PoS) terminals / Business Correspondents (BCs) is also allowed through these PPIs.


How can a business benefit from PPIs?


Prepaid payment instruments in the form of mobile wallets, multipurpose, multicurrency, prepaid cards can accelerate sales, customer loyalty, and profitability. You can earn significant revenue for every transaction made through mobile wallet-enabled prepaid cards you issue.

Businesses must leverage PPIs to tap into the gigantic 760 million smartphone users base in India, who will most likely shop online and pay using mobile apps and wallets.

Using prepaid instruments, you can enable bank-like domestic and cross-border payments, but with greater efficiency, flexibility and security. Armed with the ground-breaking PPI reforms announced by the Reserve Bank of India (RBI), every business in India must ride the PPI wave to reap the utmost benefits.

The following are significant measures announced in the 2021 RBI monetary policy review, applicable from March 31, 2022.

  1.  PPIs can offer Real-Time Gross Settlement (RTGS) and National Electronic Funds Transfer (NEFT) facilities to their users.
  2. Interoperability of full KYC PPIs is mandatory.
  3. The maximum balance of mobile wallets doubled to INR 2 lakhs from INR 1 lakh.
  4. Cash withdrawals enabled for full-KYC PPIs of non-bank PPI issuers (in addition to bank issuers)

These reforms have the potential to level the playing field between banks and non-banks, incentivize full KYC PPIs, and drive greater financial inclusion. Businesses that accept payments and remittances through prepaid payment instruments will experience higher customer acquisition, retention, and loyalty, increased customer lifetime value, and long-term profitability.


Who can issue PPIs?


The following entities can issue PPIs post authorization/approval of RBI.


Non- Banking Entities

  • They must be incorporated in India
  • Minimum paid-up capital — more than INR 5 crores
  • Minimum positive net worth — INR 1 crore at all times


  • Maintain an escrow account with any scheduled commercial bank in India


  • Compliant with PPI eligibility criteria established by the RBI


RBI’s new addition to PPI-Small PPIs can have cash upto ₹10,000 loaded per month

The Reserve Bank of India on 27/Aug/2021 issued Master Directions on Prepaid Payment Instruments (PPIs) with the fresh classification of the instruments.


“Keeping in view the recent updates to PPI guidelines, it has been decided to issue the Master Directions afresh,” the RBI said.



No entity can set up and operate payment systems for PPIs without prior approval or authorization of the RBI, it stated.


The master directions classify PPIs into two categories – small PPIs and full KYC PPIs. They were earlier classified as closed systems, semi-closed systems, and open system PPIs.


“Small PPIs: Issued by banks and non-banks after obtaining minimum details of the PPI holder. They shall be used only for the purchase of goods and services. Funds transfer or cash withdrawal from such PPIs shall not be permitted,” the RBI said.


PPI Classification


Small PPIs can have cash up to ₹10,000 loaded per month, not exceeding ₹1.2 lakh in a year.


Full-KYC PPIs will be issued by banks and non-banks after completing the Know Your Customer (KYC) of the PPI holder.


“These PPIs shall be used for the purchase of goods and services, funds transfer or cash withdrawal,” it further said, adding that the amount outstanding should not exceed ₹2 lakhs at any point in time.


The RBI has also said that the PPI issuer shall have a board-approved policy for PPI interoperability.


Where PPIs are issued in the form of wallets, interoperability across PPIs should be enabled through UPI. Where PPIs are issued in the form of cards (physical or virtual), the cards should be affiliated to the authorized card networks, it said.


PPI for mass transit systems should remain exempted from interoperability, while Gift PPI issuers (both banks and non-banks) have the option to offer interoperability.


Interoperability shall be mandatory on the acceptance side as well. QR codes in all modes shall be interoperable by March 31, 2022,” it further said.


The RBI has also said the PPI issuer shall put in place a formal, publicly disclosed customer grievance redressal framework, including designating a nodal officer to handle customer complaints or grievances, the escalation matrix, and turn-around-times for complaint resolution.

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Everything You Need to Know About Your Card and Its Processing

It isn’t necessary to have intimate knowledge of the backend working of the back card system in order to find the best card processing system. But it’s a good idea to have a general understanding of how card processing works and the types of fees charged at various stages of the system.
This blog is on the key functionality of card processing services that will help you reach a better understanding of card processing. You’ll have in-depth details about what defines a payment solution provider, how processing works, the fees involved while doing any transaction, and the risk.


Actors Involved in Card Processing


The card processing company handles the processing and batching of purchases made with credit, debit, or gift card payments. They typically assist with technology needs and customer service, wherein they act as an intermediary between card associations and banks.


There are multiple stakeholders involved when a customer swipes their card at POS. The information below helps to summarize the essential roles involved in payment processing.



If you have a credit or debit card (as most of us do), you’re already familiar with the role of the cardholder. But just to give you knowledge-a cardholder is someone who obtains a card (debit or credit) from a card issuing bank which they eventually use to purchase goods or services both online or office at the store.



Technically, a merchant is any business that sells goods or services. But, only merchants that accept cards as a form of payment are pertinent to our explanation. So with that said, a merchant is any business that maintains a merchant account that enables them to accept credit or debit cards as payment from customers (cardholders) for goods or services provided.


Acquiring Bank (Merchant’s Bank)

An acquiring bank is often referred to as a merchant bank as they contract with merchants to create and maintain accounts that allow the business to accept credit or debit card payments. Acquiring banks provide merchants with equipment and software to accept cards and handle customer service and other necessary aspects involved in card acceptance. An acquiring bank is a registered member of the card association (Visa, RuPay, and MasterCard)


Issuing Bank

You have probably guessed the role of issuing banks by their name itself. The issuing bank is also a member of the card association(Visa, MasterCard, or RuPay)


Card Association

Visa, MasterCard, or RuPay aren’t banks and they don’t issue cards or merchant accounts. Instead, they act as a custodian and clearinghouse for their respective card brand. They also function as the governing body of financial institutions, ISOs, and MSPs that work together in association to support card processing.


Primarily, card associations govern the members of their association, including interchange fees and qualification guidelines, act as the arbiter between the issuing and acquiring banks among other vital functions.


What does card processing look like in motion?


Card processing basically works in conjunction with three distinct processes:


  • Authorization
  • Settlement
  • Funding


First, let’s take a look at the authorization process.




  • The cardholder swipes the card at the merchant POS in exchange for goods or services.
  • The merchant sends a request for payment authorization to their payment processor.
  • The payment processor submits transactions to the appropriate card association, eventually reaching the issuing bank.
  • Authorization requests are made to the issuing bank, including parameters such as CVV, expiration date, etc validation.
  • The issuing bank approves or declines the request. The transaction can be declined in case of insufficient funds.
  • The issuing bank then sends the approval (or denial) statement back along the line to the card association, merchant bank, and finally to the merchant.

That’s the card authorization process in a nutshell.


Now let’s take a look at the settlement and funding


  • Merchants send batches of authorized transactions to their payment processor.
  • The payment processor passes transaction details to the card associations that communicate the appropriate debits with the issuing bank in their network.
  • The issuing bank charges the cardholder’s account for the amount of the transactions,
  • The issuing bank then transfers the appropriate amount for the transactions to the merchant bank, minus the interchange fees.
  • The merchant bank deposits funds into the merchant account.


That’s the simplified card payment processing system wherein the authorization takes a matter of seconds. Settlement and funding that used to take days are now always handled overnight, helping you get your money quickly.

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Introduction of Blockchain in Fintech

Fintech being a leading light of the startup ecosystem over the years, has played crucial roles in development of the financial services industry. Strong ecosystem level changes are opening up opportunities for new business models. Introduction of blockchain technology in this evolving sector has a considerable impact and advantage.


Blockchain technology is a “chain of blocks” where each block holds timestamped digital data and it’s own previous blocks’ unique identity. The unique features of blockchain have potential to benefit the financial sector significantly.


In this blog we will cover following topics:

  • What is Blockchain?
  • How Blockchain is transforming the financial ecosystem
  • Fintech and Blockchain-Use Cases
  • Future of Blockchain in Finance


What is Blockchain technology and its features?

Blockchain is a decentralized database management system. The name signifies itself, a series of blocks containing transaction data, a hash identity, and node details are connected to form a chain. Blockchain is distributed ledger technology (DLT) which allows data to be stored globally on thousands of servers.


Below are the key features of Blockchain for its deeper understanding:


  • Security and Transparency

Financial services all across the world are still centralized and multi-folded. Financial data is mostly stored in centralized databases, and it has to go through multiple intermediaries like front-back offices etc which results in lack of transparency across the system, wherein safety being solely dependent on intermediaries and their level of security.

This lack of transparency within the system fosters security threats or data breaches across the organization.

With the introduction of blockchain technology, transparency and security can be ensured simultaneously. Its distributed consensus based architecture facilitates the security towards data breaches, security threats etc. 


  • Privacy

Blockchain system provides operable keys-a public one and a private key. Public key is available to all users in the network. However, the private key is only accessible to the stakeholders of the transaction. This enables transparency wherein the transaction will be visible to all users in the network with public key whereas the stakeholders and the transaction details will only be visible to those who have access to the private key. This process enables transparency within the system while securing the confidential information of the stakeholders.


How does Blockchain work?

Blockchain records validate and store the data in its database. So, it leverages to validate a transaction happening across the network. Each block in the block chain contains follow information

  • A hash pointer (link to previous block)
  • A timestamp
  • Transaction data


Future of Blockchain in Fintech Technology

Andy Martin, a world-class blockchain expert, recently forecasted market changes based on the token economics forced by blockchain and described what exactly it provides:


Decentralized communities provide certainty of identity, “who am I dealing with”, the certainty of provenance, “what am I buying” and smart contracts give certainty of execution, “if I do this, then I get paid” in these new marketplaces.”


Let’s understand better how Fintech and Blockchain can be chained together to build a FinBlock ecosystem.


Blockchain in the fintech industry can provide us a more seamless and effective way to banking, built around concepts of equity and decentralization. Blockchain-based fintech enables seamless transfer of funds, top of the line security and transparent financial tracking.


Reduced Costs and Transactions in Minutes


With blockchain integration in fintech applications, sending money, regardless of the amount, is much faster. Blockchain-based transactions occur in real time, so the recipient will not have to wait for days or weeks to get the money.


In addition to this, fintech applications powered by blockchain technology can drastically reduce the transaction costs enabling direct, P2P transactions that eliminate any middleman, meaning all unnecessary expenses and fees.


Use Cases of Blockchain in Fintech


Some use cases of blockchain in fintech services are: Cross Border Payments, Lending Platforms, Credit Score, Invoice Management and Billing Solution, Fund Investment, Government Expenses, Financial Record Keeping, Stock Exchange and Initial Public Offering

Let’s discuss Cross Border Payments and Lending Platforms use case in details:


Cross-Border Payments

Banks always charge an additional fee for every transfer or payments across borders, which in a way becomes expensive and slow. 

E.g If you want to transfer money from India to the USA, the transfer goes through one or more financial institutions before it reaches the receiver.

Introduction of Blockchain allows individuals to send and receive money with minimum interference of different intermediaries, which enhances the payment settlement quickly and efficiently.


Lending Platforms

When it comes to lending, one is required to establish trust and make a transaction happen. However, with blockchain technology in fintech, borrowers can directly deal with the lenders on the rate of interest, installments, and duration of the transaction with the help of immutable smart contracts.



Blockchain in financial services can offer multiple benefits, which can help transform the finance industry. According to KPMG, “blockchain can reduce errors by up to 95%, increase efficiency by 40% and reduce capital consumption by up to 75%”. Blockchain in finance is an exciting concept with the potential to transform the finance industry.

Blockchain can help different financial institutions and government entities to improve trust, bring transparency and cut down costs. 

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Data monetization concept vector illustration.


What is data monetization?


Data Monetization refers to the process of using data to obtain quantifiable economic benefits. Earlier, payment providers were making money from the fees charged to merchants for accepting payments from their customers. But data monetization has become a new business model which generates customer insights from data via advanced analytics to monetize the data itself. 


Let’s get started with example and understand how payment data can be a next big pay off for payment providers-


For example,  large ecommerce companies like Flipkart,Amazon or Myntra, n number of transactions are happening in fraction of seconds. These ecom companies can use their transactional data and create highly differentiated advertisement offerings in real-time bidding situations. Informative data about customer demographics and activity will allow the company to offer differentiated prices.


Another example is, an online classified portal uses algorithms to spot when customers move to a new location. This information can be used by businesses to business partners to offer targeted services.


These examples highlight  how these platforms are taking advantage of new approaches and how they created value for customers along with new revenue streams in a world shaped by technology and data.



For payment providers, this shift towards holistic patterns of payment acceptance, including new softwares and financial services enabling the payment processing fast and are in a step to become a commodity. Leveraging data is a first step in the direction of redefining business models to add new value to their business. 


From payment gateways to issuers, today’s payments providers have a treasure of data at their fingertips.  Data monetization ensures that you get the most value from your data by increasing profit, decreasing costs, and optimizing opportunities for the business.


Data is not the business in the payment industry. However, it’s a resourceful by-product of a business.

It is an asset- which has untapped potential to positively affect your bottom line.



You even have the opportunity to utilize your data to streamline operations, enhance your services and goods, cut costs, and identify new opportunities. Or you can use this data as a new revenue stream, wherein it has its own right that you can sell access to.



How can you monetize data?


As our world has become increasingly data-driven, there has been development of different ways to monetize data. Payment providers are in a distinctly powerful position to capture emerging opportunities as they have deep stats of merchants as well as of the consumers, wherein they can merge these two borders by providing a lucrative incentive to influence consumer’s choice of merchants to extract value through monetized data or through third parties.


Payment providers seek new high revenue streams, many are moving into consumer finance, offering cash advances to merchants, or developing their own business management solution. Payment providers nowadays are filling the gap between merchants and consumers by providing both parties lucrative incentives.


The question arises, how can you monetize the data? One can create revenue from data stats with providers by first identifying what type of data they have, understanding the value of that data of merchants on customers and building sustainable business models to build go to market strategy.


Payment providers that can find ways to monetize their vast wealth of transaction data can seize a powerful opportunity to differentiate.”- Christian Low


Transactions build great insights around purchasing patterns


Data is created whenever a customer uses a digital payment method, either shopping online or in store purchase. In fact, this transaction data generates variable data points like:

  • How much was paid in total?
  • How many items were  purchased?
  • Where did the transaction take place?
  • Total transaction at that store? etc.


Payment providers can also create multi-faceted data which includes detailed analysis of each merchant and its transactional ecosystem.  


Together this collective information from thousands of transactions, conducted by thousands of customers every day, forms a pool of rich connected data points. This entire data set can be used in real time depending on a provider’s infrastructure.



What can be a successful data monetization model?


Payment service providers can improvise the solution using the data of the sector that are currently improving at a radical pace. Fashion is an industry judiciously using these data points. Using the user transaction and order data, they can build a financial scoring model of their customers. This is provided to BNPL (Buy Now Pay Later) companies to facilitate them making decisions on providing deferred payments to customers. In another example, online classifieds use algorithms on data points to spot when a customer moves to a new city, which in turn can be used by their B2B partners to offer targeted services, like offers from local businesses. 


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Open banking platform vector concept metaphor

OPEN BANKING- Is India ready to enter banking 2.0?

What is open banking? 


Open banking is nothing but a payment system that works on an application programming interface (API).  Let’s understand it better with the help of an example.


In India, how long does it take to open a new bank account? How many times do you need to verify your documents? If you want to apply for a loan, how much time does it take to get it approved?


I am sure you all can relate to how much effort it takes to complete each task mentioned above. If you talk about applying for a loan, let alone from a different financial organization, you need your bank account details, a good credit score, and a valid KYC document to even be approved.

With the introduction of open banking in India, everything will be possible within a few minutes and with a few clicks.


Open Banking and its status in India


Open Banking in India is still in a nascent stage and awaits a mass adoption wave. The reason behind this could be that the traditional Indian banking systems are extremely manual and system-based. Currently, even the adoption of net banking is not ubiquitous. The system focuses more on security and privacy, thereby compromising its efficiency. However, open banking has lots to offer when compared to traditional banking systems.


Is India ready for open banking? Prima facie the thought seems like a no-brainer. It is possible, as today we make payments using our phones for everything, be it an electricity bill or grocery bills, you name it! And you are doing it via phone.  A final noteworthy feature of India’s approach to open banking is that the perimeter of data subjects is broader than in most other jurisdictions.


Many open banking approaches are focused on consumer data and access to financial services. But India’s approach extends this to include small businesses also, who can be a part of this payment ecosystem and add one more layer to the data stack and have the access to improved financial services and their offerings


The progression of India with open banking principles can only be achieved through interoperability and data sharing in the financial sector. If you bring banks and non-banks together under the same infrastructure or common ecosystem, this architecture will facilitate financial inclusion, as can be seen by the increase in a high volume of low-value payment transactions, which further leads to digital transformation and development.


Open banking adoption accelerates or not?


In my opinion, the banking system has been transforming with each passing day. From an individual standing in long queues to just open an account in one tap, we have evolved. Whether it is physical banking or digital banking, individuals choose convenience and variety. 


There are many successful open banking stories. M-Pesa in Kenya, Alipay in China, and Paytm in India- their adoption indicates that there had been a certain digital drift that led to the success of these platforms. This indicates that traditional banks should change the way they have traditionally approached customers and should adapt to the new world of open banking. Digital banking or open banking systems can give them access to innovative ways of implementing digital technologies within the system, which in the future will help them to provide personalized customer services which will help them in retaining their market share and reduce capital on research and development of services.


How secure or safe is my data?


Every new technology in the market comes with new risks and uncertainties. However, with open banking platforms, they have the potential to rewrite the relations between a bank and its customers. When we talk about a consumer, a consumer is someone who prefers convenience packaged with security and safety. So, open banking will enhance or enable the management of money more securely, more convenient, and customer-focused.


At last, I would like to conclude that with every step in the future or tomorrow something or the other is changing. Change is inevitable, and it comes with a mixed bag of offerings. Here, in the case of open banking in India, the future is going to be collaborative and interconnected.

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