Next Day & Instant Payout

Habit building credit lines for businesses

Aug, 2018 · Role: Head of Design · Company: Instamojo

Problem

Businesses use Instamojo to collect payments (among other things). The money collected via Instamojo takes T+3 days (3 business days) to reach their bank accounts (a Payout).

This delay creates two problems:

  1. Cash dries, up. Especially during bank holidays
  2. Affects Instamojo's brand & customer experince as many businesses feel that Instamojo is withholding their money (which is not true).

Insights

Here's what we learned from our customers:

  • Cash flow is a critical problem among MSME, who don't have access to a formal credit line from banks
  • Cash is needed for inventory, salaries, and petty expenses
  • NEFT doesn't work on holidays—most digital sales channel do not settle money on these days
  • Customers were willing to pay a fee for the credit, as long as it was predictable

Manik Singla , the product manager, brought these insights to attention and proposed two solutions:

  1. Instant Payout: Get money in bank 24x7 instantly for 1%
  2. Next Day Payout: Get money in the bank the next day for 0.25% (works better for low-margin businesses)

Solution

With our T+3 cycle, we send one Payout every working day (if the Payout is due) the money is wired using NEFT.

Next Day Payout was to work only on working days, so it was just a matter of flipping a switch:

Next Day Payout is as easy as flipping a switch.

Instant Payout works 24x7, the money is wired using IMPS. To be "Instant" every payment would need to be paid out instantly. That's fine if you get 10 payments a day, but it could easily turn into a notification nightmare if you were receiving 1000 a minute.

It made sense to batch-process transactions, but we ran into another problem—IMPS has a limit of INR 2,00,000 per transaction.

We decided to make Instant Payout a choice (voluntary experience).

Instant Payout experince is quick & easy. Watch video.

This approach had other benefits:

  • 1% is a high amount to pay but allowing businesses to choose gives them more control
  • Allows the fraud systems to flag and prevent suspicious transactions from becoming eligible for an Instant Payout

Results

We distributed over 1NR 100 million of credit via Next Day Payout and Instant Payout in just 60 days of launch.

Next Day & Instant Payout is especially popular among customers using Instamojo using a mobile device.

"Instant Payout is icing on the top"

— A baker using Instamojo to online orders for his bakery

A habit building credit line

Our customers love Next Day & Instant Payout for solving their cash flow problems. Instant Payout, however, gets more love—because it's addictive.

Habit loop describe behaviour-building circuit of the brain. You can read more here; in breif:

Habit loop explained. A habit is formed when a pleasing reward is received after performing a known action/routine triggered by a known cue. The habit loop works on pavlovian conditioning.

At Instamojo, we always wanted to build a habit loop, but thanks to the T+3 cycle, the loop never worked:

Instamojo's ideal habit loop breaks because of 3 day delay in payout.

Instant Payout fixed that:

Instant Payout completes the habit loop—customers get a cue when they receive a payment, click a button and receive money in their banks instantly.

Customers love pressing the button and hearing their phone ring with a notification from their banks—your account has been credited!

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Read more about building of Next Day & Instant Payout here:

Team: