Nitya Sharma On Reinventing The Khata For Ecommerce

One of the major contributors towards the success of ecommerce in India has been cash on delivery (COD), which has imbibed a sense of security among customers that they won’t lose their money online while shopping. 

Nearly two decades later and despite the availability of multiple payment options, including UPI, many still prefer to pay for their online purchases when they arrive, even if it means shelling out an extra few bucks. 

An IIM-Ahmedabad study shows that over 65% of ecommerce transactions in India are CODs. It further highlights that the country’s fast-paced ecommerce space, which is likely to surpass $400 Bn by 2030, has failed to reduce this high rate of COD orders.

So, why are we discussing it now — after more than a decade-long entry of ecommerce in India. Well, the answer to this is simple — this mode of payment has today become a pain point for smaller D2C businessmen, who are most vulnerable to cancellations, high return rates, and undelivered products. 

Not just this, CODs also increase operational costs and delay cash flow, making it difficult for newer brands to scale. 

Despite a sustained spike in digital payments, this trust gap could not be bridged. And, this is where Simpl found the sweet spot. 

The fintech startup drew its inspiration from the traditional khata system when Nitya Sharma founded the company in 2015, which lets you make payments with just one tap on your phone screen without debiting your account on the spot. 

“Simpl simplifies the ecommerce experience for consumers with a one-tap checkout experience,” says Sharma, cofounder and the chief executive officer of the startup. 

“When I saw the clear trust gap between consumers and ecommerce platforms, I realised that people wanted to go cashless, yet they were opting for CODs just to feel more secure. With Simpl, we are bridging this very gap – trying to unlock the true potential of Indian ecommerce,” he adds. 

In a candid interaction with Inc42, Sharma shares how Simpl works to improve the experience of online shoppers, new products the company is working on, how it is using advanced neural networks in its operations and, last but never the least, how it is solving crucial business problems while balancing the stringent fintech regulations in India. 

Here are the edited excerpts from the conversation: 

Inc42: Given that 65% of ecommerce transactions in India still rely on cash-on-delivery, how Simpl aims to shift this paradigm and build trust in online payments with its digital khata?

Nitya Sharma: When I came to India after over a decade in the US, two things happened: First, I got rejected for a credit card which made me realise too few people here have credit cards, and second, nothing on Indian ecommerce is one click because 70% of ecommerce transactions were happening through cash-on-delivery. 

I understood that people use cash-on-delivery because they feel safer about an online transaction if they have to pay after the delivery. It was not about cash, but more about trust and safety.

I knew that in a place like India where credit cards are still out of bounds for the most, despite the tech adoption, there lies an opportunity to reimagine the space by focusing not on credit, but on user experience, and making ecommerce transactions more trustworthy. That is how the first idea of building Simpl came to me which solidified when I observed that many Indians, including a large chunk of the reasonably affluent population, were using khatas with their retail vendors. 

It occurred to me that khata is this very original version of a credit card and it’s been there for thousands of years in India. We Indians use khata because it allows the retailer to build a relationship of trust with their customers, while for the consumer, it is about a seamless experience. 

Using khata allows the consumer to cut out any payment instrument as it allows them to skip payments altogether, and have that experience of nothing. That gave me the idea of building a khata on the internet which became the foundation for Simpl. While it looked difficult to implement, I knew that if we used the right design and backed it up with a lot of data science, great engineering, machine learning, and so on, there was a probability of working. 

While I was prepared to fail, I knew that it was worth trying because if we were able to build a khata on the internet, it would change the payments forever.

Inc42: Your online khata is now known in the market. What’s your growth strategy for Simpl from here on? Any innovation or any new product on the cards? 

Nitya Sharma: We do not work out our strategy for vertical expansion but for horizontal growth. We always look at two things – acquiring more merchants and more consumers. 

On the product side, we have quite a few innovations which we’ve been working on for a long time. One of our new products is ‘Pay In 3’ that allows you to split your payments into three equal parts. We have positioned it not as an affordability product, but as a budgeting product. It’s a crucial trend we have seen in the Gen Z consumer category. They distinguish between affordability and budgeting. 

Budgeting is more about smaller ticket sizes, typically the things which are under INR 6,000, but people buy more frequently. These are like fashion items, beauty and personal care products, and health and fitness essentials. 

We work with a bunch of D2C brands focussed on Gen Z such as Myntra’s Forward or Snitch or Birkenstock. While paying through Simpl, you can simply say, ‘Hey, I want to split this transaction to three’. We are excited about Pay In 3 and we have seen massive adoption from merchants and consumers because it is a unique product and no one is doing this. 

Second, we also have millions of consumers on our platform and the majority of them are very high-quality trusted users. So, let’s say someone is using a lot of khata and paying it back on time, it means that they use a lot of ecommerce and they can be trusted. We are building a lot of interesting features inside our app to help D2C brands discover such consumers.

As of now, D2C brands have limited marketing channels, such as Meta and Google, to reach out to their target audience, which often prove too expensive and sometimes, not even relevant for the target audience. On Simpl, we have built an ecosystem in which users can discover new brands when they use our app and are then redirected to their respective online stores. During its pilot, we have seen massive consumer acquisition. 

We are also working with merchants to build a loyalty reward platform where these customers can be rewarded.

Inc42: Quick commerce is growing at a staggering pace and occupies a big chunk of the ecommerce market. How is Simpl tapping into this opportunity? 

Nitya Sharma: We are very excited about the future of ecommerce in India and how it is moving towards quick commerce because our khata is a perfect product-market fit for quick commerce. We work with all the major ecommerce and quick commerce platforms like Swiggy, Zomato, Zepto, MakeMyTrip and BookMyShow, besides 26,000 more merchants and almost 10% of users of these platforms use Simpl. 

If you are using these platforms multiple times a day or a week, using Simpl would be like using a khata or a credit card. It will aggregate everything into one bill that you can pay off on a specified date. 

We are also working very closely with quick commerce companies that are about to enter the market and that is very important for our growth and innovation. 

Inc42: How is Simpl integrating AI into its services?

Nitya Sharma: Building khata on the internet was not an easy task. Today, Simpl is the largest platform in this category in India and the third largest platform in this category globally after Klarna and Affirm. It took us 10 years to get here. The whole idea of giving the user a great experience with one click and pay later is a great thought but to execute it with a business profitability is extremely hard.

The most difficult part is building the AI models, or as we call them graph neural nets, which work like a human brain. That is something that we have built from scratch and have been using and improving since the last decade. 

We have also started using generative AI for our customer support to provide the ecommerce user a trust that if you use Simpl to buy something and it goes wrong, Simpl will take care of it. A customer can reach out to our customer support vertical if something did not get delivered or it was defective or if they have a dispute with the merchant. We believe that customer support should be real-time and we have been achieving this using AI agents since last year. 

Inc42: As an ecommerce enabler, what makes you most excited about an industry that’s set to cross $400 Bn by 2030? Where do you position yourself in this spectrum?

Nitya Sharma: The potential of ecommerce in India is still underappreciated. When compared to developed markets like the US and Europe, where the total percentage of consumer retail on ecommerce is over 30% and 40%, in India, it is still at 7%. 

Even in emerging markets like Brazil, ecommerce sales account for 18% of the total consumer spending, while in Indonesia, this goes to the high 20s. In China, it is north of 50%. So, while India’s ecommerce market share is smaller, the exciting thing for us is that this will become bigger and hopefully soon. But to make that happen, we will need to make the shopping experience for online consumers smoother, which cannot be achieved just by easy payments or quick deliveries, but by building trust.

For now, out of those 7% of consumer spending happening online, 65% happens over COD, and that is our problem. But I am very excited about our positioning here and we are focused on how to make one-click checkouts a norm and build trust in that transaction. There is an opportunity for us to not only be a part of ecommerce but catalyse its growth by cutting down on CODs as much as possible. 

We are also bullish on the quick commerce scene in the country and, as I said, we have a 10% market share of all the transactions on quick commerce, a chunk bigger than any of the individual payment categories. D2C is another great value driver for us and we are working very closely with all the D2C merchants and D2C participants to make ecommerce easy, safe, and simple.