Micropayments transforming the payments industry: Interview with Sushil Prabhu, CEO, Dropp
By Edlyn Cardoza
The payments industry has witnessed a revolution with digital payments and BNPL. Micropayments are small payments or microtransactions usually of low transaction fees that are mainly made online.
Dropp is a ‘pay per use’ small value transaction platform designed to make it easy for consumers to purchase small-value goods and services securely without signups.
Dropp enables the ‘Pay-per-usage’ model that appeals to a growing customer base that wants to use services on an ad-hoc, on-demand basis and only pay for what they use. Consumer goods and services ranging from renting a scooter, using a vending machine, paying for parking, and buying a coffee cup could immediately benefit from Dropp. Additionally, merchants providing cloud-based data API, market data feed, IoT sensor data, and others facing a similar challenge can leverage this platform to offer their services in smaller increments.
IBS Intelligence sat down with Sushil Prabhu, CEO of Dropp, to discuss how micropayments transform the payments industry.
How does Dropp’s ‘Pay-per use’ option help merchants?
Dropp is a micropayment platform, and the real option that we offer to customers and merchants is a pay-per-use option. Pay-per-use option in the digital market has been a missing link or has been a missing gap. For most digital merchants in the last 20 years, the way the digital revolution has taken place and how the market has done very well is by a subscription model, where you pay one flat fee, and that’s how you monetise. What we offer in Dropp is an alternative method for monetising digital services, where a merchant can sell on a pay-per-use basis, which means you pay only for what you consume.
Many consumers worldwide would love to use your services, but they don’t want to commit to a subscription. So, merchants miss out on all of these consumers who would like to use their services. Specifically, it helps small and medium merchants. In terms of history in the last 20 years, the digital economy has done exceptionally well and has only done well by offering you the services for free and putting ads on it. So that’s how a merchant makes money. Sometimes offering you free, and they don’t make any money for the next 4-5 years, and then at some point, they charge, or they figure out a different model, or they charge you a subscription fee. What’s happened in the market is the big companies have done exceptionally well, the companies that have the power to stay and exist for a more extended period of time without making any money. But small and medium businesses have a tough time doing that.
The second in the pandemic, there are more digital services. For example, 10 years back or even five years back, there would be one or two video streaming companies, and you subscribe, and you’re okay with it. But now there are many more services for the same sort of either the content or the same type of services. So, you’re looking at the same population, and everyone is asking you to subscribe. If I’m a small or medium merchant, it’s not easy to get that customer to commit to me. Our pay-per-use model where merchants can unbundle their services and sell them in smaller quantities is absolutely a merchant advantage, and it gives them the benefit. Dropp offers merchants the ability to make revenue from day one instead of waiting for five years and hopefully survive. Most merchants do not survive unless they have raised a lot of capital.
How does Dropp keep its consumers safe from fraud during micropayments?
These are microtransactions, so I’m going to convert to the US. You’re talking about anything less than $20, anything less than $10, $5, even as low as one cent. I can give you an example of why you need one cent, and that’s because when two machines communicate with each other, IoT devices will use micropayments.
We believe that as more and more merchants unbundle their services and offer you these goods, you will be making 10-20 transactions a day. They will be like five cents, 10 cents, and you will be using Dropp or something like Dropp more often. You do not want to share your credentials with every merchant out there, and that’s where you get hacked. So, there are two things that we have done.
One is that Dropp does not share your credentials with a merchant. When you use a credit card to make a payment, you have to put in your credit card number, and the merchant has it. This is not the way it is. Dropp uses an entirely different structure where privacy is maintained for you, so your information is not shared, and you’re private to the merchant.
I’m not saying anonymous, and it’s private because Dropp knows who you are, and we have to know who you are. It’s almost like when you walk into a convenience store, buy something, and pay cash. It’s not entirely anonymous. They have seen you, but you haven’t shared any details. So it’s private.
The second thing that we have done, which is very important, is that Dropp’s whole platform is built on a distributed ledger system like the blockchain. So we use some of these securities from the distributed ledger; we use a private key. It’s called a Digital private key. So, every month, when you use our wallet or our app, you have complete authority and authorisation. This means you have a signature, and when you click on ‘pay’, it’s almost like you’re signing a check, and only you can do that, and no one in the world can do that. So as new information is shared between the consumer and the merchant, and even with us, we know whatever we want to know about you. But we also don’t store a lot of your information. So, Dropp has reduced the hacking part of it and made it a lot more secure than ever. I wouldn’t say it’s 100% hackproof because you never know what technique people could use, but it is more secure than anything else, and it’s essential for us. It’s primarily important for us because we also want to store as little as possible in case we get hacked; you won’t be able to find much information. It’s all hashed and encrypted, and we don’t store your bank details or your credit card details; none of the details is saved with us.
What is your opinion on real-time payments? Do you see Dropp enabling this feature in the year 2022?
Yes, absolutely. Dropp is a wallet right now; if you download Dropp, we make you pre-fund your wallet and then pay merchants whenever you want to pay. Dropp is a multi-currency wallet. That means you can fund Dropp using the US dollar or government-issued currency. But you can also fund Dropp using crypto. So when you make payments to the merchant using crypto, we use a specific crypto called Hbar – a currency from Hadera Hashgraph. We will also have something called USDC; it’s a stable coin. So those settlements are in real-time even now. When a merchant gets that payment, he gets it in one second.
What we have is the other payments are not real-time because the merchant gets an acknowledgement right away; we pay them end of the day. At the end of this year, we’re going to offer real-time payments, where consumers can do three things with it. He can fund his wallet in real-time to have money in it. A merchant can get payments in real-time, or a consumer can pay a merchant directly in a real-time settlement.
The entire world is moving in that direction, and Dropp will have real-time payments for Fiat, a government-issued currency. You will see more and more merchants doing that, and India has already done that, Europe is already there, and the US is getting into it in a big way.
Recently, HBAR Foundation supporting Dropp’s platform with a Grant was announced. How will this grant bring for Dropp?
Hadera Hashgraph is the backbone of Dropp. In a payment system, there are ledgers, and we are using their network. Dropp uses their network, and we are very familiar with them, so we use their network to store all the transactions. One of the reasons we pick them is because they are secure, but they’re also their throughput. The speed at which transactions flow is 10,000 transactions a second, and this is just now, and this is going to become more. Its throughput is very high, and its transaction cost is meagre.
I can afford all these microtransactions because the transaction cost is meagre on Hadera Hashgraph. We’ve been working with them and what they have offered us is a grant for customer acquisition. Dropp will provide every new customer $5 in their wallet as an incentive to use our wallet. Every FinTech company needs to give people an incentive. Starting in May, any new customer who downloads your wallet is beneficial to merchants, too, because they get that money. The significant grant is going to be the lift-off for Dropp. You download the wallet, and you get a $5 credit which you can use in any currency, whether you pay in crypto or if you paid US dollars. It’s a big announcement. These are the kinds of events that most FinTech small companies look for a more comprehensive exposition. I think we will be able to get a lot of customers to sign up, and the merchants will be happy because we are offering an incentive to use Dropp with this.
In the digital economy era, what, according to you, is the future of payments in FIAT and Cryptocurrency?
The industry that we are focusing on, microtransactions, is an industry that people have talked about for the last 20-25 years. You would see renowned people have spoken of microtransactions, and Microtransactions have been an unmet need, mostly from consumers. You would see more and more players offering two things real-time payments and microtransaction or small value. Small value purchases or smart value transactions will continue to see more and more of that.
The second thing, we also believe that as real-time payments, real-time transactions, and microtransactions become significant, the cost of a transaction will keep going lower. Like Dropp and everyone else, payment systems will have to offer more innovations to merchants and offer different services to merchants for a merchant to be successful. It could be as simple as what we have done in Dropp, where if you use Dropp to buy, let’s say, a piece of content, and you share it with your friend. But if they buy it, the merchant now can give you a referral fee. It’s a little innovation that we introduced.
We also have the option of a merchant who doesn’t know who you are, but they know you bought an article. They can send you a coupon and an offer. So we are offering all of these services.
We think that in the next five years, the transaction fees in payments will keep lowering. But all these payment merchants are still going to be around, and it’s going to be by offering more and more other services to the merchant, and that’s how they’re going to survive.
Three things we think that the microtransactions or the micropayments industry have just started. Every digital merchant who can unbundle the services will begin using them. There will be a lot of pressure, specifically on the credit card networks. The second is that real-time payment is here and it’s coming and it’s going to be in every part of the world. And the third thing we think is the cost of a transaction of moving money from point A to point B will keep going down. And if you want to see history, look at trading fees, you know when you trade, when in the 90s, when we used to trade it used to cost us $40 a trade. Now it is zero or hardly anything. But they’re all making money. They’re making money in other ways.
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