With NRAI’s blessing, this fintech start-up is dreaming big. Should restaurant aggregators be worried?

DotPe’s contactless payment solution is just one of the many that will digitise retail 

When the PM-promoted digital wallet was getting Indians used to scanning QR codes to make payments, little did we know that within a few years, we would be ‘QR-coding’ menus in restaurants. With ‘contactless’ becoming the new norm in a post-Covid world, dining out is set to become an entirely different affair — servers in PPEs, diners in masks and gloves, sanitisers on every table and a reduced chatter through 3-ply cotton masks. Naturally, all players are jumping in to make the most of these changing habits. Zomato and Paytm have recently announced they are introducing contactless in-store solutions. But, a small fintech company has already beat them to this race.

Meet DotPe — a fintech company founded in 2019, by former PayU co-founder Shailaz Nag with colleagues Gyanesh Sharma and Anurag Gupta. The start-up has on boarded 7,000 outlets across six major cities and is in talks with another 5,000 (See: Touch me not). A few of them include Starbucks, Barista, Haldiram’s, Smoke House Deli, Chili’s and The Social.

Easy solution

With an aim to provide retail tech to offline merchants, Nag and his co-founders decided to offer more than regular billing software. From their experience at PayU, they understood the merchant ecosystem’s concerns and realised that most merchants had basic understanding of the e-commerce marketplace (just Amazon and Flipkart) at a time when WhatsApp had wide adoption (of nearly 400 million users). They sensed an untapped market potential. Therefore, they raised $8 million in seed funding from Fosun Group and Info Edge Ventures.

First, they approached the restaurateurs to integrate their menus on to their portal that bundles most payment options such as Google Pay, Facebook, Paytm and UPI. Essentially, all a consumer has to do is scan a DotPe QR code at a restaurant to get its menu, select items, add to cart and pay via credit card, debit card, net banking or UPI. Once a consumer has used the solution at a restaurant, the next time, they can just connect with the restaurant over WhatsApp and get food delivered. Thus, it cuts off the middlemen Zomato, Swiggy or Dineout, allowing the merchants to take control of the customer’s ordering and payment preferences data. Moreover, to make it more attractive for their clients, DotPe has kept a flat transaction fee of Rs.1-1.5 on every order, shares Katriar, irrespective of the size, since it is not an aggregator but just a B2B platform. “COVID-19 has boosted digital payments. From a pricing model perspective, charging a flat fee makes sense instead of unit pricing, if you are expecting high volume. You still end up profiting,” says Arnav Gupta, analyst-digital business strategy, Forrester.

Compare that with the 20-30% that the food aggregators seek and 5-15% on dine-in through apps such as Dineout and Zomato, and you have a clear winner in DotPe. Not to mention the huge #Logout movement, which was an expression of the anger restaurateurs felt. So, even though the hospitality industry has been severely hit by the pandemic, DotPe has reason to be optimistic.

What set the ball rolling was NRAI (National Restaurant Association of India) partnering with the company in May, encouraging its members to sign up. The cost benefit is huge, points out Anurag Katriar, president, NRAI and CEO, deGustibus Hospitality. He explains, “At a restaurant level, the average order size for Zomato or Swiggy is approximately Rs.280. On an average, we pay 20% commission, which will be Rs.56. But, if it becomes Rs.1 and I use my own delivery executive, I save a lot. Even if I want use logistics services, it will cost Rs.30 for 30 km.”

It’s interesting to remember that the association was spearheading the #Logout movement against high commission fees and steep discounts that food aggregators were demanding. “The ‘digital landlords’ or the aggregators offered problematic terms — they wanted a percentage of sales, forced users to use their payment gateway, but kept the data to themselves. DotPe solved all three issues,” says Katriar.

Rajat Agrawal, COO, Barista Coffee Company agrees. One of the early adopters of DotPe’s solution, he says, “Unlike food aggregators, we now know which customer has ordered what from where. We also have their phone numbers, which would stay with the aggregators earlier.” Almost 15-20% of total transactions were done via DotPe since the stores reopened in mid-May. This, he believes, will help them understand their consumers better, build better products and execute targeted marketing campaigns. Plus, he adds that they can also manage cash flow better now.

Gauging competition
One cannot deny that this system works well for both the restaurants and consumers. While restaurants can now decide how much discount they want to offer and how they want to price their items, consumers do not have to go through a third-party app that lists inflated prices and then lulls them into thinking its giving great discounts. But, on the other hand, DotPe has just started taking baby steps. It does not even come into a consumer’s life until he or she has walked into a restaurant that is on DotPe’s portal, whereas players such as Zomato and Dineout have a ready customer-base.

Dineout has also been running a separate B2B operation through InResto, which it acquired in 2015. Similar to DotPe, this start-up provides tech solutions to more than 20,000 clients and contactless dining solutions to 10,000 restaurants. It manages supply chains, POS and even loyalty campaigns. Ankit Mehrotra, founder and CEO of Dineout, adds that they charge a flat fee of Rs.2/transaction. “Hospitality industry is very large with 1.7 million restaurants and one fintech player can’t cater to all. For a new entrant, DotPe is doing well but they aren’t the first ones in this space,” he adds and shares that they recently closed a deal with DLF Mall, where all 400 restaurants on DLF properties will use Dineout’s backend solutions.

Mehrotra believes that his customer-facing app would give him a better footing against DotPe. One of the key features it offers is that customers can place their order with a restaurant while they are on the way. “The restaurants can keep the food ready instead of having the diner wait for 45 minutes or more. Both parties save time and restaurants can achieve faster table turnaround time. This is especially needed now when they are working at half the capacity,” he says.

The other player DotPe is up against is the oldest hand in this game — Zomato, which has onboarded 30,000 restaurants that will use its contactless dining solution. Interestingly, both Zomato and DotPe have a common investor Info Edge, which holds a major stake in the former’s business. Sanjeev Bikhchandani, founder and executive vice-chairman of Info Edge, says, “Both companies have different business models even though there may be some synergies. We discussed the investment with the founders of both companies individually before going through with it. Zomato is a foodtech business whereas DotPe is a fintech play.”

Nag, who isn’t concerned about competition from these players, explains how they differ from food aggregators and other fintech companies. For one, they are building consumer demand through commerce and then integrating fintech solutions. “If I have only payments at a merchant, I can only look at lending. But if I have commerce with payments, I can offer much better products because I know what the consumers are buying, their pattern and payment mode,” he explains. Second, they are not just a player in the food industry. DotPe has already started working on expanding their solutions to segments such as groceries, pharma, healthcare and retail (apparel).

Forrester’s Gupta believes there is opportunity for them to grow in the SMB (small and medium-sized businesses) space. “There is a lot of scope in tech solutions for digital invoicing and payments, which would digitise finance, supply chain finance and trade finance. These are primarily offline right now,” he says, but adds that it is going to be a tall task since each enterprise will need customisation according to its business structure. 

Even in the case of restaurants, retaining and expanding customer base will be crucial, especially since consumers are used to ordering through the likes of Zomato and Swiggy. If something goes wrong with an order, the restaurant has to take a hit if it is serving through DotPe. This onus right now falls on the aggregators. For now, the team is betting on volume growth to at least make a small dent in several competitive industries.

Bikhchandani is confident about the experienced team. “They are helping businesses maintain records, engage with their customers and digitise their operations,” he says. It certainly is a timely bet, in sync with changing consumer behaviour. As long as DotPe can stay differentiated for both businesses and customers, the company and its investors believe they can ride the COVID-19 ‘contactless’ wave for quite some time.