Cracking customer retention through PPIs – III

Jul 15, 2022

This is the third and the last part of the series “Cracking customer retention through Pre-paid instruments (PPIs)”. This blog will go through difficulties that the brands must overcome before integrating PPIs into their ecosystem.

In part 1 of this series, we explored the benefits associated with incorporating PPIs while in part 2 we analyzed the lingo behind the recent regulatory developments in the PPI landscape and identified how they resembled the banking industry's 2007–2009 events.

Do find the Ist part of the series here & the IInd part here

PPIs are a modern tool that are subject to regulatory changes. 

  • Brands must abide by these rules in order to maintain the PPIs. 

  • Many firms that relied heavily on credit extending operations as a key element for customer acquisition & retention have been negatively impacted by recent developments enacting restrictions on their business model.

PPI integration entails significant related expenditures. The instrument is regulated by the government agencies and any further unfavorable regulatory influence may yield negative unit economics.

The regulatory environment's challenges are merely the tip of the iceberg.

What benefit does a small PPI with a transaction cap of Rs. 10,000 for consumer durable brands whose AOV (average order value) is far more than Rs. 10,000?

Going back to the first blog in the series, we discussed how convenience-driven PPIs influence customer behavior, but this convenience has its limits. As the class of PPIs upgrades to accommodate higher order values, their convenience declines.

  • Would a customer go through a 15 minute KYC process to get KYC verified even after the availability of other convenient payment methods, for transactions over Rs. 10,000? 

  • Imagine the endless process given the number of brands any customer purchases from. 

  • Additionally, the fact that cash is still the primary method of payment highlighted in the recent Times of India article reduces the merits associated with PPIs.

Consumer attitude is driven by convenience. But from the standpoint of the brands, there is a convenience vs. value dilemma.

  • The typical operational cost for third-party PPI connections are between one and two percentage of the overall gross transaction value (total amount of transactions through the platforms). 

  • By extending the use case to low margin industries like grocery and stationery, PPI transactions may cost more than the margins. 

However, PPIs are still being adopted in such business, on account of technological developments aimed towards reducing the implementation costs and enhancing the value generated. 

Technology has made adoption simple but it does come with limitations: 

  1. Lack of infrastructure: What happens, while one is paying from the E-wallet and the phone isn't charged?

  2. Security Concerns: Many people have been discouraged from mass adoption due to security-related issues. Brands must increase consumer trust in their payment systems in light of the rising number of online frauds. 

Further, security concerns have been a significant driving force behind regulatory improvements such as regulations pertaining to ' storage of customers' personal financial information’.

Internal security guidelines can be established by the companies such as implementing SSL certifications to enable data encryption.


Companies must understand the principle of positive unit economics i.e. creating more value than was invested into these instruments. And that comes with careful due diligence of the associated benefits and challenges. While PPIs help brands retain customers and lower the cost of customer acquisition, it requires companies to overcome all the obstacles presented by the PPI landscape.

Author(s) :
Kanuj Jadwani