This is yet another “delayed post” – one that I thought up some two weeks back but am getting down to write only now.

After some posts that I’ve done recently on the payments system, I decided to check out some of the payment apps, and installed Chillr. This was recommended to me by a friend who has a HDFC Bank account, who told me that the app is now widely used in his office to settle bills among people, etc. Since I too have an account with that bank, I was able to install it.

The thing with Chillr is that currently they are tied up with only HDFC Bank. You can still sign on if you have an account of another bank, but in that case you can only receive (and not send) money through the system. So your incentive for installing is limited.

Installation is not very straightforward since you have to enter some details from your netbanking which are not “usual” things. One is a password that allows you to receive money using the app, and the other is a password that allows you to send money. Both are generated by the bank and sent to your phone as an SMS which the app automatically reads. I understand this is part of the system itself and this part won’t go away irrespective of the app you use.

Once you have installed it, you will then be able to use the app to transfer money to your contacts who are also on the app without requiring to know their account number. The payment process is extremely smooth with an easy to use second factor of authentication (a PIN that you have set for the app, so it is instant), so if more people use it, it can ease a large number of payments, including small payments.

The problem, though, is that it is currently in a “walled garden” in that only customers of HDFC Bank can send money, and hence the uptake of the app is limited. The app allows you to see who on your contact list is there on the app (since that is the universe to which you can send money using the app). The last time I checked, there were four people on the list. One was the guy who recommended me the app, the second was another friend who works in the same organisation as this guy, the third a guy who works closely with banks and the fourth a Venture Capitalist. And my phonebook runs into the high hundreds at least.

In terms of technology, the app is based on the IMPS platform which means that in terms of technology there is nothing that prevents the app from transferring money across banks using its current level of authentication. This is very good news, since it means that once banks are signed on, it is a seamless integration and there are no technological barriers to payment.

The problem, however, is that the sector suffers from the “2ab problem” (read my  argument in favour of net neutrality using the 2ab framework). Different tech companies are signing on different banks (Chillr to HDFC; Ping Pay to Axis; etc.) and such banks will be loathe to sign on multiple tech companies (possibly due to integration issues; possibly due to no compete clauses).

Currently, if HDFC Bank has $a$ users and Axis Bank has $b$ users, and they use Chillr and Ping Pay respectively, the total value added to the system by both Chillr and Ping Pay is proportional to $a^2 + b^2$ (network effects, Metcalfe’s law and all that). But if these companies merge, or one of them gets the account of the other’s bank, then you have a single system with $a+b$ users, and the value added to the system by the combined payments entity is $(a+b)^2$ which is $a^2 + b^2 + 2 ab$. Currently the sector is missing the $2ab$. The good news, however, is that there are no tech barriers to inter-bank payments.

Postscript: The title is a direct translation of a popular and perhaps derogatory Kannada phrase.

## One thought on “No Chillr, Go Ahead”

1. Hey.. Great to know you liked Chillr. We are launching with 3 more banks in the next 2-3 weeks. I’m sure you must have figured that already you can send money to customers belonging to more than 65+ banks, though those customers can’t send you back money unless they belong to one of our partner banks.