Real-Time Payments & Fraud Management Summit Recap

Written by Bella Clemente

November 22, 2022

 Dropp was very happy to have participated at the Real-Time Payments & Fraud Management Summit on Friday, November 18 organized by Kinfos.

We had insightful discussions on instant payments, pay-by-bank services, authorized credit push, and real-time fraud detection. Meeting and hearing about trends and challenges from The Clearing House, FedNow, and many other institutions was very helpful.

Watch Dropp CEO Sushil Prabhu presenting on The Future of Micropayments at the Summit, below:

Video Transcripts:

Speaker 1 (00:00)

Our next speaker is also one of our sponsors, Sushil Prabhu, who is the Chairman and CEO of Dropp with two P’s. I’m sure he’ll tell us what Dropp does. He’s going to be talking about the future of micropayments.


Sushil Prabhu (00:17)

Thank you. Thanks. Thanks. Thanks for attending. My name is Sushil Prabhu. I’m the CEO, founder of Dropp, a micropayment platform. What I want to focus on in the next 15 minutes is just give you an overview of the micro payment sector itself. Is the mic on the mic? Hello? Can you hear me? Okay, sorry. I’m Sushil Prabhu. I’m the CEO of Dropp, founder of Dropp. In the next 10, 15 minutes, what I want to do is focus on the micropayment sector. A lot was talked about in the morning, and I love the panel in the morning about real-time payments, instant payments right now. There were issues about authorized credit payments, privacy. All of those are very relevant issues and they need to be solved, and we’ve tried to solve in our platform, and I’m going to share that at the tail end of the presentation about Dropp. But I really want to focus on the sector micropayment.


Sushil Prabhu (01:31)

What’s the need in the market? What are the solutions out there? And why we think that banks, specifically banks and real-time payments, could hugely benefit from it and could probably be the organization that they can provide a solution for micro-payments. Micro-payments is not a new concept. It’s been talked about for the last 10, 20 years. There’s been numerous attempts in the last 20 years to build micro-payment platform. Almost most of them have either because of technology reasons or because of lack of demand, is micro-payments did not do well. Most recently, there was an attempt to build micro-payments using credit cards, and there was attempts to build it in crypto and it didn’t work. But one thing is very clear that the future of micro-payment is not based on credit cards and nothing against the credit cards. We actually are talking to credit card platforms. It’s just the transaction fee makes it economically not feasible to use the credit card network. That’s the gap. There is a gap. There is the opportunity. That’s where the banks can get in. That’s why I really love the session in the morning about instant payments and pay by the bank because really that’s where the market is headed right now when it comes to small value purchases.


Sushil Prabhu (02:59)

Just in terms of the volume, how big is the market? When we talk micro payments, people always think about nickel and dimes and people don’t look at the market as a big. It’s a pretty big market. This is one of the Fed surveys, 50% of the consumer reported payments are under $25. I was surprised myself when I saw this report. There’s every year the Fed comes out with these reports and consumer reports. This was, I think, was from 2020. I think in the last three or four years, these numbers have increased. 50% of the payments are under $25, and out of that, 30% to 40% of the payments are made in credit cards. During the pandemic, that number most probably has gone up because less people are using cash. Cash is still there. People still make cash payments. But the rest of the crew, anyone who has a credit card uses a credit card. It’s very convenient for consumers, not convenient for merchants because the merchants end up paying a much higher transaction fee, and if they accept cash, it just security is an issue when you accept cash. When it comes to digital merchants, cash is not an alternative.


Sushil Prabhu (04:09)

When it comes to small payments, like if you had to use PayPal, just give it that as an example, you end up paying 52 cents on a dollar. It’s economically just not possible to sell something small on the digital network. This need of micropayments is a lot more severe when it comes to the services market. Here I have an example of a newspaper publication where the only way digital services can be sold is either you make it free and put ads on it, or you can sell it by subscription. Most consumers are just tired of subscription. You might subscribe to New York Times, maybe Wall Street Journal, you can’t subscribe to every newspaper out there in the world. That’s just one digital services. You think about everything from music, streaming, video, almost every digital services out there is sold on subscription. The issue with that is consumers are tired, they have an appetite for small purchases, but not for a flat fee subscription. The merchants can’t sell it. You can’t sell an article for 10 cents. There is no cost-effective way in the market right now to accept small payments. I just want to quickly define… I’m rushing because I only have 15 minutes, but I just want to quickly define micro payments.


Sushil Prabhu (05:29)

I get asked this question a lot. There doesn’t seem to be a clear definition on it. It depends on who you ask. If you ask the consumer, any purchases that they don’t have to think twice is the answer that you get. It also depends on the options. If the option is I pay $10 a month to get New York Times as opposed to I can buy something for 10 cents, I’ll make that purchase. Really, the answer is in the gray area for some reason, for me paying $5 as opposed to paying $20 to get Netflix for a day, I would go with it. It really depends on the context. But with merchants, it’s very clear. Any transaction where it is low enough for it to be… The transaction fee is low enough for it to be economically feasible. If I have to pay 50 cents to sell you something for a dollar, that’s not going to fit into the micro payments. The merchants really don’t care what is micro payments. What they really care is, is it going to be economically feasible? To Dropp the micro payment platform that we launched, we define it as anything under $10 falls into the micro space.


Sushil Prabhu (06:43)

There are definitions out there, people say under $25, but clearly if you compare it with credit card network, anything under 10 becomes a fair game, becomes a micro payment. Now, I want to talk about what’s out there. What are the opportunities for micro payments? Let’s just talk about… In the morning session, we were talking about the gig economy and many of this, and I think that’s spot on. There’s about 50 million creators. The creator economy consists of 50 million creators and maybe more. That’s the number from last year—and most of these creators are independent workers. They are artists, they are bloggers, they are podcasters, they are videographers, you name it. I mean, all of them. Most of them have either an art, an article, a music that could be sold and you could buy it for 10 cents and 20 cents, but there is no microprocessor or micropayment processor to process that. The only option that they have is to use services like YouTube, Apple, whatever services out there where they make a lot less. There’s a need for many of these independent workers to make that money instantly. That means they need that cash as soon as they get.


Sushil Prabhu (07:59)

In our product, we say what if there’s a potential for every like, every like which an influencer or artist gets, it could be a potential payment. If you think about the convert the likes into payments, the artists will be able to sustain themselves. This is the most low hanging fruit out there in terms of micro payments, and we are enabling that right now, which is micro bloggers, micro payments. But just digging a little deeper in the digital services sector, we normally talk about paper use, but there is micro donations. If you ask me to put in $20, I’ll think about it, but I’ll donate a dollar if I is interested in a cost. There is a large amount of appetite to buy something in small bites. But there is no payment platform that can process that. If you look at paper use, micro-donation, recurring payment, micro-subscriptions, micro-royalty, this is another sector. If you’re an artist and if you have a music on, let’s say, I’ll just pick Spotify, it takes them 90 days to pay you. Why can’t they be paid instantly? This is where instant payment, real-time payments. That payment could be really 10 cents because you bought a dollar music from them, and it could be just be 10 cents.


Sushil Prabhu (09:31)

But that payment could be made instantly. There’s a lot of these use cases that are buried under… Because credit card payments have a higher transaction fee, and in some cases, because there is no instant payment, these payments happen 90 days a week. Micro royalty is something. As we launched our product, we found more and more of the creator economy folks come to us talk about royalty, which we didn’t even know there was such a big sector out there that royalties get paid 90 days if they get paid. Cash flow is a big issue. I think I’m really glad that instant payments or real-time payments would be a good solution. Our focus here is the small payments. Because the small 10 cents that you make at some point it becomes $100 and then you make that payment. In terms of the digital sector, some of them are very obvious: video streaming, digital publishing, music, but it’s also in the cloud space. When I talk about small bits and bytes, I also mean bytes, meaning BYTs, small cloud data can also be sold, cloud API can. It’s really not just you renting a scooter or buying a video.


Sushil Prabhu (10:41)

It’s anything that’s offered on the internet. If it can be fractionalized and it could be …, you could sell it using a micropayment. There is a huge amount of appetite. According to us, this is like the next frontier for the digital economy in terms of monetization. Right now, there are only two ways to monetize: digital ads and free and subscription. I think micro payments and the paper use is going to be the next one. One last in terms of demand, in terms of what’s out there. We talk about IoT devices. People talk about that all the time. It’s been going on for the last 10, 15 years. But now it’s come to a maturity where these devices do talk to each other. We’ve been working with connected devices companies. Just to make it a little bit simpler here, take an example of a connected car. Many of the cars, electric cars are nowadays connected. It doesn’t have to be electric, but they’re connected. A car, a device paying for parking, a device paying for EV charging, and a device or a car getting paid for sharing the data. This is a smart city, smart grid solution out there that we’re working on where it’s not that you have to pay, you can also get paid using the same platform.


Sushil Prabhu (12:02)

It could be just 10 cents for sharing the data while you were driving in New York City. There are all these use cases, and they all look like payments and they are payments, but they are micro payments and the requirements are slightly different. In some cases, you need to do device authentication as a part of your device, as a part of your payment thing. Most of them are fractional payments. Some of them have to have location data. They all look like—and I’m just going to go to the next slide very quickly. They all are micropayments. But the micropayment requirement is a little bit more than the general payments. One is one of them, which is privacy. We believe that you’ll be making 10, 20 transactions a day, maybe more, because they are 10-10 transactions. Privacy is going to be a lot more important because you don’t want to share your credentials with 10, 20 merchants whom you have never met or you probably don’t know them. You don’t want to share that. Privacy is going to be very, very important, a lot more important than when you buy something on Amazon or any other places.


Sushil Prabhu (13:07)

That’s going to play. The second is the sub-second response. It’s not that the credit card network or other networks don’t give you that, but this is going to be more important. When your car is paying for the toll, when your car is paying for the charging, the response between the two devices has to be instantaneous. It has to be seconds or sub-seconds. Finally, the user experience, and I think one of the panel suggested that the user experience has to be as frictionless. I’m going to share one user experience of making a purchase. Right now, when you purchase anything on the—and this person is purchasing an article, typically you have to share your credentials. You got to put in your credit card details and all of that stuff you got to do. You’ve shared it with the merchant. Even if it’s tokenized, you’re sharing it. In this case, that’s not how it’s going to work. When I’m paying 10 cents, my patient is going to be a lot less, a lot lower. It has to be instantaneous. It has to be frictionless, but it has to be really secure. In this case, the user is browsing the net.


Sushil Prabhu (14:14)

They came across an article, they’ve not signed up. It’s not that you’ve signed up, the merchant doesn’t know you. You clicked on, pay five cents for that article, and you authorize that payment, and that article became yours. It really has to be just one click, or in some cases, automated, where you said that you trust New York Times. When I click on Pay, that article becomes mine. The sub-second response, the frictionless response, these are really nice to have right now. With micropayments, these are real needs or as it won’t work. Because think about micropayments as the next best thing compared to free. Free is powerful. When you buy something for free, you don’t have to think about it. You just click on it. This has to be the next best thing. It can’t be as good as free. But the merchants have to make money, so they got to charge you. But the experience has to be, and this is just one experience, there are other ones which we’re working on where it just happens. It’s taken out, you’ve authorized it, and then… That’s what we think the new sector is. I just want to share a platform we launched called Dropp.


Sushil Prabhu (15:32)

It’s a micro payment platform. We can accept payments as low as a cent. Right now, you can’t even accept a payment as low as a dollar without losing money. In this case, we can accept payments as low as a cent, even a fraction of a cent is a use case that we’re working on. But we normally advertise this as low as a cent. We can go all the way to a million dollars. Nothing, but our focus is right now micropayments. Instant payments to merchants. Merchants need a notification right away. We can make payment both in Fiat and digital currencies. In Fiat is US dollar. It’s a multicurrency ledger is what we’ve built. We are also going to be launching in UAE, so it’s in Derham. It’s multicurrency. But we also accept payments in USDC, which is a stable point. But the more important thing is the consumer is in complete control. None of the credentials of the consumer is shared with the merchant. They do an authorized credit push, and we believe in that authorized credit push, and every transaction that you do is signed. I want to share the architecture in a second, but it is signed, it’s digitally signed, it’s extremely secure and the consumer always remains controlled.


Sushil Prabhu (16:49)

It’s not like you’re debiting someone’s account. It’s paid by you. The transaction is paid by you. The platform is about 10 times on a dollar transaction. In general, we are cheaper than most payment systems, almost all of them. But if you compare it with a credit card or PayPal or Stripe, we are about 10 times cheaper because it’s specifically meant to enable monetization for the digital market. Very quickly, how did we achieve this? Two sets of technology. On the back end, we use distributed ledger technologies. People call it blockchain, but this is a true distributed ledger technology from that we use. It’s got a very high throughput. We can do 10,000 transactions a second. Why do we use distributed ledger? Well, for security. There’s a proof of transaction maintained in this ledger. When you sign up with us, every consumer and a merchant who signs up gets a wallet. Wallet is an account in the blockchain. You get assigned a digital signature. That’s your signature. No one else other than you have access to it. All the transaction flows in the systems are signed. Anything else is not honored. All of the transactions are fine.


Sushil Prabhu (18:08)

It’s really a real-time payment, but we call it authorized credit push. When you say pay, you basically using your chip on your mobile or if you’re using a browser, you’re actually signing the document. When a merchant sends us a request saying, Pay this person, they have to sign it. It’s all using digital signatures, and that’s why we use the Ledger technology. We have an entire platform that does everything from payments. A merchant can actually send you a coupon. They don’t know who you are, but they do know that you bought something from them. You bought a television show and they don’t know exactly, but they don’t have any idea who it is. It’s not anonymous, it’s private. We know who you are. It’s a closed loop. I know you and I know the merchant, but the merchant would not know. There is no way for a hacker to hack into the merchant and get your details, which is where most of the fraud happens. Fraud, reduction of fraud, reduction of chargebacks, these are really important thing. Then we use the ledger technology as a ledger itself to reduce the cost of the transaction. We are currently working…

Sushil Prabhu (19:16)

It’s right now using ACH. We are currently working with the bank to enable RTP, and that’s the reason why we’re here. Initially, most of the merchant disbursement will take place to RTP. Then the RFP conversation was very good today because we’re going to enable that. If a transaction is, let’s say, $20 and you don’t have enough money in your wallet, it is an intelligent routing, it will automatically collect that money from your bank and then transmit to the merchant. This has been going on. Lately, we’ve been working with banks to embed this technology in a bank. Banks that are interested, because this is a retail-centric app to enable payments using ACH and now very soon using RTP. This is a technology that banks can embed very easily. If they want to offer a private-labeled or bank-labeled, or-branded, mobile app. We also have a point-of-sale. You can just download that and start taking payments. We have an e-commerce plugin, which the merchant has to put. We have the entire set and then we integrate with the bank. When banks want to offer an embedded payment system, their own payment system to bring buyers and sellers together, we are now offering that solution.


Sushil Prabhu (20:40)

That’s a… I was making sure that I didn’t… Okay, four more minutes. If you have any questions, please, I would take it.


Question (20:54)

Shashil, this way, you could probably, if you were a bank, right? Yeah. You could offer your consumers the wallets, bank-ran the wallet and bank-ran the merchant wallet as well. From a bank’s point of view, they’re offering real-time payments without very small-


Sushil Prabhu (21:15)

With very little work, yeah. There’s some work left, but you could get a payment system in 90 days when you don’t have one. Yeah, absolutely. We can use our ACH rails or RTB rails or if they have an ACH of most banks have it, we’ll use theirs. Yeah, we got to talk to Fed. Any questions at all? Okay. Thank you.

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