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The payment gateway ecosystem in India is a huge market to capitalise upon. The firms participating in this industry require a reliable system and robust mechanism of logistics and financial compliance at every stage. Today, Razorpay is one of the leading internet-based financial solution providers revolutionising the fintech space with groundbreaking innovations.

From days of justifying every payment the company made for essential items from its college seed fund to raising millions and becoming members of the coveted unicorn club, Harshil Mathur and Shashank Kumar of Razorpay have come a long way.

In today’s article, we throw light on how Razorpay has been rising up the charts to emerge as a dominant name in the Indian fintech space.

Razorpay’s Origin

In 2014, Kumar and Mathur met at IIT Roorkee when the duo decided to work on a crowdfunding platform. However, they realised that online payment was a problem for small & medium-sized (SME) businesses, especially e-commerce platforms. Thus, they created Razorpay to address this issue. The idea of Razorpay was to offer a simple payment gateway platform for startups/SMEs.

The platform provides access to several online payment methods for business entities, including credit & debit cards, net banking, and UPI. They charge just 2-3% for each transaction. It also supports many leading wallets in India, including JioMoney, Mobikwik, Airtel Money, FreeCharge, OlaMoney, and PayZapp. Razorpay provides a comprehensive dashboard for handling payments for users and is applicable for both web and mobile applications.

The dashboard has various products, namely Razorpay Route, Razorpay Smart Collect, Razorpay Subscriptions, Razorpay Invoices and Razorpay Capital. These products handle tasks such as cash flows, disbursement of money, and automating electronic fund transfers. Razorpay also collects scheduled payments and supports businesses with instant loans to help them resolve cash flow issues. They also offer smart payroll software to manage and automate employee salaries.

Oyo, Cred, Facebook, Flipkart, Zomato and Swiggy, Byju’s, Zilingo, Yatra, Goibibo, and Airtel are some of Razorpay’s most prominent clients! Even marketfeed has been using its payment gateway and payroll services since 2020!

Razorpay’s Latest Funding Rounds

In October 2020, Razorpay obtained $100 million in a funding round headed by Singapore’s sovereign wealth fund GIC and Sequoia India. With this funding, Razorpay joined the exclusive batch of unicorn startups from India. It raised $375 million in a Series F round in December 2021. In May 2022, the firm announced its fourth liquidity event for Employee Stock Ownership Plan (ESOP) for $75 million.

Ribbit Capital, Tiger Global, Y Combinator, Matrix Partners, Singapore’s GIC, and Sequoia India are the platform’s leading investors.

At $7.5 billion, Razorpay is currently India’s most valuable fintech firm!

Razorpay’s Acquisitions

In 2019, Razorpay announced its first acquisition of Thirdwatch, an AI-powered company specialising in big data to reduce return-to-origin and fraud orders for e-commerce businesses.

It also acquired cloud-based payroll management startup Opfin in 2019. The acquisition allowed Razorpay to roll out a new HR automation product, primarily for the payroll process. It also complemented RazorpayX’s B2B banking product, which is a neo-banking platform targeted at businesses and corporates.

2021 – Acquired TERA Finlabs to strengthen its B2B Credit Infrastructure.

2022 – The company made an international foray and acquired leading Malaysian fintech startup Curlec to transform the payments ecosystem in Southeast Asia.

Purchased a stake in payments tech startup IZealiant Technologies to build industry-first solutions for banks to create a world-class payments experience for their businesses and customers.

Razorpay acquired Ezetap to build a full-stack omnichannel payments solution.

Ventured into Loyalty and Rewards Management with the acquisition of PoshVine. The acquisition was made to enhance the offline shopping experience for customers by integrating PoshVine’s loyalty and reward offerings on its point-of-sale network.

Peer Analysis

Razorpay faces heavy competition from PayU, Paytm, PayPal India, CCAvenue, BillDesk, Instamojo, and many more. These firms aim to increase their market share by forming multiple partnerships, investing in projects, and launching new products. The market is highly concentrated with various small and large players.

(Razorpay’s market share in the Banking category. Source: Slintel Report, Oct 2022)

Razorpay’s Strong Growth

The platform has close to 80 lakh merchants who are primarily small & medium enterprises (SMEs). This figure is expected to reach 90 crores1 crores as the industry matures.

With an annual payment processing volume of roughly $80 billion, the business has a solid opportunity to overtake rival PayU as the leading online payment processing platform.

The company clocked revenue of ₹1,484.4 crore in FY22 along with a profit (undisclosed) as per unaudited financial reports.

Over the past years, Razorpay has expanded beyond digital payments. In just four years of its launch, RazorpayX and Razorpay Capital, the company’s lending arm and neo-banking division, have already contributed 30% to its total revenue.

With the Curlec acquisition, Razorpay is looking to expand its core payments services to markets in Malaysia, Indonesia, Thailand, the Philippines, etc.

As a result of its strong product and technology stack, Razorpay was also voted as The Economic Times Startup of the Year 2022.

Razorpay’s Mission

India’s payments space has seen increased activity over the last few years. Consumers are changing their preferences for making online payments as a result of increasing internet penetration and awareness about the ease of online transactions. Razorpay’s mission and vision lie in the objective of making payments easier; making it super-simple for businesses to accept and receive payments. By strengthening its focus on the web and consumer categories through additional acquisitions, Razorpay has been working to establish itself as an omnichannel payments operator.

The company’s razor-sharp focus on creating start-up offerings has helped them grow substantially. Its focus now lies on increasing market share in India and building a base in the South Asian payments market.

With larger offerings like upgrading neo-banking platforms and smaller ones like introducing multilingual checkout pages, do you think Razorpay looks ready to dominate the global payments space? Let us know in the comments section of the marketfeed app!

As India moves towards building an extensive digital society, there is a requirement for multiple players to be involved. The RBI has run many experiments in the digital payments space in India, including licensing exclusive payments banks and setting up white-label ATMs. They have now come up with a new concept— New Umbrella Entities, which is set to revolutionise the payments industry. A large number of companies have reportedly applied for New Umbrella Entity licenses for payment systems. Let us have an understanding of what NUEs are.

The Current Scenario

You may be familiar with payment or settlement systems such as the Unified Payments Interface (UPI), Aadhaar Enabled Payment System (AEPS), RuPay, FASTag, etc. These are all managed and operated by an umbrella entity known as the National Payments Corporation of India or NPCI. It is a non-profit entity that is promoted by the Reserve Bank of India (RBI). The NPCI is owned and managed by a consortium of major banks, including State Bank of India, Punjab National Bank, Canara Bank, ICICI Bank, HDFC Bank, and many more.

Recently, many prominent players in the payments space have indicated the various disadvantages or challenges faced by NPCI. It is now the only entity that manages all of the retail payment systems in our country. As more citizens are using online payment platforms, the volume of transactions conducted every day has risen exponentially. In February 2021, the NPCI admitted that they were facing structural and technical issues. According to reports, investors could not get mutual fund (MF) units they purchased on time due to a problem in the settlement system operated by the NPCI.

The RBI has now envisioned a plan to allow more private players to set up umbrella entities for payments systems. This would promote competition and lead to further development of the payments landscape and network in India.

What are New Umbrella Entities?

New Umbrella Entities (NUEs) will be a non-profit entity that will set-up, manage, and operate new payment systems such as ATMs and white-label Point-of-Sale (POS) systems. It also includes Aadhaar-based payments and remittance services. NUEs will develop the standards and technologies for these payment systems. They will operate clearing and settlement systems, identify and preserve the integrity of the system. These entities will also manage relevant risks such as settlement, credit, liquidity, and operational risks.

NUEs will monitor retail payment system developments and related issues in India and internationally. This is to avoid shocks, fraudulent activities, and cyber threats that may adversely affect the financial systems and our economy as a whole.

Framework Related to NUEs

As per RBI guidelines, only those entities that are owned and controlled by Indian citizens (residents) can become promoters of NUEs. They should have at least 3 years of experience in the payments ecosystem.
The umbrella entity should have a minimum paid-up capital of Rs 500 crore.
The shareholding pattern should be diversified. Any entity holding more than 25% of the paid-up capital of an NUE will be deemed as a promoter.
No single promoter or promoter group should have more than 40% investment in the capital of the NUE.
A minimum net worth of Rs 300 crore should be maintained at all times.
An NUE should conform to the norms or regulations of corporate governance. The RBI retains the right to approve the appointment of directors and members of the board of an NUE.
Foreign investment is allowed in NUEs as long as they comply with the existing government guidelines.

Recent Developments

The RBI had set a deadline of March 31, 2021, for firms to submit their applications for setting up New Umbrella Entities. As per reports, several Indian companies have tied up with major banks and tech companies to apply for NUEs. Reliance Industries, which has partnered with tech giants Facebook and Google, were planning to apply as a consortium. Other reports suggest that the Tata Group has partnered with HDFC Bank, Kotak Mahindra Bank, MasterCard, and Bharti Airtel. E-commerce platform Amazon.com, Inc. has tied up with Visa, ICICI Bank, Axis Bank, as well as fin-tech startups Bill Desk and PineLabs to obtain the NUE license. Also, Paytm and Ola have also reportedly joined hands to apply for the NUE.

The primary aim of players that are planning to establish NUEs is to obtain a bigger share in India’s digital payments sector. According to RedSeer Consulting, the digital payments industry in India is expected to grow over three-fold to Rs 7,092 lakh crore by 2025. There is no doubt that more companies would want to obtain a piece of this highly promising market. Let us look forward to seeing which of these firms gets selected by RBI to launch NUEs, and how they disrupt or revolutionise the payments space.