Billdesk, Razorpay leaders talk of innovation, AI and regulation in payments industry

"AI will touch every aspect of the entire ecosystem. Everyone is experimenting with it. We at Razorpay are looking to add AI in the risk and data security area where we need to build products to control frauds," says Harshil Mathur, CEO of Razorpay.

Pursuing profitability in the fast-growing landscape of India's payment gateways remains a challenge and no one knows it better than Harshil Mathur, co-founder and CEO, Razorpay, and MN Srinivasu, co-founder and director, BillDesk.

At Moneycontrol's Startup Conclave in Bengaluru on July 7, the two fintech leaders shared their thoughts on the growing competition in the space that has undergone a sea change in recent years.

Mathur highlighted the significant cost of technology as the most substantial expense for payment players. While marketing and advertising costs are relatively low, investments in technology infrastructure, research and development (R&D), and human resources remain the biggest line items, he said.

Sharing insights into the capital requirement, Srinivasu said it took around $7 million for BillDesk to become profitable at its inception. For him, too, technology costs continue to be the highest expense.

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Srinivasu stressed the importance of building a robust technology stack in the B2B space. "Being in the B2B space, whatever you do you are building a stack on top of it...As the stack's potentiality profitability settles, we will look at what more to add. But so far there is still more to do," he said.

He also highlighted the harmonious relationship between payment gateways and regulators, noting that fintech companies are closely monitored by regulatory authorities overseeing the banking sector.

Mathur and Srinivasu acknowledged the impact of regulation on innovation within the industry. "When you are innovating in the regulated space it will ultimately impact the end customer. That should be kept in mind by the industry, the media and the regulator as well," Srinivasu said.

The Reserve Bank of India, through a series of measures, has tightened the regulation of the fintech sector, especially loan apps.

Also read: Fintechs rewriting the rule book, banks will compete and co-exist, says Rajnish Kumar

Talking about the role of artificial intelligence (AI) in the payment gateway industry, Mathur said, "AI will touch every aspect of the entire ecosystem. Everyone is experimenting with it. We, at Razorpay, are looking to add AI in the risk and data-security area where we need to build products to control frauds," he said.

Mathur also expects AI to transform customer service in the coming years.

On the initial public offerings (IPO), Srinivasu said the plan is contingent on market conditions and investor liquidity. While there is no pressure to set a timeline, both Mathur and Srinivasu expressed a desire to go public in future.

Razorpay's IPO aspirations are around two-three years away, given the company's advantageous liquidity position as a B2B payment gateway, Mathur said.