Cashfree will double down on payment gateway business, 15,000 merchants to go live soon: CEO Akash Sinha

Akash Sinha, CEO of Cashfree

On December 19, the Reserve Bank of India brought cheer to many payment processing majors in India including Cashfree, Razorpay and others as they received the final authorisation to operate as Payment Aggregators (PA).

Cashfree’s Co-founder and CEO Akash Sinha couldn’t believe what he saw in his e-mail inbox and his first reaction: ‘Let’s get started!’

“I've been waiting for this for a long time. We have a lot of merchants waiting to go live, and they have all finished their KYCs too, we will start the process from now,” Sinha said.

The Bengaluru-based firm has raised more than $40 million and was valued at around $200 million during its last fundraising round in June 2021. While major players such as PayU, Razorpay and Billdesk reported profits in the financial year (FY) 2022, Cashfree was an exception. After being profitable in FY20 and FY21, Cashfree reported a loss of Rs 3 crore in FY22 after a profit of Rs 25 crore in the previous fiscal.

Sinha says that the final nod from RBI on the PA License will help them get on track to profitability. In an exclusive interview with Moneycontrol Sinha talked about the company’s alternate game-plan and its revenue roadmap for FY25.

Edited Excerpts

You have received the final approval to operate as a PA after almost a year. How do you feel about this?

I think everyone is very excited. Okay. I've been waiting for this for a long time. We have a lot of merchants pending to go live. More than 12,000-15,000 merchants have already finished their KYC and are waiting to go live on Cashfree.  And now I think we'll make them go live as soon as we can. It is very positive and this is a very exciting time for all of us.
What kind of setbacks did Cashfree face while pausing the on-boarding of new merchants to the platform?

There's nothing like a major long-term setback that we faced. Cashfree always had a very large merchant base. We had more than 3 lakh merchants signed up on Cashfree, for the last 10 to 12 months, we had been very busy reactivating a lot of dormant accounts increasing wallet-share and others. Cashfree also has other products on the platform along with the payment gateway. We had been pushing strongly on forex payments and verification of cross-border payments. We had always been busy.

Of course, the biggest share is from the payment gateway. We would have doubled down on it, but we could not, so now we will look at doubling down on this. We were serving our existing customers, now we will on-board new merchants.

Why was there a delay from the RBI in approving the PA licenses?

Earlier when we received the in-principle nod from RBI, the regulator wanted some audit reports from us. We submitted the same around March-April this year. There was a little feedback and we had to comply with some changes and then the RBI took some time to review and we have finally received the license. There might be some internal process to review the reports, that we are not aware of.

System Audit Report review was a requirement for all players who received the in-principle authorisation. We got back from the RBI in Q1 of FY24 and there were more reviews.

There have been communications between industry players and the RBI. Whenever there is a new policy change or anything, we have been called in for consultations. Time and again we were assured that the license will be coming soon, that was the communication we had with the RBI.

What was the major business impact and will that reverse in the coming days?

The company has been able to grow in a healthy manner. It hasn’t grown in the way we wanted, but there is growth. Overall we recorded healthy growth in H1 compared to last year. Even payment volumes have grown more than 50 percent compared to March of last year. The revenues have also grown proportionally. The payment gateway business did have an impact on us, but we were able to grow our numbers with our existing business lines.

Is the payment gateway your biggest business and what kind of alternative revenue streams has Cashfree has created so far?

From day one Cashfree was not a single product business. Payments was the first product we launched and today, we have more than 15 products from Cashfree. We always believed in this platform play where all merchant needs will be handled in a single portal. The platform is therefore well-diversified. This naturally helped us when we were told to stop on-boarding new merchants for the payment gateway business. There wasn’t something new that we had to do, but just some change in focus here and there helped us get the growth we wanted.

Now that you are looking to on-board new merchants, what is the game plan ahead?

Before the restrictions, we were able to get like 30,000 leads per month. Compared to last September, the number of leads we get is the highest in the market. We expect similar momentum to come pretty soon. Given that forex are much superior we anticipate higher than market expectation sign ups on the platform in the next few months. Forex has already matured a lot and we will onboard most SMEs right now. The license will enable us to further double down on the SME segment along with large enterprises. This is a great gift that has come at the end of the year.

Do you think the market is getting very competitive and in what ways will Cashfree sustain this competition?

RBI authorised a lot of players, but if we look at the industry, it is biased towards two-three large players. These players earn more than 80 percent of the market share. Payment gateway is an infrastructure business. If we give top-notch infrastructure, more and more merchants will come to the platform. There are many players but they don’t have the scale at which we operate and that is where Cashfree stands out. We process more than 2 billion transactions in a year and to do this number reliably is pretty hard work. Companies who are in the market will need to spend more time to build the capabilities to get a majority share in the market. All of these guys will be around but the market share is the important aspect to look at. Despite the competition we feel, we could still have a healthy market share and growth.

How many new merchants will you be looking to on-board now?

Close to 12,000-15,000 merchants have completed KYC on our platform and they are ready to be on-boarded. They had been waiting to go live for the past few months. Over the course of two-weeks we will be able to onboard all of them. We are in touch with our banking partners regarding this. The main advantage now is, we have a definite timeline to give to our merchants. We don’t have to keep them waiting. We on-board pretty fast compared to other players.

Tell us about Cashfree’s FY25 roadmap and what will be the focus areas for next year?

Our payment gateway business will continue to scale from here and we expect to triple our volumes in the next 12 months. That is our target. There is a lot of pent-up demand which we will be able to tap now. We will continue to scale other businesses too like cross-border payments and forex which is picking up. We are also going to apply for ‘Payment Aggregator Cross Border (PACB) licenses. RBI has announced its Payment Stack. We are also exploring new markets for our products. Our entire verification suite has also been expanded and doing pretty well. We are definitely not sitting idle, we will be scaling all our business lines including forex and the payment gateway business.

We expect payments to contribute at least 65-70 percent of our overall revenues, even in the longer term. Around 30-35 percent will come from new businesses. Payments still is a large market with a big target market. We are still a long way off and have a lot of headroom for us to grow.

Are you looking to raise more funds to feed the growth plan that you have charted?

We were able to grow sustainably; if we look at the last four-five financial years, barring the last one year, we were always profitable. We have generated more than $12 million -$13 million in cash, in the last five years. We always intend to be in the EBITDA positive path.  If there are good deals we will look at exploring the market but right now that is not the focus for us. We have whatever we need, the plan is to continue to grow our product.