Life after getting payment aggregator license: Thousands of merchants already pinging us, says Razorpay's Harshil Mathur

Harshil Mathur, CEO of Razorpay

It wasn't just any other day for a lot of payment processing firms on December 19.

After waiting for the final approval from the Reserve Bank of India (RBI) to become a payment aggregator (PA) for more than a year, fintechs such as Razorpay, Cashfree, EnKash, Open and Payments received the green signal.
"I was at home when I got this news and I rushed to the office to meet the team. The entire leadership team was present and we quickly got on to plan the next steps," says an elated Harshil Mathur, co-founder and CEO of Razorpay.

In July 2022, the fintech unicorn had received an in-principle approval from RBI to operate as a PA. However, in November, the RBI ordered the payment firm to stop on-boarding new merchants to its platform till it received the final approval to become a PA.  Payments being the core business of Razorpay, this was a setback.

PAs are entities that enable e-commerce websites, mobile apps, and merchants to accept various payment instruments from customers for the completion of their payment obligations – without the need for merchants to create a separate payment integration system of their own.
Razorpay’s Mathur spoke to Moneycontrol on how the firm was impacted both emotionally and business-wise, and about their alternative game plan to compensate for the lost business. Mathur also spoke about the company's plans ahead for on-boarding new merchants to the platform.  Edited Excerpts:

Harshil, what is the mood like in the office after hearing from the RBI on the PA licence? 

We got the mail today (December 19) and a physical letter informing us. The mood is quite happy. I was outside the office, at home, and as soon as I heard the news, I came back to the office to discuss the next plans. We were happy and figuring out the next steps in terms of how to quickly on-board merchants. Several of them have been pinging us and waiting for this development, too. This is the primary focus now. There are thousands of merchants who have been waiting and pinging us every day, every week. Some of them are waiting for us, some went with other PAs but are not satisfied and are coming back to us. We just want to ensure that they won’t wait any extra day to go live now.

Tell us about the past one year when you were awaiting this licence. Did it affect the company more than you anticipated? 

As a startup, growth is one of the most important things that motivates and drives us. While contributions from newer merchants to PandL might be low, it definitely does impact the morale and sentiment of the team.

While we had a lot of other businesses where we continued to on-board new businesses like PoS (Point of Sale) and RazorpayX, payments is our core and largest business with the largest teams.

The place where we started Razorpay is from payments. Thus, the pausing of on-boarding did cause some emotional impact of not being able to on-board. We are thankful and grateful to the RBI for this and now we can go ahead with the business. There is a lot of energy in the team to have the opportunity again to on-board new merchants. We are quite confident that we will be able to get a lot of business due to this now.

Did the firm face any significant business impact that affected your top line or bottom line?

The impact on our numbers was low. There was an impact but it was minimal. New merchant contribution to our business is very minimal because we already had most of the large merchants on our platform, and contributions from new merchants were limited in the short to medium term.

Of course, the longer it took, the impact also widened accordingly. While big merchants have already been on-boarded, we expect some of these new merchants to become bigger in the coming years.

As we were also active on other business lines, we were able to manage the P&L growth in some ways. I also want to call out the resilience of the team here who quickly changed priorities to ensure Razorpay's growth doesn’t get hit a lot. From this perspective, the growth did not get hit a lot.

However, there were a lot of questions being asked from partners, merchants and other participants as to why we have not on-boarded yet and why the licence was still stuck. This definitely created a soft impact on us.

How did you make up for the vacuum? What were the key focus areas that helped you sustain the last one year? 

We started focusing on areas like offline payments. We went big on PoS devices where we saw around 60 percent growth rate in the last month. We also focused on international payments. We saw around 80 percent growth rate in the Malaysia market.

Along with this, we were also doing a lot of business on payrolls, which was scaling quite well. We also launched UPI Turbo payments and more cross-border payments where we saw very good growth. We had six-seven other opportunities that we focused on in the last one year. This was, to some extent, able to reduce the impact of on-boarding new merchants to the payments side.

I won’t say this completely helped in the situation. We did have an impact as the main business was still PAs. On-boarding did have an impact, but all I’m saying is this helped in reducing the impact on the business. Opening of new-on-boarding is a very welcome move and we will see a lot of positive impact after this.

RBI granted in-principle approval to more than 60 players in the market. Do you think you would have lost some business to others during the time you were awaiting the licence? 

Any merchant who was looking for a PA would have already got one, as it has been a year. However, there were a few who were waiting. Merchants who were in a hurry to go live would have found a partner. A lot of them are there in the market. I will not emphasise that we are the only ones in the market here to on-board. However, any merchant looking to partner with Razorpay and had been waiting will be on-boarded quickly. This is where all our energy will be.

Now that you have received the licence, how are you gearing up for this? Is the infrastructure for on-boarding merchants ready at Razorpay? 

We had been preparing for this for a while now. Now, we are very much ready. We, in fact, created a playbook on how to turn this on and how do we on-board quickly and with checks and balances from day one. We are certain that right from tomorrow (December 20), we will be able to on-board customers fully. There won’t be any long waiting list. We have an infrastructure where we can on-board very quickly. As long as all merchants are able to fulfil all our on-boarding criteria, I think we can quickly start the process.

How will this change your revenue projections? Any road map that you can share? 

This may be a little too early to say. This will definitely add to our revenues. However, how many merchants will we be added and all will take some time to get. Out of the waiting list, we have to see how many would want to come, etc.

Now that your core business is fully operational, will you be needing more funds from investors? Are there any talks to raise more in the coming months? 

We are very well-capitalised. We have raised a decent amount of funds. We might not raise funds till our IPO, which we are planning in the next 2-3 years. We are not in a hurry to raise funds. Our businesses are getting into a breakeven phase. We don’t really need more capital for now.

Razorpay decided to reverse flip to India and you were in the process. Is there any connection between RBI’s approval and the domiciling in the India plans of the company? 

Domicile is not related to this at all. It has no connection with RBI’s approval. That process is underway and it will take some time.