With licences in, payment aggregators gear up for rising demand from merchants

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

Onboarding starts

Mathur added that the firm has started onboarding merchants on its platform.

“There are thousands of merchants who have been waiting and pinging us every day, every week. We just want to ensure that they won’t wait any extra day to go live now,” Mathur said without mentioning specific numbers on awaiting merchants.

Razorpay and others have already contacted its banking partners to start the onboarding process.

“We have an infrastructure where we can onboard very quickly. As long as all the merchants are able to fulfil all our onboarding criteria, we can quickly start the process,” Said Harshil Mathur, cofounder and CEO of Razorpay to Moneycontrol.

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

EnKash said it is gearing up its team for the new business.

“We had been working with 12 different banking partners. All those are already in place. What we are focussing on now is training and gearing up our team for this new business. While the RBI has given us a timeline of six months to start the business, we will be looking to go live in less than three months,” said Yadvendra Tyagi, cofounder of EnKash.

Intensifying competition

The PA market is getting competitive, and the RBI’s approval has come as a relief to payment gateway companies as competitors such as Billdesk, Pine Labs, Infibeam, PhonePe, and Amazon Pay could onboard new merchants and these companies were losing potential customers, who are unlikely to switch once they integrate with another player.

PhonePe offered free onboarding and zero annual maintenance charges. With the humungous growth of digital payments over the past couple of years, several businesses started using multiple PGs in case one system is down.

PAs ensure a high payment success rate, which is the most important metric for any business while choosing a PG. But a plethora of options with competitive rates means that this is a highly commoditised market with additional layers of services and features helping companies to distinguish themselves from rivals.

“We also had other products along with a payment gateway. We had been pushing strongly on forex payments, verification of cross-border payments,” said Sinha. “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.”

Accelerating revenue growth

While Razorpay and Cashfree can resume the PA business, for others like EnKash and Open, it is a new business segment.

“This brings along a lot of business opportunities for us and opens up new streams of revenue. Out of our total 250,000 merchants on our platform, many are looking forward to our PA services… Our intention is to become a complete, end-to-end payment processing company for a business,” Tyagi said.

For companies already in the ecosystem, the move will help accelerate revenue growth and compensate for business lost over the past one year.

“There were a lot of questions being asked from partners, merchants and other participants on why we had not been allowed to onboard new customers yet and this created a soft impact on us,” Razorpay’s Mathur told Moneycontrol.

After being profitable in FY20 and FY21, Cashfree reported a loss of Rs 3 crore in FY22. The RBI’s approval will turn into a tailwind for the company and help it get back on track to achieve profitability.

“There is a lot of pent-up demand which we will be able to tap now. We will continue to scale other businesses like cross-border payments and forex, which is picking up… We expect payments to contribute 60-75 percent of our total revenues now,” said Cashfree’s Sinha.

Raising hopes

PAs enable e-commerce sites and merchants to accept various instruments from customers to complete their payments without the need for merchants to create their own systems. PAs get the payments from customers, pool and transfer them on to the merchants.

Fintech-focussed venture capital investors said the move is a positive sign for the funding environment as well.

“RBI's active engagement ensures that the right players receive licences, fostering a conducive environment for growth and innovation in payments. It's a positive signal for the fintech space, assuring upcoming companies that regulatory strides are being taken to advance the industry rapidly,” said Varun Malhotra, a partner at Quona Capital.

While the RBI had granted in-principle approval to many applicants, only eight companies had been asked to stop onboarding new customers, including PayU, Razorpay and Cashfree. The central bank returned Paytm’s application.

Also Read: Why Payment Aggregator licences are stuck for months

The RBI’s final approval of PA licences for seven companies has lifted the hopes of 30 aspirants that had been granted in-principle authorisation to run the payment gateway business.

According to the PG companies, the final stage of discussions and audits took place a few months ago and the lack of final approval had raised concerns among them. The RBI’s authorisation now is an indication that approvals will likely come to all applicants over the next few months.

“Why will the others not get it? Most companies that got in-principle approval from the RBI to act as PAs will start getting the final approvals in the coming days. This is good for the ecosystem,” said Vishwas Patel, joint managing director at Infibeam Avenues, a PA firm that has in-principle approval.

The RBI said the grant of in-principle authorisation should not be construed as authorisation unless the entity is granted ‘authorisation.’ According to experts and company officials, the delay in issuing PA licences is due to the stringent approval process that is aimed at ensuring transparency, standardisation and trust in India’s fintech ecosystem.

One of the major reasons for the delay was that the RBI was monitoring cases filed by the Directorate of Enforcement against payment firms to see how serious past offences were and whether they facilitated illegal businesses. The cases pertain to issues such as the facilitation of Chinese money lenders, enabling gambling and betting companies to bring in and take out money from the country, and supporting crypto trading.

The PA licences are meant to ensure that all data, cybersecurity, processes, monitoring and reporting of suspicious transactions are done following RBI’s expectations.