Why do payment gateways want to disconnect Juspay, even it means losing business

PG vs Juspay

The payment gateways’ (PGs') ultimatum to their merchant partners to cut their ties with the payment orchestration platform (POP) Juspay passed without any major disruptions. Thanks to the extension requests from merchants, which the PGs duly agreed to.

A senior executive with a PG that works with a number of small and medium enterprises from tier 2 and 3 cities told Moneycontrol that this was because Juspay was not being transparent about the reasons behind its low payment success ratio.

Juspay did not offer any comments on the detailed queries Moneycontrol sent.

Transparency and integration issues

“We wanted to understand whether the low payment success ratio was because customers did not have their card details handy, or whether their internet connection was slow or intermittent. Unless they share these details, we cannot improve our product. It is not about payment routing or transparency, but how you work and share details which can help merchants and PGs,” the senior executive said.

MC Explains

Meanwhile, a senior executive with a merchant said that the data belongs to them and Juspay cannot share it without their permission. However, it is not clear if merchants are unwilling to share this data and if so, why.

Juspay has a multi-faceted relationship with many merchants. It simplifies the management of payment flows by offering features like multi-PG routing, transaction optimisation, and failover mechanisms. Such platforms are especially useful for businesses operating at scale, as they streamline payment operations and reduce dependencies on a single PG.

Though most PGs also provide these solutions, the integration works best at the payment orchestration layer.

“Juspay's chokehold means that we are at their mercy if our merchant partners want to use our solutions for their requirements. Juspay has been refusing to help us integrate,” another PG executive said.

“At some point, we needed to take a call that was better for our long-term business. When you go through a POP, you cannot provide a differentiated customer experience. We were building so many new features but the merchants could not use them because Juspay was not willing to integrate them in the payments interface,” said the PG senior executive quoted earlier.

An executive with a payment orchestrator platform said that while PGs might want to push for better and newer features, due to some merchants’ lack of enthusiasm and resistance to change, Juspay cannot integrate such changes.

Multiple PGs

“No payment gateway firm in its right mind is expecting merchants to use a single PG. The understanding is that merchants will own this piece as it is important for controlling the customer's payment experience,” said a senior official with a PG, which has decided not to work with merchants who use Juspay.

At the centre of the crisis is Juspay’s acquisition of a payment aggregator licence —  required to run payment gateway business — in February 2024 from the Reserve Bank of India (RBI).

Most merchants work with multiple PGs and Juspay helps with the integration via a single interface. Juspay's payment routing engine determines which PG a merchant should use at a given time to ensure a better success rate.

According to sources, “Juspay being a new entrant in the PG space with relatively low traffic means that their latency is naturally lower, and hence their success ratio looks better. Which means that they could possibly be routing transactions to themselves, instead of other PGs.”

Merchants’ prefer status-quo

Last month, Juspay open-sourced the source code of its payment routing engine for the sake of transparency, for anybody to check whether it was routing traffic to itself at the expense of other PGs.

A large segment of merchants are non-committal about the PGs’ stand that they will not work with Juspay as they  want to keep their options open. But if the mood in either camp is anything to go by, the long-term solution lies in merchants developing or building an orchestration layer themselves.

While large merchants have an incentive to build a POP, a shortage of  time and resources often gets in the way.

The solution to this crisis could very well be the merchants deploying the Juspay solution as a white-label SaaS product. This could help Juspay retain its revenues while addressing concerns.