Corporate

A Dutch company is buying BillDesk for a whopping $4.7 Billion: rise of digital wallets – all you need to know.

Billdesk :In the last decade, we have seen so much progress in the path of digitalisation that sometimes it feels unreal. The country has been constantly progressing in its digital sector and new investments are made every day. Times have changed a lot in recent years with people doing whatever they can to save their time.

This boosts the process of digitalisation in the country. One such evidence of the growing digitalisation in the country is the shift to online payment methods. Online transaction apps have gained a lot of popularity in recent years majorly because of the busy world we live in currently. The transaction which earlier took a lot of time can now be done easily with a click. Modernisation has supported digital payment methods a lot.

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In this article, we will be discussing one such popular payment app known as BillDesk which has recently been bought by a Dutch company for a huge sum of $4.7 billion. Why BillDesk was sold? What benefits will the company have from it and everything else, we will be discussing all of this in this article.

BillDesk

A Mumbai based home-grown company BillDesk is one of the most popular payment aggregator gateway platforms in the country. BillDesk and Paytm are the most commonly used popular payment platforms in the country are being used by almost everyone.
The Company provides various payment systems such as UPI, wallets, net banking, credit/debit card and others, all on a single platform making it very easy for the users to transact. BillDesk is very profitable in its working and according to reports, BillDesk and Paytm together controlled a massive chunk of people using online payment applications and the company is said to be very successful in its operations.

prosus's payu acquires billdesk for $4.7 billion - techstory

A key strategy of the company?

While many of the competitors are operating on a loss-making growth strategy in order to survive, BillDesk had turned its strategies to profit a very long time ago. Evidently, for the financial year ending March 2021, the company reported a net profit of Rs 271 crore or $37 million, making it a prime target for its competitors which are looking to grow inorganically. The company gained this huge profit, that too in the year when the whole world was fighting the pandemic and the whole world was locked in their homes. However, even after being such a successful company, there is one catch.

The investors of the company are looking for the perfect buyer for the last two years. The main reason behind this is the growing competition in this sector. The company has to face competition from a lot of companies like Paytm, PayU, Razorpay, Infibeam and many more. The investors agreed that the competition will further rise in the upcoming years and it might not be beneficial for BillDesk to continue its operations and therefore decided to completely sell it.

The buyer

Recently, the company has been completely sold to a Dutch company called Prosus. Prosus is a division of the South African multinational Naspers. It was announced on 31 August that the Indian unit of the Prosus’ fintech business PayU will acquire 100 per cent of the home-grown digital payment provider for a huge sum of $4.7 billion. This means that will be no more ownership of investors over Billdesk and therefore Prosus will augment its payment business in our country.

We see every day that new investments are being made in the country. This has a very great effect on the nation’s economy as it brings in a lot of foreign investment and helps to boost the development of the infrastructure in the country. However, a company will invest such a huge amount only if there is a benefit for them. Let us now discuss how this investment in BillDesk will benefit the company PayU.

What’s in it for PayU?

PayU, the Prosus unit is present in various payment segments like the Wallet, UPI, Credit/Debit card, Net banking and much more. It is also present in the non-banking financial company space. Ever since the company has started to grow, it has invested in a lot of fintech companies like CitrusPay in 2016, ZestMoney and PaySense in 2017 and Wibomo in the year 2019. Moreover, PayU completely acquired PaySense last year. However, no investment was as big as the company has invested now in acquiring BillDesk and no other fintech company was as big as Billdesk.

prosus buys payment gateway firm billdesk in one of india's biggest fintech deals ever

According to the reports of Prosus, it is expected that the acquisition of BillDesk will give a huge advantage to PayU in India as it already has a huge market in India and will therefore help PayU in its operations. The company expects the post-deal entity to handle as huge as 4 billion transactions annually, which is a lot. It will seem much bigger when we’ll say that this is equal to four times the current annual transaction which the company PayU handles.

Economists and experts have suggested that this step of consolidation of the two companies will be a great step towards the development and growth of PayU keeping in mind that the biggest payment company in the county, Paytm is about to start its initial public offering. The competition will therefore further rise by huge numbers and therefore in order to survive and compete with the biggest payment company in the country Paytm, this step was much needed. Moreover, the rise in investment prospects will be beneficial for the country’s economy too, as it is on the path of revival after being hit by the pandemic.

Digital payment sector in the country.

Time has changed a lot in recent years. While people were preferring offline transactions dew years ago, now everyone has gladly accepted the online mode of transaction because it is so much quicker and efficient. According to the RBI, the number of digital transactions in the country has risen by 80% in the last financial year and has reached the level of 44 billion from 24 billion in the previous year.

According to RBI, in the upcoming three years, nearly 200 million new users will adopt digital payment technology and will overcome relying on the traditional method of payment. Further, it is said that the annual per capita transaction will rise tenfold from 22 to 220. However, like any other sector, the digital transaction sector also witnessed a setback during the pandemic when people limited their expenses and relied on their savings. However, the growth has achieved its place as soon as the economy started to open up again after the pandemic and therefore the future of this sector seems very bright for the economy.

Before we come to the end, you should know that this acquisition by PayU is the biggest exit involving an Indian start-up by the mode of acquisition. Previously, it was Byjus’ $950 million acquisition of Aakash educational services. This deal of PayU has therefore surpassed the deal of Byjus. This deal further marks the exit of investors from BillDesk which involved some huge investors too such as General Atlantic, Temasek Holdings and the much popular card holding company- Visa. Lastly, this huge deal will surely help in providing a boost to the reviving economy of the country.

Edited by Sanjana Simlai.

Simerleen Kaur

Talk to me about economics, trade, and all things India.

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