These two fintech companies get RBI approval for payment aggregator licence
The Reserve Bank of India (RBI) has given the fintech companies Razorpay and ‘ Plural principle approval for a licence as a payment aggregator (PA), enabling them to provide merchant payment services.
In 2020, the central bank established the Payment Aggregator framework, which stipulated that all payment aggregators must obtain authorisation before providing payment services to merchants. The framework mandates that companies granted licences will fall directly under RBI’s jurisdiction.
For payment providers to be able to provide their platforms to merchants, who can then integrate them on their websites and provide customers with many payment options like cards, UPI, wallets, EMI, net banking, etc., the licence must be granted.
This collapses in the absence of the PA licence.
PAs have contributed to making online payments easy in the eCommerce sector, which has been growing in India since 2020, by providing many payment options.
Because PAs are easier to integrate, faster, and provide more user-friendly features like instant refunds than bank payment aggregators, which often have large setup fees and are more difficult to use by eCommerce businesses, D2C and B2C businesses.
In addition, PAs provide analytics and data insights, which bank payment aggregator systems do not.
The RBI licence would allow fintech companies like Paytm, Razorpay, and others to conduct business and provide authorised payment services to other companies.
The story was first reported by Moneycontrol and The Economic Times, who used sources familiar with the development.
According to Moneycontrol, the RBI has told businesses with in-principle approval to complete an audit within the next six months to receive the final approval.
Many participants, like PhonePe, BharatPe, CRED, Paytm, etc., have applied for the licence.
It is believed that the RBI’s official list will be released soon.
Separately, the Co-founder of Setu Nikhil Kumar said on Twitter that the startup’s division, Agya Technologies, has been granted an in-principle licence for the term “Account Aggregator.” Setu was bought by Pine Labs last month.
Online payments are made possible by the fintech company Razorpay because of its developer-friendly APIs and efficient integrated system. Along with various plugins and integration suites for all major backend technologies and e-commerce platforms, Razorpay provides a comprehensive dashboard for managing payments. Razorpay is increasing online payment methods for startups and other businesses and the user experience with its effective technologies.
Route, Smart Collect, Subscriptions, and Invoices are four solutions that Razorpay introduced in September 2017 to help organisations handle different parts of money transportation, including collecting, reconciliation, and disbursement.
Razorpay announced that its sister company, Razorpay Capital, will enter the SME financing market. It is a platform for lending that gives small and medium-sized businesses quick and simple access to lenders. This project aims to provide small businesses with speedy settlements and collateral-free loans to address their liquidity and cash flow issues. The platform’s beta version, which was introduced in September 2018, has already issued $30 million in loans.
Razorpay added two new capabilities to the services it provides. These are called “Batch Uploads” and “Partial payments,” respectively.
Partial Payments: Rather than paying the complete payment at once, it helps end customers to make payments in part against a certain order ID.
Batch Uploads: By uploading a single file including all of the order details, business organisations can create and process linkages in bulk rather than individually.
If we go back to the last five years, almost 67 per cent of the 2,100 or so fintech companies have been established in India, which has been touted as the world’s fastest-growing fintech market in terms of growth.
According to the Razorpay Team, the Indian fintech market will reach Rs 6.2 lakh crore by 2025. It added that COVID-19 had accelerated the company’s digital payments segment.
Razorpay – Founders and Team
The fintech company is co-founded by IIT Roorkee alumni Shashank Kumar and Harshil Mathur.
Startup Story: How did it start?
The co-founders of this firm came up with the idea while working on the crowdfunding portal and realised how complicated the online payment system in India was as a result. In addition, they learned that US-based payment systems are not the best for the Indian markets, mainly when considering credit card usage. After that, they changed directions to focus on the payments issue in India, where it was very difficult to apply technology. Additionally, the percentage of payment failures was very high, and the last pricing options lacked clarity.
So they set out to create a user-friendly, simple-to-integrate internet payment gateway. The co-founders began working full-time on the Razorpay concept after initially conducting market research to assess the concept’s viability and subsequently gathering favourable feedback from potential customers.
As a part of the 2015 winter batch of Y Combinator’s startup programme, this endeavour started in Jaipur. After receiving support from Startup Oasis in Jaipur, which was established jointly by the Rajasthan Industrial Investment Corporation (RIICO) and IIM Ahmedabad’s Centre for Innovation Incubation and Entrepreneurship, both of these co-founders eventually left their respective jobs at Schlumberger and Microsoft (CIIE). In addition, the fintech company is considered the second startup with an Indian emphasis to be selected by the Y-Combinator programme, the first being ClearTax.
Mission and Vision
The fintech company ensures that “companies find it easy to accept and receive payments” as part of its aim and vision.
Graduates of IIT Roorkee established Razorpay to transform online corporate financial administration. The business seeks to do this by providing streamlined, developer-friendly APIs and seamless integration. It provides a quick, inexpensive, and secure solution for businesses, eCommerce sites, and other organisations to collect and distribute payments online. Additionally, Razorpay helps its users to open a current account that is fully functioning and to apply for working capital loans.
Business and Revenue Model
Razorpay levies a 0.25 to 0.5 per cent fee for every subscription collecting transaction through their gateway. Razorpay 2.0 has given rise to an increase in the company’s revenue streams. It holds around 30% of Razorpay’s overall income generation. This fintech company aims to raise the number of adopted products on average from one to two. According to the team, nearly 35 per cent of the company’s overall revenues are anticipated to come from RazorpayX and Razorpay Capital.
Some of the prominent Razorpay competitors are:
- Paytm Business
- Apple Pay for merchants
- Citrus Pay
Growth and Revenue
Since the beginning, Razorpay has experienced exponential development. Today, it processes payments for over 5 million small and large enterprises, including Facebook, Ola, Swiggy, Zomato, Indian Oil, Cred, and many others. The fintech company in Bangalore claims to process payments totalling $50 billion annually and boasts a healthy growth rate of 40 to 45% each month.
With a valuation of $7.5 billion, the business is now touted as the most valuable privately held fintech company and the second-most valuable Indian fintech service provider, behind One97 Communications Ltd. Since Razorpay’s valuation peaked in 2021 at a little over $1 billion, it has increased seven times.
Razorpay’s total revenue was estimated at Rs 519.4 crore in FY20, but it increased to Rs 844 crore in FY21. Its sales revenue, estimated to be Rs 508.99 crore in the last year, increased by 65.2% to reach Rs 841.2 crore. The remaining Rs 2.8 crore were non-operating revenues that the fintech company produced in FY21. Mathur is optimistic about the company’s potential to double its revenues in FY22 because the TPV is increasing for the business, estimated at $60 billion in 2021.
Razorpay had operational costs of Rs 525.4 crore in FY20, which increased by 60% to Rs 836.6 crore in FY21, while total expenses for Razorpay have recorded at Rs 844 crore in FY21. The expenses, or Rs 480 crore, were spent on the payment gateway commissions. For Razorpay, the cost of offering employee perks was Rs 213.3 crore. Razorpay only spent Rs 120.5 crore on the same in FY20. Other costs that Razorpay incurred in FY21 were those for training, and recruitment processes, for which Razorpay paid Rs 18.3 crore and Rs 5.6 crore, respectively.
This fintech company which had earlier experienced three years of losses, achieved profitability in FY21 and produced a net standalone profit of Rs 7 crore.
Razorpay has received four major investments to date. The latest investment of Razorpay was in HostBooks on June 10, 2022. The Gurgaon-based fintech startup, which has raised its Series A funding round worth $3 mn, where Razorpay was counted as the lead investor. In 2009, Biswajit Mishra and Kapil Rana launched HostBooks, which is today used as a cloud-based platform for small and medium-sized businesses to do accounting and compliance tasks (SMEs). HostBooks will use this money to expand its business and product line.
Before this, Razorpay made a seed round investment in NextPay, a fintech company that serves SMEs in the Philippines.
Recently, Razorpay has been focusing on gaining market share in India. This fintech company aims to expand into Southeast Asian markets for its future objectives. The corporation will focus primarily on Southeast Asian nations, using them as a springboard for future goals for global expansion. In 2022, the team will be looking to invest in businesses in the Fintech B2B SaaS sector. Razorpay has announced that it wants to hire up to 600 people to develop its workforce further and expand.
The neobanking platform Razorpay and its lending arm, Razorpay Capital, both want to expand their product offerings. On May 10, 2022, Razorpay founder Mathur stated that the company is not looking to raise money in the next 12 to 18 months since he believes Razorpay is already well-capitalised. Mathur believes that increasing TPV will help the business to increase its income.
About Pine Labs
Founded in 1998, Pine Labs is an Indian merchant platform business that provides financing and technology for last-mile retail transactions.
Businesses use their services daily to increase sales while lowering expenses, complexity, and dangers. This presents an opportunity for the company to participate in their development. The needs of the merchants, strategies for generating money, technologies for last-mile retail transactions, data analysis, and experiences for their customers and shoppers are the main topics. The business provides a full-stack merchant platform, a distinctive combination of technological and financial options.
Over 100,000 merchants in India and other Asian nations are using Pine Labs’ products, which businesses from many industries employ. The company’s cloud-based platform in India powers over 350,000 PoS in over 3,700 towns.
The company’s initial goal was unmistakably on broad-based, sophisticated, card-based payment and loyalty solutions for the retail gasoline market. The fintech company’s actual payments journey began in 2009 when it entered the mainstream payments market to provide merchants solutions through its PoS devices, connecting them to banks and other financial institutions. The business ensured its equipment could process all digital payments by collaborating with banks and payment aggregators.
Pine Labs updated its payment technology solutions in 2012 and developed into a business that invented the intelligent, cloud-based unified point-of-sale platform, which is intended to save costs and increase profits for shops. The company provided the merchant with many services through its platform, thanks to its partnerships with leading banks and companies.
As a result, it changed into a merchant platform with payment offerings, risk analysis, multi-channel analytics, merchant loans and insurance, brand offers, cashback, integrated billing, and more. It boasts a network of more than 100 brands and 21 financial services companies.
Pine Labs had its first international presence in 2017 when it entered Malaysia through an exclusive agreement with CIMB Bank. And it is developing the most powerful merchant platform in the world, combining technological and financial solutions to suit every need of the contemporary merchant.
Founders and Team
The founders of Pine Labs are Lokvir Kapoor, Rajul Garg, and Tarun Upadhyay.
Products and Services
The fintech company provides portable point of sale (PoS) devices that let retailers accept credit and debit card payments. Instant EMI, Instant Discounts, Cashback Programs, PaybyPoints, Loyalty Solutions, e-Wallet, Targeted Promotions, Dynamic Currency Conversion, and Gift Solution are just a few Pine Labs’ products and services.
On October 14, 2021, Pine Labs announced the introduction of Plural, a merchant commerce platform that marked the company’s entry into the payment gateway industry. It is now directly competing with businesses like Razorpay, PayU-Billdesk, CCAvenue, and Paytm. The company introduced three products—Plural Gateway, Plural Checkout, and Plural Console—to support its merchant base of more than five lakhs.
These can be categorised as:
Plural Gateway: The use of Plural Gateway will help retailers to access a single payment dashboard for all payment methods, including credit and debit cards, Unified Payments Interface (UPI), and other payment methods.
Plural Checkout: Plural Checkout is an Android and iOS Mobile SDK (Software Development Kit) that attempts to improve the functionality of payment gateways.
Plural Consoles: According to a news release from the firm, Plural Console is a Payment Orchestration Platform (POP) that provides a single technical framework to initiate transactions through many payment gateways.
Business and Revenue Model
After collaborating directly with retailers for two decades, Pine Labs now provides more effective solutions to help retailers sell, expand, and build more. It meets the omnichannel needs of the merchants. It provides services to merchants of all sizes, assisting them in thriving in the shifting global economy by leveraging technology and subject expertise.
Its business model is modified to suit the requirements of its merchants. The payments startup unveiled cutting-edge point-of-sale (PoS) devices that are cloud-based, improving its interaction with customers when they are making a purchase. Pine Labs has transformed the payment technology field while contributing to the global digital economy. It is acknowledged as one of India’s first fintech companies.
Pine Labs primarily relies on selling its goods, including the POS payment equipment. Additionally, it makes money from commissions on the selling of its services. The fintech company makes money through interest on current investments and fixed deposit deposits.
Growth and Revenue
Over 150K shops are part of Pine Labs’ network, which spans 3700+ Indian and Malaysian cities.
Cards, QR codes, or phone number billing can all be used to start transactions on a Pine Labs machine. Additionally, the business provides working capital loans and PinePerks reward programmes. Pine Labs has consistently dominated the Point of Sale industry and has given retailers card swipe devices. The fintech company is creating Buy Now Pay Later (BNPL), invoice management, gifting, and eCommerce solutions to broaden its range of services.
Its partners include companies like Apple, Google Pay, Samsung, Sony, and others. Actis Capital, Altimeter Capital, Sequoia India, PayPal, Temasek, Madison India Capital, and Sofina are just a few investors who have contributed $310.8 million to the company.
Top Competitors are:
- Stripe Connect
- Apple Pay
Pine Labs, a platform for digital retail payments, is preparing for the following stage of its development. In the upcoming 18 months, it wants to introduce the most recent solutions that promise a better client experience, venture into new areas and categories, and launch an IPO. The fintech company’s IPO is thought to be valued at about $1 billion. According to news from January 2022, the corporation is reportedly planning on launching the NASDAQ exchange this year.
The fintech company anticipates a more than fourfold increase in its total payment volume (TPV)—from $23 billion to $100 billion—over the following two years.
Pine Labs will then join the ranks of Square Inc, a US-based financial and merchant services company, whose gross payment volume in the most recent fiscal period was $84.65 billion, up from $65.35 billion in 2017, according to data portal Statista.
In the following stage, Pine Labs will start partnering with banks and NBFCs to provide loans to businesses, along with services like insurance. On behalf of these retailers, it will make payments for the goods and services tax (GST).
Edited by Prakriti Arora