The Razorpay payments Matrix: Can this Neo bank be The One?

We are growing at 450% year-on-year and we should be market leaders in 15 months,” says Harshil Mathur, the 28-year-old CEO and co-founder of payment gateway Razorpay* Software Pvt Ltd. The fast-talking, straight-faced founder makes two eye-popping claims—about its projected growth and its market leader dreams—right there.

For a five-year-old startup in any sector, an annual growth of 450% would be considered extraordinary. But payment is a bit of an anomaly. Over a billion transactions happen a day in India, and they have seen blazing growth. Almost 70% year-on-year.

Unified Payment Interface

And the transaction turnover is expected to contribute nearly 15% of GDP by 2021, from the current 10%, according to the RBI’s latest vision document for payments. So, for a company like Razorpay, which aggregates and processes all payment options—Unified Payments Interface (UPI), cards, wallets—for merchants, 450% volume growth isn’t an overreach.

Mathur defends his market leader projection by stating that Razorpay has grown from 2% to 10% in market share in the past year alone. By 2020, he believes, it will shoot ahead in processing internet commerce companies’ payments. That means it will have to outdo the reigning payment gateway in internet commerce, South-African investor Naspers-owned PayU India.

Annually, payments worth $60-billion is made, of which, roughly half is from internet-based commerce companies, according to payments executives. Ltd-owned BillDesk, PayU India and CCAvenue India (now owned by e-commerce company Infibeam Avenues) traditionally held an 80% share of online payments. But the difference is dwindling. A year ago, the difference in volumes between PayU and Razorpay was 12X, now it is 4X, claimed an executive close to the company, who didn’t want to comment on the record.

Unseating PayU will mean getting to some of its top merchants—Airtel, Ola, Ibibo, Zomato, Indigo, Oyo, BookMyShow and the like. Mathur says they are already processing most of the volumes with most of these merchants. PayU denies this claim and said its fight is only with cash. Merchants’ responses, meanwhile, have been mixed.

Travel company Ibibo’s spokesperson said Razorpay only gets a small portion of its overall transactions. A source close to food tech company Zomato said, it is not the leading gateway option. A senior official at cab company Ola confirmed that Razorpay is its preferred payment gateway partner. An Oyo official said the hotel chain is looking to move a significant share of its transactions to Razorpay.

No need to comment 

While Razorpay is considered a serious competitor, those in the industry are skeptical about Mathur’s claims. The one way Razorpay might get to that top position, they believe, is because of Rahul Kothari. Kothari is the head of enterprise sales at PayU, who, two sources close to PayU said, is joining Razorpay. “He is responsible for some of PayU’s marquee clients. When he moves, chances are those accounts will move with him and that’s more likely a reason for Razorpay to come on top,” says the co-founder of a fintech. He didn’t want to comment on the record for this story.

The last time PayU was under threat from a competitor was when another nimble startup Citrus Payment Solutions Ltd came within spitting distance of it. PayU, in 2016, bought Citrus for $130 million, putting to end months of a price war between the two.

But this time it is different.

“It is not a price war anymore; it is now a tech war,” says Mathur. The irony of those words is that this war is being fought on something that is now a commodity. But Razorpay’s business is now more about becoming bank-like in customer retention. Becoming a ‘neo bank’.

There is no moat

Razorpay got into the gateway business in 2014 when online commerce frenzy was at its infancy. Gateways then mostly serviced large non-tech merchants for government payments, mutual fund payments. Razorpay created a niche for itself by working with tech-enabled mid-tier internet businesses like Zomato and grew with them.

“Because Razorpay was new to the market, it had a better tech stack and was able to pull in those merchants,” said the fintech co-founder quoted above. It was one of the first gateways to process mobile-based UPI payments and it used that edge to get a foot in the door of merchants such as Zomato and Oyo.