Bengaluru-based online payment solution company Razorpay is focussing on simplifying payments in India. Started in 2013 by Harshil Mathur and Shashank Kumar, it has built solutions to address complex use cases and accept payments in every online mode. In an interaction with Uma Kannan of DH, Harshil Mathur, Co-Founder and CEO of the company, says Razorpay, apart from product expansion, is also looking at global expansion. Edited excerpts:
How did you get into Y Combinator, an American seed accelerator?
Both of us (Harshil and Shashank) initially started Razorpay in Jaipur at my parents' house. We were both working in different jobs at that time. I left my job in Schlumberger and Shashank left his job in Microsoft in the US and joined me in Jaipur. Soon, we got into the startup programme by Y Combinator. Once we got funded by Y Combinator, we decided to move to a larger city because we had to scale up our technical talent. It was a pure tech product and the choice for us was either Gurgram or Bengaluru and we felt Bengaluru is the right place because senior technical talent was already available in the city and most of our clients were based in Bengaluru. We moved to this city in May 2015.
Why did you choose mobile payment system and were you clear about its growth potential?
We had the base idea, as we had faced the mobile payment problem. As a young startup, we knew there were certain challenges with digital payment system. We wanted to make it really easy for any company to accept payments, especially on the mobile devices that were getting popular at that point. 2014 was the year when transactions on mobile phones began to rise compared to web.
Smartphone penetration was increasingly growing in India and most transactions were happening on mobile. We saw a huge potential and a market as nobody was focusing on mobile payments at that time. That's how the original idea came about. We constantly added new features integrating our services into wallets, UPI. At that point, no one was focusing on optimising payment for 2G speed. Bringing a payment gateway, which is mobile-first, and specifically designed for payments on 2G speeds or low network speeds on a small scale device was critical and this was one of the technical problems that we wanted to solve.
How do you ensure to deliver a smooth mobile payment experience?
UPI was launched in 2016. So we worked on developing one single payment layer so that merchants can integrate and accept all instruments that came along. Initially it was debit and credit cards, then net banking. After that we added wallets, EMI payments and then UPI. So a merchant didn't have to go to individual banks, card networks, NPCI for UPI, everything was integrated under one single umbrella. So all modes of payments including wallets such as Freecharge, Ola Money, were under one umbrella. Mobile payment experience was the key and most of the mobile transactions were happening at low internet speed and we worked on optimising payments for 2G speed.
Has internet connectivity improved?
The connectivity has gone up, but it is still flaky. So it is not the bandwidth issue. People have bandwidth plan, but it is the network inconsistency. Indian internet connection is one of the slowest in the world and we always optimised our platform to ensure payments are happening on mobile even when the internet speed goes slow.
What about funding? How much have you raised so far?
We raised around $2.5 million through Y Combinator, Matrix Partners and 33 angel investors who included founders of Snapdeal, Freecharge, InMobi and many other Indian internet influencers. Then we raised around $9 million from Tiger Global and Matrix, followed by an undisclosed strategic investment from Mastercard.
What about your global expansion plans?
Global expansion is something that we are looking at. The payment problem is specific to developing countries and not developed countries. Geographies like South East Asia face similar payment issues like India. We don't want to immediately take the technology we built for India to these markets. We are working on market research and product customisation before we plan to expand. But base problems are the same setting up payments acceptance layer, multiple payment local instruments and technology. We have to take it there and customise it a little.
What are your plans for the Indian market?
Right now, we are primarily focussed on simplifying payments in India, working on product expansion. We had a bunch of product launches three months ago. We now not only accept payments, we also disburse payments, different forms of payments, beyond online payments like bank transfers and NEFT. Increasingly our focus will be to add a lot of these different products and verticals which diversify us in terms of what we do for businesses so not just payment acceptance in the online space but if somebody accepts bank transfers, we accept it and disburse payments for them to pay their vendors.
You had a good run during demonetisation.
With demonetisation, there has been a change in mindset. Before demonetisation, even schools and colleges would not opt for digital payments. But this move, caught them off guard and now they can't say that it is a cash loss for us as they don't have an option. So the change in mindset is still helpful for us. This has enabled many to be in the digital platform, the government is also working towards incentivising businesses to move digital. In the last one year, we have grown about 20x in terms of volume, and similar ratio in revenues. In the last four months, we have grown about 40-50% month-on-month.
How many products are you offering right now?
One is the core payment gateway product for payment acceptance and four new products which are Razorpay Route, Razorpay Smart Collect, Razorpay Subscriptions and Razorpay Invoices - all these will solve for managing the entire money movement for the country's huge under-served business community and embrace cash-rich traditional sectors such as education, government, insurance and new age ecommerce companies.
When do you plan to break-even? Are you closer to it?
We are not profitable yet, but we are not far from break-even either. We really want to push towards it. It will be easy for us to achieve break-even in six months. But right now, our focus is on product expansion, spending a lot of money on investments and work on things that will give us positive returns in future. So focus for the company is not really to look at creating profits right now, it's just that market economics are positive so it is not difficult for us to breakeven. We are processing billions of dollars in payments, and we cater to over 60,000 businesses including the likes of GoIbibo, Yatra, Zomato, Zoho, DSP Blackrock and Zerodha, among others. We are aiming to impact the lives of 500 million end consumers by 2020.