The Reserve Bank of India (RBI) this month cleared Razorpay and Cashfree as payment aggregators even as it kept applications from Paytm and PayU on hold. The central bank last year imposed a ban on major payment aggregators such as Paytm, Razorpay, Cashfree and PayU, preventing them from entering new merchants and businesses.
So how did these businesses cope after the ban?
While the ban slowed them down and affected valuations, these companies explored alternative revenue streams and diversification, including globalization.
Paytm is redirecting efforts to offline payments, catering to a market segment unaffected by the ban while Cashfree is actively developing value-added services on its payments platform.
PayU India, another major player, reported revenue from its core payments business in the first half of the current fiscal year, mainly driven by its existing merchant base and subscription products like Wibmo. PayU has reapplied the payment aggregator license and is working with existing merchants to boost total payment volume.
Razorpay ventured into Malaysia and shifted its focus to offering new products to existing merchants, aiming to increase revenue per customer. The company launched value-added propositions for the direct-to-customer segment and the broader payments ecosystem. Razorpay’s chief operating officer noted a change in revenue dynamics, with the share of revenue from new customers declining.
The challenges
The Indian government’s scrutiny has made things difficult for digital payment aggregators. Razorpay, Paytm, and Cashfree were implicated in the Chinese loan program case, prompting investigations by the Enforcement Directorate.
RBI’s ban on established payment companies has facilitated accelerated growth in merchant onboarding for emerging players such as Pine Labs’ Plural, PhonePe, Innoviti Payments, Billdesk, and CCAvenue. These payment companies took advantage of the regulatory change by aggressively onboarding merchants.
The government’s emphasis on digitizing citizen payments has positioned players like Billdesk and CCAvenue as frontrunners in the evolving payments landscape. CCAvenue reported a significant increase in its total payment value.
While diversification into new business lines strengthens these online payment startups within their domains, the key challenge remains to digitize new merchants.