Razorpay honcho Harshil Mathur on when Bengaluru based payment service provider will get profitable

Harshil Mathur, chief executive officer and co-founder, Razorpay.

Bengaluru-based payment service provider Razorpay expects to have 30% of its revenues coming from the integrated range of business-to-business (B2B) payment services it launched in September, chief executive officer and co-founder Harshil Mathur told FE’s Shritama Bose in an interview. Profitability is still another two years away, he added. Edited excerpts:

You have said that you are now India’s first integrated B2B payment service provider. What does that mean?
Essentially, we are transforming as an organisation from being just a pure payment gateway to complete managed payment solutions. Right now we handle everything to do with the flow of money — from where it’s accepted to where it’s disbursed. So we’ve launched a new product around the same as well, which helps solve a lot of problems that a business faces. What we saw in the last two years was that payment acceptance is just part of the problem for a business. There are a lot of problems a business faces when the money moves from one part to the other inside the organisation. Payment gateways typically help with acceptance of only B2C (business to consumer) payments, but a lot of businesses have a B2B arm as well, where large-ticket payments — anything beyond Rs 1 lakh — happen.

These are typically done via NEFT (National Electronic Fund Transfer), IMPS (Immediate Payment System), RTGS (Real Time Gross Settlement). Now with our Smart Collect offering, we’ll be able to help merchants automate that side of the problem as well.

What is your role in asset-light businesses such as the e-commerce space?
In businesses like e-commerce platforms or cab aggregators, after the payment is accepted, it also has to be disbursed to the seller or to the driver. Right now, payment gateways don’t help with that. The companies have to handle thousands of disbursements by themselves on a daily basis. We have a product which helps with that.

We also have a GST-compliant invoicing solution for traditional businesses. They don’t need a separate app for this. They get a beautiful dashboard through which to manage this solution. Lastly, there’s a subscription product which takes care of payments for businesses like Netflix and RentoMojo without a two-factor authentication.

How many merchants are you trying to reach with these new offerings?
Right now, we have around 40,000 merchants on our platform. We expect it to more than double in the next one year. We expect to target another one lakh merchants in the next two years with this. In terms of end consumers, we expect that more than 100 million of them will use the Razorpay platform in the next two years because of these new offerings.

What kind of volumes do you record on a daily basis?
At present, we process more than a lakh of payments every day with our current set of merchants. What we expect is that while our payment volume continues to grow rapidly, we expect 10x growth this year. We also believe that in the next one year, more than 30% of our revenue will come from the newer products that we are launching.

How is your service priced?
Different products are priced differently. For example, the GST-compliant invoicing solution is completely free. But if a merchant uses our payment platform, we charge them for that. For the disbursal and subscription platform, we charge a percentage commission. For the B2B payments, we charge a flat fee per transaction because these are high-value payments that can go anywhere from Rs 1 lakh to Rs 1 crore.

What would your capital requirement for the year be and what are your plans for capital-raising?
At this point, we are not planning to raise additional capital. We are already pretty well-funded. For executing the new project, we already have enough capital. We probably might raise another round somewhere around the middle of next year. It will be a typical Series B round and the raise will be from the point of view of working towards newer projects and newer technologies.

What is your timeline for achieving break-even and then profitability?
At a unit economics level, we are net positive. We don’t lose money on transactions. In terms of achieving complete profitability, I think we are still a year-and-a-half to two years away from that.