Razorpay Success Story - How is it Facilitating the SMEs with Effortless Online Payment Mechanisms?

 

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Smartphones and the internet certainly took the world by surprise, but, at the same time, they signaled a world full of advanced technologies that would extend efficiency and availability for everyone living in it. The growth of cutting-edge software and technology thus helped in opening the gates to limitless opportunities for all the thriving sectors of the world. The banking and payments industry is one of the sectors where these developments have ushered in some major transformations. Digital payments or online payments are some of the many advantages that the new-age technologies have brought forth. The growing ways of payments and instant online payments of today are not only benefitting the banking and finance industry but the merchants and the general public as well all across the globe.

In the same field, with the vision to revolutionize the online payment mechanisms by providing transparent and developer-friendly APIs with hassle-free user integration, Razorpay was launched by Shashank Kumar and Harshil Mathur in the year 2014.

Razorpay is an Online Payment Solution in India allowing businesses to accept, process, and disburse payments with its product suite. It helps the business entities gain access to all the modern payment modes like credit and debit cards, net banking, UPI, and other popular wallets in the country namely JioMoney, Mobikwik, Airtel Money, FreeCharge, Ola Money, and PayZapp. Razorpay's online payment solutions can be integrated by both web and mobile applications.

Here's more about Razorpay, its Founders, Team, Industry, Mission and Vision, Name, Tagline, Logo, Business and Revenue Model, Competitors, Future Plans, "when was Razorpay established?" and more. 

Razorpay - Company Highlights

Company Name : Razorpay

Headquarters : Bangalore

Sector : Fintech, Financial Services

Founders : Shashank Kumar, Harshil Mathur

Founded : 2014

Funding : $815.7 mn (June 2022)

Revenue : $110.61 mn (Rs 844 crore in FY21)

Valuation : $7.5 bn (December 2021)

Website : razorpay.com

Razorpay - About and How it works :

As mentioned earlier, Razorpay enables online payments by providing developer-friendly APIs, powered by an effective integration process. Razorpay also offers a comprehensive dashboard to manage payments, as well as other plugins and integration suites for all major backend technologies and e-commerce platforms. With its efficient products Razorpay is bettering the online payment systems for startups and other companies and improving the individual experience too.

In September 2017, Razorpay launched four products - Route, Smart Collect, Subscriptions, and Invoices, which allow businesses to manage multiple aspects of money movement including collection, reconciliation, and disbursal.

During the same time, Razorpay also announced that it was entering the SME lending space with its subsidiary venture called Razorpay Capital. It is a lending platform that is designed to support Small and Medium Enterprises with instant and easy access to lenders. This initiative is aimed at solving liquidity and cash-flow challenges by providing these firms with quick settlements and collateral-free loans. A beta version of the platform was launched in September 2018 and has already disbursed $30 million in loans.

Also, Razorpay added two new features to its services offered. These are respectively called ‘Partial payments’ and ‘Batch Uploads’.

Partial Payments - It allows the end-users to make payments in part against a particular order ID instead of making the entire payment at once

Batch Uploads - It lets the business entities generate and process links in bulk rather than creating individual links by uploading a single file containing collect order details.

Razorpay X (Comprehensive Banking Platform) is an AI-driven API banking platform, which is set to fundamentally transform how businesses move money. The account number provided enables businesses to manage all forms of pay-outs (salary, vendor payments through NEFT, RTGS, IMPS, UPI) and receivables on Razorpay itself. Posing as a unique solution, businesses can now do everything and more with Razorpay that they were existentially doing with banks till now. Lately, there has been a significant enhancement to the existing online payment mechanism. Razorpay has also launched more new features to its checkout. These are essentially called Affordability, Personalisation, and Native OTP.

Razorpay - Industry

The Indian market for fintech has seen massive growth in the past decade and has been hailed as the world's fastest fintech industry in terms of growth where over 67% of around 2,100 fintech companies have been set up if we look back at the last 5 years.

As per the Razorpay Team, the Indian fintech market will touch Rs 6.2 lakh crore by 2025. It also added that COVID-19 has accelerated the company's digital payments segment.

Razorpay - Founders and Team

Razorpay is co-founded by IIT Roorkee alumni Shashank Kumar and Harshil Mathur.

Harshil Mathur

The CEO and Co-founder of Razorpay Harshil Mathur is an IIT Roorkee alumnus who completed BTech in Technology. Mathur further went on to join Y-Combinator in the W15 batch in 2015. Harshil started his career as a Wireline Field Engineer at Schlumberger. After his brief stint with the company, Mathur then decided to found Razorpay in 2014 with Shashank Kumar.

Shashank Kumar

Shashank Kumar is known as the Co-founder and CTO of Razorpay. He was also a former IIT Roorkee student who completed his BTech in Computer Science before attending Y-Combinator in 2015. After completing 3 months as a research intern in the Computer Science and Engineering Department at the University of Minnesota, Kumar joined another internship at Microsoft as a Software Development Engineer. Concluding 3 months as a Microsoft intern, Kumar eventually joined as a Vice President at SDS Labs before he joined as a Software Development Engineer at Microsoft. He worked as an employee with the software giant for less than 2 years and then decided to part his ways and co-founded Razorpay.

Razorpay has more than 1000 employees working with the company, as of December 2021.

Razorpay - Startup Story | How did it start?

This startup idea originated when the co-founders were working on the crowdfunding portal and in the process came to realize how muddled the online payment mechanism was in India. Besides, they also discovered that the US-based payment systems are not ideal for the Indian markets, especially if we look at the credit card penetration. Following these, they changed tracks to work on the payments problem in India, where the implementation of technology was really tough. Furthermore, the rate of the payment failures were also considerably high and the pricing that was available earlier, lacked transparency.

“We realized that most online payment gateway solutions were extremely cumbersome to get started on, especially for start-ups and small- and medium-sized enterprises. When we contacted a few payment gateway companies, we were asked for our past operational records, presence of physical offices, security deposits, and very high set-up fees. Online reviews of most payment gateways in India confirmed similar bad experiences,” said Mathur.

They, thus, started up to build a friendly online payment gateway that would be easy to integrate and use. After conducting some market surveys in the initial stages to verify the feasibility of the idea and then accumulating a positive response from potential customers, the co-founders decided on starting to work full-time on the Razorpay idea.

This initiative originated in Jaipur as a part of the winter batch of Y Combinator's startup program in 2015. Eventually, both these co-founders quit their respective jobs at Microsoft and Schlumberger after being supported by Startup Oasis in Jaipur, set up jointly by the Rajasthan Industrial Investment Corporation (RIICO) and IIM Ahmedabad’s Centre for Innovation Incubation and Entrepreneurship (CIIE). Razorpay is also regarded as the second India-focussed company to be chosen by the Y-Combinator program, the first being ClearTax.

Razorpay - Mission and Vision

As part of Razorpay's mission and vision, the company ensures that the "businesses find it easy to accept and receive payments."

Founded by IIT Roorkee alumni, Razorpay believes in revolutionizing money management for online businesses. The company aims to do it by providing clean, developer-friendly APIs and hassle-free integration. It offers a fast, affordable and secure way for merchants, schools, eCommerce, and other companies to accept and disburse payments online. Furthermore, Razorpay also helps its users to own a fully-functional current account and avail of working capital loans.

Razorpay - Business Model and Revenue Model

Razorpay charges 0.25 - 0.5% fees on every subscription collection transaction made through their gateway. With the emergence of Razorpay 2.0, the company has seen a growth in its revenue streams. It now contributes about 30% of Razorpay’s total revenue generation. This online payment portal is now looking to increase its average product adoption from one to two. The team expects RazorpayX and Razorpay Capital to contribute close to 35% of the total company's revenues.

Razorpay - Competitors

The online payments market is fairly crowded when it comes to ventures operating in the sector. In a market scenario like this, Razorpay competes with both well-established and new entities.

Some of the prominent Razorpay competitors are:

• InstaMojo
• PayPal
• Paytm Business
• PayU
• Payoneer
• GoCardless
• Apple Pay for merchants
• Oxigen
• Citrus Pay

Razorpay - Funding and Investors

Razorpay has raised a total funding of $815.7 million, as of June 6, 2022. Razorpay last raised around $75 mn on May 9, 2022, in a secondary transaction ESOP sale.

The company raised $375 million in the previous Series F funding round with the help of Alkeon Capital, Lone Pine, and TCV, who were the lead investors of the round the company saw on December 19, 2021. Furthermore, this round also saw other existing investors like Tiger Global, Sequoia Capital India, GIC, and Y Combinator. The Series F round is expected to help the company ramp up its banking suite, RazorpayX. With this round, the company has now become the most valued fintech startup in India. The valuation of Razorpay was last confirmed to be $7.5 bn on December 20, 2021.

The company's October 2020 funding round led by Sequoia Capital India, GIC, and existing investors of $100 million has given Razorpay a "Unicorn" Status amidst the coronavirus pandemic.

Razorpay - ESOPs

Razorpay announced that around 650 of its existing and former employees have sold their shares, the combined value of which is estimated at nearly $75 mn, as per reports dated May 10, 2022.

The Razorpay employee shares were sold at a 15% lower price than the company's preference shares. This round is followed by the joining of Lightspeed and Moore Strategic Ventures to the company's cap table. The secondary share sale round saw investments pouring in from two of the lead investors of Razorpay. This $75 mn ESOP buyback initiative is the 4th and the largest ESOP buyback of Razorpay and will stand as the second-largest buyback to date in the Indian startup space. Flipkart's Rs 600 crore ESOP buyback in 2021 still stands as the largest of the buybacks.  

The first ESOP was conducted by Razorpay in November 2018, which was arranged for 140 employees. The company led the 2nd and 3rd ESOP sale in November 2019 and March 2021, when 400 and 750 employees were eligible respectively. Though less is known about the 1st and the 2nd ESOP buybacks, the previous ESOP buyback, conducted in March 2021, was worth $10 mn. Razorpay, to date, has awarded ESOPs to 1940+ employees, including existing and former employees, with the help of which, the company created wealth opportunities for them.

Razorpay - Acquisitions

Razorpay has acquired 5 companies, as of March 16, 2022. The acquisition of IZealiant Technologies on March 16, 2022, was the last acquisition of RazorpayThe team of IZealiant Technologies is to be joining Razorpay after the acquisition. It previously acquired TERA Finlabs on Jul 19, 2021, before the company acquired Curlec, a Fintech startup from Malaysia. The acquisition was announced when the prominent Indian Fintech company acquired a majority of the stakes in Curlec on February 8, 2022.

Razorpay - Growth and Revenue

Razorpay has managed to record an exponential growth rate since its inception, and currently, the company powers payments for more than 5 million small and large businesses, including Facebook, Ola, Swiggy, Zomato, Indian Oil, Cred, and more. The Bangalore-based fintech services company claims to process total payments worth around $50 billion annually and records a healthy growth rate of 40% - 45% month-on-month.

The company is now hailed as the most valued, privately-held fintech company with a valuation of $7.5 billion, and the second-most valued Indian fintech service company after One97 Communications Ltd. The valuation of Razorpay witnessed a seven-fold jump in its valuation since 2021 when it was valued at a little over $1 bn.

Some of the growth highlights of Razorpay at a glance are:

The merchant count increased to 3,00,000 in 2019, which is currently estimated at over 8 million, and may rise to 10 million too in FY22.

Razorpay achieved $60 bn in total payment volume (TPV) via its platform in 2021, 20% above $50 bn, which was targeted for the year.

Razorpay witnessed an impressive 3X increase in its transaction volume, which was registered at around 400% in September 2021.

The fintech startup has deployed its ZealPro product suite across 50+ banks spread over 18+ countries in Asia and Africa.

On the disbursement side, Razorpay powers more than 5% of the IMPS transactions.

Out of the Indian unicorns, more than 34 of them are powered by Razorpay, when last reported in December 2021.

Razorpay Revenues

The overall Razorpay revenue was marked at Rs 519.4 crore in FY20, which saw significant growth to become Rs 844 crore in FY21. Its revenue from sales, which were reported to be Rs 508.9 crore in the previous fiscal, grew by 65.2% to stand at Rs 841.2 crore. The remaining Rs 2.8 crore was generated by Razorpay as a non-operating income in FY21. The TPV is growing for the company, which was clocked at $60 bn in 2021, which makes Mathur hopeful that the company has the potential of doubling its revenues in FY22.  

Razorpay Expenses

Razorpay earlier spent Rs 525.4 crore in FY20, which rose by 60% to become Rs 836.6 crore expenses in operational costs during FY21, whereas the total expenses of Razorpay were counted to be Rs 844 crore in FY21. A lion's share of the Razorpay expenses went for the payment gateway commissions, for which, the company spent Rs 480 crore. Rs 213.3 crore of Razorpay expenses went for providing the employee benefits. The employee salaries, PF, expenses, gratuity, and other employee benefits are all included under this expense. In FY20, Razorpay spent only Rs 120.5 crore for the same. Expenses for the promotional activities and for training and recruitment processes, where Razorpay spent Rs 18.3 crore and Rs 5.6 crore, are some other expenses that Razorpay bore in FY21.    

The company, which made losses 3 consecutive years earlier, had turned profitable in FY21 and has successfully managed to pull off a net standalone profit of Rs 7 crore.

Razorpay - Investments

Razorpay has seen 4 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. Biswajit Mishra and Kapil Rana founded HostBooks in 2009, which is currently serving as a cloud-based platform that provides accounting and compliance functions to the small and medium enterprises (SMEs). HostBooks will use these funds to scale up operations and the product suite they have.

The previous investment of Razorpay was in the Seed Round of NextPay, a payments fintech that supports SMEs in Philippines.

Razorpay - Challenges

Razorpay had its share of challenges and yet another challenge came up in the form of cybercrime. Razorpay underwent a theft of Rs 7.3 cr against which the Bengaluru-based fintech company has filed a complaint with the South-East cybercrime police. The cybercrime was conducted over a period of 3 months and the police are trying to track down the hacker, as far as the reports dated May 20, 2022. The Head of legal disputes and law enforcement, Abhishek Abhinav Anand of Razorpay, filed a complaint when the company failed to reconcile the receipts of Rs 7,38,36,192 against 831 transactions, on May 16th, 2022.

Razorpay - Awards and Recognition

The various awards and recognitions that Razorpay received throughout the years include:

• 2018 - Recognised as one of India's Top 50 Mid-Sized Workplaces in the category of “Great Places to Work.”
• 2018 - Awarded by IAMAI as the “Best Digital Payment Facilitator.”
• 2018 - Awarded by LinkedIn as India’s 25 Most Sought-after Companies to Work for.
• 2017 - Was a runner-up for the “Financial Express Software Product of the Year.”
• 2017 - The co-founders Shashank Kumar and Harshil Mathur got selected for the 'Forbes 30 Under 30'.
• 2017 - Backed the Bronze Award for the Best POS Innovation by PYMNTS.com.
• 2016 - Made it in the Nasscom 'League of 10' Companies.

Razorpay - Future Plans

Recently, Razorpay is focused on capturing the Indian market. As per their future plans, the company aims to enter the South East Asian markets too. The Southeast Asian countries will be the company's primary focus and will act as the stepping stone for its plans for global expansion ahead. The team will also be looking to acquire companies and invest in the Fintech B2B SaaS space in 2022. Razorpay has also revealed its plans of hiring up to 600 employees in order to strengthen its team further to grow.

Razorpay is also looking to further grow its product lines - the neobanking platform Razorpay, and its lending arm - Razorpay Capital (an initiative to empower SMEs). Razorpay founder Mathur revealed on May 10, 2022, that the company is not looking to raise funds in the next 12-18 months because he thinks that Razorpay is well-capitalised as of now. Mathur is hopeful that the company will double its revenues on the back of growing TPV.