India’s Small Businesses Turn to Digital Ecosystems to Ease Payments, Ordering, Logistics and More

As much of the digital commerce world is busy building consumer payments ecosystems, the merchants that accept those payments need digital ecosystems with highly specialized and integrated services.

Fresh from a $375 million Series F funding round placing its current valuation at $7.5 billion, Bengaluru, India-based payments platform Razorpay is creating a B2B ecosystem for India’s businesses, innovating with the national Unified Payments Interface (UPI) system to bring a slew of services to business clients, from tax payments to lending, neobanking and more.

Read more: Razorpay Raises $375M Toward Expansion, Acquisitions

Razorpay CEO and Co-Founder Harshil Mathur told Karen Webster that India’s demonetization in 2017 lit the digital fuse in a nation known for merchant purchases using cash on delivery (COD). It also became the spark that ignited Razorpay’s business.

“[Demonitization] was a big boost for digital payments in India because suddenly nobody had cash and every major business in India wanted to go digital,” he said. “That’s why we created this solution, to allow any business to go online within a matter of minutes, instead of days or weeks.”

Rapidly creating a small suite of no-code and one-click tools for businesses, Razorpay achieved scale quickly and is now playing an important role in India’s digital transformation.

Noting that “India is full of businesses who don’t really understand technology very well,” Mathur said this made seamlessness and simplicity vital to product/service design.

“We created an ecosystem around it,” he said.

The pandemic drove even more demand for digital, Mathur said. Gaming, educational technology and investment companies suddenly took off as people looked for things to do during lockdown. Online microbusinesses and India’s gig economy also benefitted. It was a digital shift that Mathur said Razorpay was well positioned to support.

“Small sellers [had never accepted] payments, but suddenly people wanted to accept online payments on Instagram, on Facebook, on WhatsApp, and they needed a simple solution to click and create a link, and we were right there.”

As it stands, Mathur told Webster that paper money is on the run, with payments in sectors like food delivery now 80% digital, and travel and hospitality now almost 100% digital in India.

And moving quite rapidly to UPI rails.

“UPI is displacing cards, it’s displacing wallets, it’s displacing almost everyone now,” he said. “It’s just massive the last couple of years.”

Mathur also attributed a lot of its growth more recently to adopting UPI early on and enabling acceptance for wallets like GPay, PhonePe and Paytm that have integrated UPI as a payment method. He estimated that as measured by the number transactions, UPI is about 65% of transactions now.

One Rail to Rule Them All

Having one common national payments rail is inarguably streamlined and simplified, Mathur said. In the case of digital payments in India, he said he believes that UPI is the best payment method for transacting using the mobile device. UPI’s big strength is the fact that it’s not a proprietary technology.

“In the U.S. you have Venmo [and others], but they’re owned by [companies], and it’s not interoperable,” he said. “UPI is open, so Google has Google Pay on it, Paytm has Paytm on it, you have WhatsApp now entering and scaling up. Anyone can build an app and apply tomorrow.”

That includes India’s central bank with a digital rupee down the road.

“UPI becomes the right rail for it because the ecosystem is interoperable, making access and use easy for all,” he said.

See also: India’s Digital Payments Incentive Push May Come at Visa, Mastercard’s Expense

The Merchant Super App

With 8 million businesses on the platform, Razorpay is positioning itself as the go-to program for rapidly digitizing businesses, a super app of sorts for merchant needs. It’s a big opportunity for Razorpay to connect the system and add a lot of value to the merchant, which is part of what the company will use its recent fundraise to further develop and support.

Mathur said Razorpay does vendor payments; tax payments; payroll; employee health insurance; and enables buy now, pay later (BNPL) and access to working capital through bank accounts set up via its neobank RazorpayX.

“Our essential vision is to be the single financial platform for businesses, especially internet businesses, in India,” he said. “We want to get to a point where if tomorrow someone starts an internet business, they sign with Razorpay, and we take care of everything they need to do with money on our platform.”

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