After receiving the final status on its application in September this year, Bengaluru-based Instamojo has ceased operations of its payment gateway business, as per regulations, and has onboarded licenced PAs to ensure business continuity for its merchants.
Elevate Your Tech Prowess with High-Value Skill Courses
| Offering College | Course | Website |
|---|---|---|
| Indian School of Business | ISB Product Management | Visit |
| IIT Delhi | IITD Certificate Programme in Data Science & Machine Learning | Visit |
| IIM Lucknow | IIML Executive Programme in FinTech, Banking & Applied Risk Management | Visit |
At present, Instamojo claims to have a total of 2.5 million merchants registered on its platform, with almost 25,000 active in September, before the RBI returned its application.
“According to the rules, entities have a cool-off period of a year before they reapply for the (PA) licence. Last year, of course, the RBI made an exception. We will reapply for the licence after a year, and RBI has encouraged us to do so,” Gehani told ET.
Instamojo has already onboarded two licenced PA partners and is expected to onboard another two in the coming months, he said.
Gehani, however, declined to reveal the names of the onboarded PA partners.
Discover the stories of your interest
The central bank’s decision to not grant Instamojo the licence is linked to the company not meeting its net worth criteria. “It was due to the eligibility criteria related to the net worth of the company. There was a difference in the way RBI calculated and how we arrived at the net worth (of the PG business) in 2021. But our conversation with the RBI has been positive and good so far,” Gehani added.
News website The Morning Context first reported about RBI returning Instamojo’s PA application on Wednesday morning.
Big blow
The move has come as a big blow for the 11-year-old entity, which provides ecommerce tools and payment services, as several of its merchants were left in the lurch regarding their payment settlements.
These merchants said payouts to their bank accounts have been completely stopped since October. This, coming in the festive period, has been a big blow as they heavily on settlements to pay their staff and give out bonuses.
“We have alerted our merchants about the disruption, and have started processing payouts with new partners. The ones impacted now will only be in double digits,” Gehani said.
Further, the move is expected to have a sizable impact on the overall margins earned by the company, as it brings in other payment gateways into the mix, rather than leveraging its inhouse capabilities.
The failure to procure the PA licence is also expected to impact the topline of the company, as almost three-fourth of its revenues comes from payments. This revenue pool is expected to shrink considerably now.
Almost 25% of the firm’s revenues comes from ecommerce tools.
Talking about impact, Gehani said, “We have seen some merchants log out. But it is too early to say anything. In the immediate term, we have seen 30% of our monthly TPV (total payment volume) impacted.”
Backed by the likes of Mastercard, Gunosy, Kalaari Capital and Blume Ventures, Instamojo currently provides products such as payment links, smart pages and online store builder to direct-to-consumer brands.