The company recently received an in-principle approval from the Reserve Bank of India to build this business.
Juspay has been operating as a payments service provider for ecommerce companies. It offers a layer on top of payment gateways where it can route transactions to the right gateway, ensuring a higher rate of success.
Now, it is building a full-stack payment gateway which can offer card payments, transactions via the Unified Payments Interface and wallet payments. It will be handling funds and will do the settlements at merchant accounts, said a senior industry executive in the know.
“We have received an in-principle approval and are in the second category that is ‘approved but cannot operate’,” said Juspay cofounder Sheetal Lalwani, responding to ET’s queries.
ETtechDiscover the stories of your interest
The RBI directive says that existing payment gateways can continue operations with an in-principle approval. But new entrants need its final approval to start operations. Juspay is a new entrant.
The company’s strategy assumes significance in the context of the RBI embargo on existing players Razorpay, PayU, Paytm and Cashfree for onboarding new merchants.
Lalwani said Juspay will not compete directly with incumbent payment aggregators (PAs), rather focus on new areas.
“Over the years, we have collaborated and established a great working relationship with our PA partners for our payment orchestration platform…we will continue to work in this manner to make it a win-win for our merchants and PA partners,” she said.
Juspay intends to create products for business payments and open credit enablement networks, and work on emerging use cases on the open-source commerce platform ONDC (Open Network for Digital Commerce).
New geographies
Besides tapping into new business areas, Juspay is also trying to enter the North American markets.
Bengaluru-headquartered Juspay has built an open-sourced payments platform named Hyperswitch.io which helps digital businesses in the US to manage payments.
“Our vision is to help businesses, banks embrace payments diversity, accelerate adoption of real-time payments and fundamentally eliminate payments fraud by embracing seamless two-factor authentication in the US market,” Lalwani said. Juspay intends to replicate the learnings from India in the rest of the world, she added.
The do-it-yourself Hyperswitch payment platform can sit on top of existing payment gateways and route transactions efficiently.
“Hyperswitch is the very first step towards a long journey and payment aggregator business could happen in the long term…but for the foreseeable future, Hyperswitch will work on top of existing and new PAs in the US region and we are not getting into payment aggregation there,” Lalwani said.
Both founders, Vimal Kumar and Lalwani, are looking at the US business, while its chief growth officer Shan MS is moving to Namma Yatri, the open-source ride hailing platform in Karnataka.
Also read | UPI to ONDC’s Namma Yatri: How Juspay made its way through India Stack
Stronger revenue lines
Digital payments is a sector with narrow margins. Juspay, which offers a technology layer on top of other payment gateways, gets an even smaller share of revenue per transaction.
“The company needed to diversify its revenue base to push up its topline and becoming a payment gateway will ensure that it can keep a large share for itself,” said one of the people quoted in the story.
Additionally, competition in the payments space is heating up, with new-generation payment aggregators like PhonePe coming up. While Juspay plays a crucial role in the ecosystem with its ability to process UPI payments and others, there is a challenge emerging in its own turf too.
In October, Razorpay launched Optimizer, an artificial intelligence-powered payment router. This solution is similar to what Juspay offers at present.
In 2021, Juspay had secured $60 million in a funding round led by Softbank, which was also an investor in Paytm. Back then, its valuation stood at around $450 million.
For fiscal 2022, Juspay had reported revenue of Rs 120 crore, data from Tracxn show. This had gone up around 70% from around Rs 71 crore the year prior. The company has yet to file its FY23 financials.
“If you want to build a $100 million revenue company, you will need to invest in a full-stack payment solution and also build solutions for omnichannel merchants, that is what everyone is doing,” said the founder of a rival payment company who spoke on the condition of anonymity.