“B2B payments is something that we are thinking very hard about … the idea is to expand into vendor payments and (look at) the different ways in which we can manage the suppliers of these anchor merchants, solve their reconciliation problems,” said Vijay Agicha, PayU’s global head of strategy, mergers and acquisitions, and investment.
Eventually, once it is deeply embedded in the business payments ecosystem, the company would like to venture into small-ticket supply chain financing for its merchants, Agicha said. Last year, PayU participated in a Rs 114 crore funding round in Vayana Network and now holds a 4.6% stake in the supply chain financing startup.
Digitisation of small merchants is an expanding space in India, but competition is also very high. A founder with a major fintech startup, which competes with PayU, told ET that merchants tend to work with multiple payment providers —stickiness is low and mortality high in this segment.
“If a payment player can get deep into the merchant ecosystem, and become a full-stack service provider from consumer payments to business payouts, and consumer credit to supply chain financing, it can create a sticky client base,” the startup founder said.
While many of its competitors, including Paytm and Razorpay, have gone big in the offline space, PayU is currently not looking at setting up a terminal business.
Discover the stories of your interest
Agicha explained that PayU is mostly looking at deploying QR codes at places where transactions are being recorded. It can thus keep the cost of operations low, while offering omnichannel solutions to clients.Building fresh on a strong base
From being an early player offering online payments to internet companies back in 2011, to facing severe competition from new-age startups such as Paytm and Razorpay, to a failed attempt to acquire Billdesk and facing a merchant acquisition embargo from the Reserve Bank of India, PayU has had a chequered history in India.
ETtechPayU has also seen a leadership churn recently. Bob van Dijk and Laurent Le Moal, who were previously top executives at Prosus and PayU Global, quit the company in September. Chief financial officer Akash Moondhra and PayU Finance CEO Prashanth Ranganathan also left the company around the same time.
Anirban Mukherjee has now been elevated to the position of PayU CEO. With a new management in place and a new corporate office in Mumbai, as well as a sharp focus on India, PayU wants to re-establish its grip on the domestic payments landscape.
“The appointment of Mukherjee, who is based in India, as the CEO of the entire PayU business is significant in the sense that PayU is now an Indian entity with some business in Southeast Asia and looking to export services from here to the world,” said the founder cited earlier.
The previous CEO, Le Moal, was based out of South Africa or the Netherlands.
On the business front, the company has grown from processing 800 million transactions in FY21 to 1.4 billion in FY23, settling $58 billion. Revenue has increased 145% to Rs 3,910 crore in FY23 Rs 1,591 crore in FY21.
ETtechRivals Razorpay processes around $100 billion in gross transaction value annually and Paytm reported a gross transaction value of around $54 billion in the September quarter alone.
Talking about the future, Agicha said the new leadership is fully focused on the platform business. It started with merchant payments, scaled up through the acquisition of Citrus Pay in 2018, and began checkout finance through LazyPay and consumer financing through Paysense. Now, with Wibmo, PayU is offering fraud protection and security infrastructure to banks, and through the Vayana Network, it intends to enter B2B payments and credit.
Lending becomes cornerstone
For PayU, payments is a client acquisition tool. A major chunk of its revenue comes from credit, and this share is expected to grow.
In FY19, around 99% of PayU’s revenue came from payments. Currently, the company generates 47% of its revenue from operations other than payments, with 30% coming from credit. Underlining its focus on lending, PayU has pumped in around Rs 1,740 crore till date into its wholly owned lending venture, PaySense.
“PayU works with many other fintechs supporting their customers with its own balance sheet arrangement. It has also made its platform compliant with the latest regulatory norms on FLDG,” said a senior executive at a fintech firm who tracks PayU closely.
A Crisil note from August noted that the total assets held by PayU Finance (its Reserve Bank-registered lending subsidiary) stood at Rs 2,427 crore as of June 2023. The company has improved its collection efficiency to more than 96% — it had dropped to 80% during the Covid period. In June it had gross bad loans of around 4.9% for its personal loan business, and for LazyPay, the 12-month gross write-off was 3.5%.
Agicha pointed out that on a base of around 230 million unique transacting customers, PayU offers checkout finance to trusted merchants. Once these borrowers repay loans steadily, PayU can offer them larger-sized personal loans.
Between 2019 and 2023, the credit business grew 200% on a smaller base, but overall disbursals hit $750 million last year, Agicha said.
Towards the future
To consolidate its position in India, PayU needs the blessings of the RBI. Last year, the central bank rejected PayU’s application for a payment aggregator licence, which it needs to operate as an online payment player in India.
“We are actively working with the regulator and have resubmitted our application, and are awaiting a final decision,” said Agicha. “We have implemented the changes (in holding structure) and our resubmitted application is in order.”
The senior industry executive quoted anonymously previously said with a clearer holding structure, and a green light from the regulator for the payments business, PayU will be able to plan for an eventual public listing locally.
Agicha claimed that the embargo on acquiring new merchants has not been a major impediment to business growth, with the company recording its highest transacting volumes ever in October.
With around $800 million invested in the Indian fintech ecosystem, PayU has a lot riding on its performance in the domestic market. With a strong platform approach, the new leadership at PayU is focused on India and in the country for the ‘long haul’. And with a full-stack offering, it hopes to encompass the entire merchant ecosystem.