Witness to the growth of neobanking and credit: Harshil Mathur
By Srinath Srinivasan
With the lockdown disrupting offline businesses, Razorpay has helped many small businesses with digital contactless payments. Razorpay co-founder and CEO Harshil Mathur shares some information from the lockdown period with Srinath Srinivasan. Excerpts:
How did the market react after the announcement of the lockdown and how did you deal with the fluctuation?
The first month of the lockdown was tough for all segments – e-commerce, offline businesses and others. When things started to stabilize, there was a significant increase in new businesses registering with us. On average, we integrated 200 merchants per day. The monthly figures would be between 7,000 and 9,500 traders. This figure has increased by about 50% and is between 10,000 and 15,000 merchants per month. Indeed, offline businesses have realized the need for digital payments to avoid contact and keep business going, which would ensure cash flow. OTT services, e-commerce, electronic technologies, online games and dating have also increased significantly.
Did you identify any new use cases during containment and which segment were they from?
Very small businesses. Small shops in the streets began to sell more products WhatsApp and other messaging platforms. So we created payment links to integrate with these platforms with tax and legal compliance. This has been a good number of customers that we have onboarded. The UPI network is a huge instrument for a national payment player like us. Foreign payment players cannot provide this type of service.
Besides building functionality for small businesses, have you seen a demand in other service areas?
Neobanking and credit are two of those service areas where we are currently seeing growth. The neobank allows us to deepen our integration into the activity of a merchant. In addition to managing payments, we also manage merchant payroll, tax payments, vendor payments, and all other financial transactions. We reached a total payment volume of $ 3 billion through RazorpayX neobanking.
Regarding loans, we lend based on the history of the business with Razorpay. We pre-approve the loan if their history is good. During lockdown, loans took a hit. Now the sellers are coming back at the end of the moratorium. MSMEs can borrow working capital with a credit limit of Rs 50,000 to Rs 10 lakh in 10 seconds. By the end of 2020, we aim to support Rs 100 crore in credit. This is our new cash advance service.
What challenges do you expect from the neobank because it is not a well chartered space?
With the neobank, challenges like fraud and loss of trust arise. It requires a policy-level framework, like how you have policies to identify defaulters today, centrally. Another problem is that the neobank is still a gray area. Singapore introduces virtual neobank regulations and licenses. We expect something similar from Indian regulators in the next two years. As a bank we have to hold money and today digital wallets are the only way to do that in India. This limits the services we can offer. A wallet is not a full-fledged digital bank. The final challenge will be to resolve issues related to user experience. We have hired over 100 product and user experience professionals over the past few months when demand has increased.