PayU's enterprise unit to focus on cross-border payments, tech play

Online payment solutions provider PayU, owned by South African Internet conglomerate Naspers, on Wednesday agreed to buy Mumbai-based rival Citrus Pay in one of the largest acquisitions in India's fintech sector. The $130-million deal will increase PayU's India customer base to 30 million and help it process 150 million transactions worth $4.2 billion in 2016. The merger will strengthen Naspers' foothold in the enterprise side of India's online payments segment, as both Citrus and PayU focus on corporate clients. PayU runs its enterprise business under unit PayUbiz. In a recent interaction with TechCircle, Rahul Kothari, head of PayUbiz, talks about the company's growth plans, new offerings and competition. Excerpts:

How is PayUbiz performing? PayU primarily has three businesses—SMB business PayUmoney, enterprise business PayUbiz, and consumer business through wallet. PayUbiz has close to 10,000 enterprise merchants and PayUmoney has 1,60,000 merchants. PayUbiz powers businesses across the value chain and is used by about 80 of the top 100 e-commerce websites in the country. PayUbiz processed transactions worth half-a-billion dollars in July, amounting to an annual $6 billion. However, the pace at which we are growing, we should be able to process transactions at the rate of $10-12 billion annually.

According to a July 2016 report by Google and Boston Consulting Group, the digital payments industry in India is $50 billion. So, a $6 billion market share is significant. Banks hold a majority share in the market, but if you look at third-party players we are clearly one of the biggest. In terms of revenue percentage share, PayUbiz leads. Nearly three-fourths of PayU's overall revenue comes from the enterprise segment.

What is the transaction fee you charge from merchants? The fee varies from merchant to merchant but, on average, we charge close to 1% of the overall transaction.

How do you plan to take the enterprise business forward? We have deployed a lot of technology, such as One Tap technology, CVV-less transactions, Magic retry and SurePay, over the past few months to provide users with a smooth transaction experience.

The e-commerce industry in India today is at around $20 billion, and is projected to become $200 billion in the next five years. Customers must be given a smooth and user-friendly platform to transact. Fundamentally, as a company we are looking at becoming a technology provider across the value chain. Currently, eight to nine players are involved when a transaction happens. Our aim is to eliminate most players and conduct the transaction alone.

What are your plans for PayUbiz in the short term? You will see us evolving as a much stronger technology player over the next 12 months. We will be working with partners, competitors and banks.

We will aggressively move on cross-border payments. Currently, if any foreign merchant wants to sell in India, it can't use an Indian payment gateway as regulations require the merchant to have a licensed office in India. But recently, the Reserve Bank of India announced guidelines for cross-border payments where Indian payment gateway providers can provide services to foreign merchants. We will probably be the first one to enter this space. We will launch our service in next 30-60 days.  We will start with China, the US and the UK. We have decided to go live with four-five merchants, though we have close to 30 merchants in the pipeline.

We will also be launching our own payments instruments in some time. For example, if you use Uber cab and you have money in your Paytm wallet, the ride ends and the payment takes place. We are coming up with a solution where you will not have to load the money into the wallet to make the payment.

We will be very aggressive on the PoS (Point of Sale) offline payments space. We have PoS machines in the market. Currently, these focus on small businesses, but now a lot of this will happen in the enterprise business. We will provide merchants a single view of all their transactions across both online and offline channels. There are 300,000 to 400,000 online merchants in India and about 50 million merchants offline, of whom probably one million are using PoS machines. So, the sheer size of the offline space is big.

How do you see your competition? What's your biggest differentiating factor? PayUbiz sees three different sets of players as competitors. One, other payment gateway aggregators such as CCAvenue and BillDesk. Second, banks. Third, wallet providers such as Paytm, FreeCharge and MobiKwik. Though we partner with banks and wallet providers, we also compete with them. It's something like sleeping with an enemy.

Wallet companies are focused on expanding their consumer base while PayUbiz is focused on expanding the merchants' base, so it becomes a win-win partnership. Similarly, we compete with banks as a payment gateway company but are also investing in building the core payment products for the banks.

When it comes to other payment gateway providers, we chose e-commerce as our target vertical, and we have really beaten our competition in this vertical. We are leading the e-commerce market with 30-40% share, while BillDesk is leading in the utilities segment.

Things have not changed for decades in the Indian payment ecosystem from the back-end perspective, though a lot of things have been happening on the front-end. We are trying to solve that. The biggest differentiator for PayU is our technology DNA.

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