PayU to widen fintech play, bets on cross-border payments, offline business


Naspers-owned payments gateway PayU India is betting big on the fintech space in India. While its primary focus will be on payments, particularly cross-border payments, it is also entering the credit business and offline space.

In an interaction with VCCircle, PayU co-founder and chief operating officer Shailaz Nag said that the Gurgaon-based company plans to scale up its presence in the cross-border payments space, which it recently entered. "We are working with around 18 big merchants globally, and expect 20% of our overall business from cross-border payments next year," Nag said.


Currently, foreign merchants cannot sell their goods using an Indian payment gateway service because regulations require them to have a licensed office in India. But recently, the Reserve Bank of India's (RBI) guidelines for cross-border payments – Online Payment Gateway Service Providers (OPGSP) – have relaxed this condition for foreign merchants.

PayU has more than 300,000 merchants on its network, out of which 80% are small and medium businesses (SMBs). Still, majority of the company's revenues comes from large enterprises, Nag said. But he expects the market share of SMBs to increase.

Besides payments, the company is keen on the offline segment. Earlier, PayU planned to aggressively target the offline payments space through PoS (Point of Sale) machines, but the company deferred the move. "We were trying to get into the PoS terminal infrastructure business, but not now. We believe that mobile is blurring the offline and online thing, so we are concentrating on mobile-based offline features. We will use mobile as our base to do offline transactions," Nag explained.


PayU plans to introduce a mobile-based multi-tender PoS service that will support wallets, debit and credit cards for kirana stores in 2017. The product will allow merchants to create white-label apps for themselves, while customers can authenticate transactions through notifications.

To mark its foray into the consumer credit business, the company will soon be launching a new product, which is currently in the beta phase. Christened Lazy Pay, it will allow customers to complete purchases without making a payment. It will appear as a payment option on the merchant payment website and will give consumers a 'pay later' option while making a purchase.

Nag also said that the firm is scouting for investments in the credit business segment. Late last year, it invested $6.5 million (Rs 44 crore) in consumer lending startup ZestMoney, along with Ribbit Capital and Omidyar Network. PayU also picked up 20% in the startup. ZestMoney allows users to avail of equated monthly instalments (EMIs) to make purchases without using a credit or debit card. For this, the startup has a repository of user data, which it gathers from credit information bureaus.


Additionally, PayU intends to innovate around the government's recently announced Unified Payment Interface (UPI). According to Nag, the initiative is not a business in itself and he intends to tap into that opportunity, "We want to build something offline around UPI in a very different fashion. Secondly, we plan to work with multiple banks where we want to control their user interface. Thirdly, we are going to build an authentication system around UPI," Nag said.

Competition Nag is not very confident about the wallets business, "That's not a long-term sustainable thought process. We believe in the banking infrastructure," he explained.

Despite his contrarian view, PayU has its own wallet, but this is only to ensure the company receives regulatory clearances on a variety of transactions, Nag said. "If you have to get through the settlement reconciliation cycle, you need to register with the Payment and Settlement Act and for this, you need a wallet licence (PPI)," he added.


However, more than wallets, it is the Paytm payments bank that would provide a more competitive edge in the payments space and credit space, said Nag.

PayU claims it is clocking gross merchandise value (GMV) of $1 billion every month. The company is not profitable yet, but hopes to achieve it in each business segment.

"We expect our payments business to grow over 70% next year. We will win this market," he quipped.


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