Payments Startup Razorpay Bullish On Lending, Launches Lending Platform

With 1.3 Bn population, few markets are just unstoppable in India. Digital payments and lending are two of them. As, both the digital payments market and digital lending are set to hit $1 Tn each, in the next five years, many companies including Flipkart and Paytm have been planning to foray into India’s digital lending market.

Razorpay, a prominent B2B payments startup is next to explore the digital lending space. The payments startup has now officially launched Razorpay Capital, a lending marketplace offering quick settlements and collateral-free loans. Integrated with the company’s existing dashboard, Razorpay Capital offers both short-term working capital loans as well as long-term business loans.

The company has also launched RazorpayX, which claims to simplify, accelerate, and automate small and medium enterprise’s (SME) banking operations such as accepting payments, managing cash flows, reconciling transactions and enabling flexible payouts.

Speaking to Inc42, Harshil Mathur, cofounder and CEO of Razorpay said, “We always thought we can make lending a lot easier than what it is today.  We are now launching a full-fledged lending marketplace offering SME loans from a daily basis to monthly.”

Three months back, Razorpay had launched the beta version of Razorpay capital. The marketplace currently has an annual loan disbursal rate of $30 Mn and aims to attain $100 Mn loan disbursal rate by March 2019.

Founded in 2013 by IIT Roorkee alumni Shashank Kumar and Harshil Mathur, Razorpay claims to be India’s first converged payment solution.

Razorpay Capital: What It offers

Razorpay has partnered with a number of Non Banking Financial Companies (NBFC), bringing their solutions onto the Razorpay Capital. The platform would offer a loan of ticket size varying from $7,058 (INR 5 Lakhs) to $141K (INR 1 Cr).

Based on Razorpay’s own Alternative Credit Decisioning System, the lending marketplace offers early settlements — short-term working capital loans — that can be availed automatically or on-demand by merchants and business loans that are long-term loans for growing businesses.

While the business lending aims to cater to high-growth companies looking to invest in new growth projects and expansion, early settlements is for companies looking to fuel their operational working capital.

Mathur said that the marketplace aims to provide hassle-free, pre-approved business loans from Razorpay’s NBFC and banking partners without any collateral. The credit limits are defined based on SME’s unique Razorpay credit score.

Like Experian and CIBIL scores, the Razorpay’s Alternative Credit Decisioning System uses transaction records to assign a unique credit score to each applicant. Based on that, the NBFCs and banking partners provide pre-approved loans.

On how automated these loans are, Mathur says that depends on the size of the loan. If it’s a small amount, it’s fully online. However, for big amounts such as $70K (INR 50 Lakhs) or more, there would be some offline verifications as well.

Some of the existing lending marketplaces are Finzy, Faircent, i2iFunding and i-Lend.

RazorpayX: Managing Finance

RazorpayX is an AI-enabled solution offers end-to-end operations for single or multiple accounts across various banks, managing their cash flow by aggregating these accounts.

Shashank Kumar, cofounder Razorpay told Inc42, “With RazorpayX, one can create and manage multiple payouts and disbursals via various methods such as bank transfers UPI, cards, wallets and more with complete control over the routing logic.”

Like many other personalised fintech startups such as Mintzip,  RazorpayX further provides insights and recommendations based on income, expenses, accounting, taxation and payments reports that are all made available on the dashboard.

Besides the company has also launched Razorpay Flash Checkout, adding new features such as of pay later and flashing OTP in the same screen, to its existing payment gateway and The X Club, a startup community. The X Club aims to support startups in their entrepreneurial journey and makes it less stressful and more successful.

Razorpay’s Growth Story

Last year, the company had rebranded its solutions under Razorpay 2.0. Stepping up from a being a simply payments gateway to offering a suite of B2B payments solutions, the payments startup had then introduced Razorpay Route, Razorpay Smart Collect, Razorpay Subscriptions and Invoices, all aiming to facilitate automated digital transactions to its clients.

After demonetisation was announced on November 8, 2016, Razorpay, in September 2017, had claimed to have grown 10x during the period. While demonetisation bubble is settled now, Mathur said, “In 2018 too, we have managed to grow 6X in terms of payments transaction volume.”

He added, “In the last one year, we have made a smooth transformation from being a single product company to multi-product company.  This includes subscription plans for recurring payments, generating virtual accounts on demand, custom payment pages, and more,” added Mathur.

Razorpay currently caters to 170K SMEs on its platform and aims to increase this to 300K by 2019.

Marking policy developments, Mathur averred that for the last couple of years, what we have seen is that there has been an increased attention and focus on payments in terms of policies and investments. For instance RBI’s decision to appoint an ombudsman. This gives a lot more trust back to the system.

Razorpay was part of the 2018 edition of the most coveted list of India’s most innovative startups — 42Next by Inc42.

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