When Prosus, a global consumer internet group that operates fintech company PayU, acquired Indian payments gateway company BillDesk for $4.7 Bn in what is touted as the largest acquisition in India’s digital payments space, the digital payments sector received another mega push, that is expected to reach $1 Tn in TPV (total payment value) by FY25, up from $300 Bn in FY20, and the current 160 Mn unique mobile payment users are likely to multiply by 5 times to reach nearly 800 Mn by 2025.
Post the acquisition, PayU and BillDesk will emerge as one of the leading digital payments providers globally in terms of TPV, at a time when the digital payments growth in India has positioned the country as a global fintech leader, with online transactions growing 80% in 2020 and Unified Payments Interface (UPI) transactions witnessing a 120% growth last year.
According to Anirban Mukherjee, CEO, PayU India, the ecosystem they are building through the proposed acquisition of BillDesk provides the scale and growth opportunities to position PayU at the forefront of digital payments in the country. “By bringing together these two complementary businesses, we expect to create a fintech ecosystem handling 4 Bn transactions annually — that is four times PayU India’s current level,” Mukherjee tells Inc42 in an interview.
On Way To Create a Digital Payments’ Behemoth
The acquisition will also establish PayU as one of the top online payment providers globally, putting yet another Indian success story on the international stage. The transaction, subject to regulatory approval, is going to stimulate both innovation and competition within India’s digital payments industry.
“This will not only help to strengthen India’s digital economy, but also bring financial services to those who may have historically been excluded,” Mukherjee says.
BillDesk is one of the few profitable startups in the country’s fintech space. The fintech giant recorded a net profit of INR 23,152 Lakh in FY20 as against INR 15,190 Lakh in FY19. The company posted revenue INR 134,190 Lakhs in FY 20 as compared to INR 105,958 Lakh in the previous financial year, according to Tofler. The company also saw its total expenses grow from INR 87,609 Lakh in FY 19 to INR 113,209 Lakh.
BillDesk is the fourth major acquisition by PayU in India. Prior to BillDesk, PayU had acquired CitrusPay for $130 Mn in 2016; acquired payment and security firm Wibmo for $70 Mn in 2019; and last year, Prosus acquired a controlling stake in a digital credit platform PaySense for $185 Mn.
Despite being profitable, BillDesk has solid competition in Razorpay, Airpay, Oxigen, PayUbiz, Paytm, Instamojo, CCAvenue and PhonePe, among others.
PayU’s Three-Fold Approach For India
The Reserve Bank of India (RBI) expects more than 200 Mn new users to adopt digital payments over the next three years.
“In India, PayU’s approach is three-fold. We wish to build a large business in payments; be innovators in digital credit and aim at having a full financial services ecosystem. The first two are principally organic plays, till date,” says Mukherjee.
“For us, financial services is just a partnership play for now, which is noticeable in our investments in Fisdom (mutual funds) and IndiaGold (digital gold). While PayU is still exploring, we want to create a comprehensive financial ecosystem with brokerages, insurance and issuance stacks etc. PayU is a platform company; so that means that we will power bank infrastructure, while having an independent app, as well,” he elaborates.
On regulatory frameworks present in India for digital payments gateways, he said that the world has seen the emergence of world-class Indian entrepreneurs who have led this digital transformation from the front.
“The Indian fintech sector, specially startups, has seen support from the government and progressive policy in this sector will help grow this sector manifold. One good example is the Account Aggregator (AA) ecosystem that has been recently launched which will be a big step forward for achieving the aim of financial inclusion,” Mukherjee tells Inc42.
Earlier this month, the Indian government’s much-awaited account aggregator framework that was conceptualised in 2014 to facilitate smoother and safer access to financial data went live with four Indian banks coming on board.
HDFC Bank, ICICI Bank, Axis Bank, Federal Bank, Kotak Bank, State Bank of India (SBI), IDFC and IndusInd Bank were in various stages of implementation of the framework. More than 7,000 accounts have already been linked so far and nearly 6,000 customers have used Account Aggregator to share data, according to estimates.