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Harshil Mathur Co-founder & CEO, Razorpay
Harshil Mathur Co-founder & CEO, Razorpay

Growth at all costs mindset has changed now: Harshil Mathur

Covid-19 will spur digitization that even demonetization couldn’t, since the impact there was only for three months or so

The digital payments industry did not escape the crisis caused by the coronavirus pandemic, with the sector seeing a sharp drop in volumes. Harshil Mathur, co-founder and chief executive officer of payment solutions provider Razorpay, said in an interview for Mint’s Pivot or Perish series that new digitization opportunities are emerging before digital payment companies as they continue to face the new challenges. These include equipping not just the humble kirana stores with digital payment capabilities, but also larger fast moving consumer goods (FMCG) companies and the logistics sector, which continued to be outside the gamut of digital payments even after demonetization. Edited excerpts:

How has the crisis forced you to rethink business strategy and operations?

Social distancing will definitely be a norm for the next 12 months at least. Keeping that in mind, we have made changes to our product strategy. To give some examples, we relaunched our ePoS (electronic point-of-sale solution) and card payments product, which we had looked at during demonetization, replacing the need of a physical card payment terminal with an app.

For kirana stores, we have looked at providing our existing products ‘payment pages’ and ‘payment links’, as a simple tool for neighbourhood store owners to send payment links to customers as they deliver essential goods in the locality.

We are also talking to various FMCG companies who now want to incorporate our solutions stack to reconcile inventory and payments made against those items. It is rare for FMCG companies to talk to digital payment solution providers, and the covid-19 crisis has seen that change.

How has the virus crisis and the nationwide lockdown impacted your business and plans?

During the first lockdown, business and payment volumes were down by 30%. Now, as e-commerce deliveries resume, we see a road to recovery for online payments soon. During this crisis, our revenues also declined by 30%. However, it was still manageable. Banks are also trying to go digital; so, digital onboarding products and neo-banking solutions are critical as we continue to onboard new customers.

For lending, digital lenders are trying to get more liquidity, so the industry might take some time to revive. We have also paused our international plans for this year. But we continue to add 1,000 merchants every month, in spite of the lockdown.

From a business standpoint, we continue to be a low-burn business, since as a payment gateway, we don’t invest a lot in field operations. We have a capital runway of 2-3 years, with the current market condition, and will hire a total of 150 people across product and technology roles in FY21.

What do you expect to be a long-term change in your business plan in a post-covid era?

Definitely, there is a capping on all discretionary spends since business activity is low. As a business, we are avoiding long-term planning, since no one knows what the future looks like. The typical ‘growth at all costs’ mindset has changed to ‘survival at all costs’, which includes extending runways.

With startups struggling to raise funds, how will that affect the industry and its growth?

Startup funding has been definitely impacted. That isn’t just due to the business uncertainty around covid, but also the new FDI (foreign direct investment) regulations, which is expected to reduce investments in the Indian startup ecosystem even further. Overall, it is a bad time to even raise funds since valuations of private markets and startups have dipped. As valuations drop, there will be significant uptake in mergers and acquisitions, with consolidation on the charts. We are also evaluating to acquire some companies, which might be fundamentally good, but are caught in the wrong economic cycle.

What will be the new normal for the startup and digital payments industry?

Contactless payments will be an interesting trend, since all stakeholders, including merchants, are looking to deploy it. This crisis poses interesting opportunities like digitizing not just the supply chain but the shipping and logistics industry as well, something which fundamentally digital payment companies have tried, but failed.

Hence, covid-19 will bring the digitization that even demonetization couldn’t, since the impact there was for only three months or so. Covid-19 will force sectors to digitize since businesses can’t be closed for a long period of time and social distancing is here to stay.

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