Cashfree targeting return to profitability by Q1FY25: CEO

New Delhi: Nearly a year after barring Cashfree Payments and Razorpay from onboarding new merchants on their payment aggregator (PA) platforms, the Reserve Bank of India last month lifted the ban and granted them final PA licence.

Ever since, there has been a “significant pent-up demand among businesses eager to utilize Cashfree Payments services,” Akash Sinha, CEO and co-founder of the Bengaluru-based payments company told Mint. “Since obtaining the PA licence, we have already onboarded over 25,000 accounts (or merchants) that were pending for the past 12 months. With expectations of 45,000 to 50,000 monthly merchant leads going forward, we are confident of a sustained growth of our platform,” he added.

When there were no new business/merchants coming onto its payments platform due to the regulatory ban, the once-profitable Cashfree—which claims to have about 3-4 lakh merchant base—said it invested more time developing new products and building new lines of businesses. “We just went harder on cross-sell and upsell, activated a lot of dormant accounts, increased the wallet share with existing accounts. And we have seen the growth in payments volume and on overall revenue-wise from the existing merchant base. We will be higher than what we did last year,” Sinha said.

The primary focus, according to him, was on building a well-diversified platform capable of addressing all merchant needs through a unified portal. The company, which now aims to return to profitability by the first quarter of FY25, introduced more than 10 products across payouts, verification, connected banking, escrow management, including innovations such as KYC Link, Reverse Penny Drop, and Co-lend.

“Additionally, we launched FlowWise, India’s first self-hosted payments orchestration platform.”

FlowWise is an important innovation that Cashfree came up with. There are large enterprise internet companies in India, which still struggle with using payments in the best way possible. Enterprises can install FlowWise on their own cloud and manage the entire payment operation.

They can integrate all the payment methods on their platform, route transactions, optimize successes for transactions, do reconciliation and refund management, dispute management, customer analytics, cost optimization from the same platform, he said.

“In terms of cost, a mid-to-large enterprise would need a team of 10-15 developers, 3-4 product managers, and a finance team of 15-20 people doing reconciliation, refund etc. These are very high-paid resources. The challenge is also training the talent, ramping up…and it’s a big task. With FlowWise, they literally can do all of this with just 10% of resources they have,” he claimed.

While the product is still at beta stage, Cashfree said it won’t follow the pay-per-use model. Instead, there is a licence fee for the software and a monthly fee. Without disclosing the name of the merchants using this software, Sinha said that the number of merchants using FlowWise is in ‘double digit’ currently.

Cashfree claimed that it is seeing great traction for FlowWise since its launch, and that the product is set to process $1 billion monthly TPV (total processing volume) in Q1 of FY25.

Another product is KYC Link, which the company launched a few months back. In this segment, the company competes with standalone KYC startups such as IDFy, Signzy, Karza among others. Over 1,000 merchants, including Bajaj Finance, Dream11, and Meesho are using Cashfree’s KYC Link product.

“We crossed almost 90-95 million verifications per month. So, that is a scale we are seeing, which is much larger than a standalone reg-tech (regulatory tech) player. Revenue that we are seeing from this product is very close to independent reg-tech companies in the market,” Sinha asserted.

The company—which processes $4 billion worth of payments per month—is also looking at expanding its presence in the UAE through its acquisition of payments firm Telr.

“We aim to take as many products as possible from India to global markets this year, and expect the global market to contribute 30%-40% to the company’s overall revenue in next five years, which currently is in single digit, Sinha said.

On aggressive competition and a long list of RBI-approved payment aggregators, Sinha said that as an ecosystem, no one has the ability now to burn hundreds of billion dollars just to secure a high growth rate. “Whoever is going to take the bet on pricing, it can only survive for a small amount of time. Second is, product capabilities have to be at par. In this market, there’s no long-term contract with merchants, so if they find a good product, they’ll switch immediately. Some players have started very late, they will take years to be where we are.”

Payments is a thin-margin business, which is further shrinking due to competition. However, Sinha believes the total addressable market in India is big. “If you’re processing $100-$200 billion GMV, the 0.1% margin can give you $200 million in revenue, which is a pretty high number.”

But why hasn’t it been achieved yet? That’s because of intense competition, he said, adding that a consolidation is taking place. Also, the size of market is expanding. So, the market has to grow to a certain level and the players have to be fewer in order to make more revenue, which, he believes, is happening organically.

It has been more than two years since Cashfree raised its last funding round at $200 million valuation from the State Bank of India. Over the past year, a few media reports said the company–which has raised over $40 million in funding till date–was in acquisition talks, but the talks failed over valuation.

Sinha denied any report of Cashfree being in talks to be acquired. “Right now, Cashfree is a very formidable player and it is very difficult to displace us from the market.”

After being profitable in FY20 and FY21, the company posted a loss of ₹3 crore in FY22. In FY23, the company’s revenue from operations grew to ₹614 crore, compared to ₹350 crore a year ago, whereas its loss widened to ₹133 crore. Surviving in this cut-throat market with no fundraise in the last few years, where does the loss-making company stand in terms of runway?

Once a company becomes profitable, the runway doesn’t matter, Sinha stated. “We are a large organization, generate more than ₹700 crore in revenue. And, for any company of this size, attracting money is not a challenge. This model is stable, there is no fundamental flaw. At the same time, we know how to be self-sustainable. We will be back to profitability very soon, say by Q1FY25.”

Cashfree–which employs 800-900 people–claims that it has been investing a lot in new products over the last couple of years, which will “start generating revenue very soon.” He said that in next financial year, he expects 20%-25% revenue contribution coming from the new products.