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  • South Asia

Deal focus: Cashfree targets merchants in India’s payments boom

  • Justin Niessner
  • 03 December 2020
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Apis Partners' support of India-based Cashfree is driven by a recognition that the democratization of digital payments is as much about empowering traditional merchants as unbanked consumers

UK-based Apis Partners had a large menu of start-ups when it began shopping for inclusive online payments exposure in India last year. But the field narrows quickly when the prerequisites include both fast growth and profitability.

One of the few companies that fit the bill was Cashfree, which has built up a network of 50,000 merchants since its inception in 2015 and achieved profitability late last year. Apis committed about $35 million to the company this week as part of a Series B round.

Cashfree’s key operational differentiation is a relatively strong focus on “payouts,” which essentially encompasses any non-purchase money transfer between merchants and individuals, including wages, refunds, and rewards. These transactions can be done using existing government-created infrastructure in India, but the technological capacity needed is often prohibitive to mom-and-pops trying to go online for the first time.

“A lot of companies help you take payments, but not very many help you return a payment if you have to reverse a transaction or do refunds for any one of the reasons why money would have to go back into a customer’s account,” says Udayan Goyal, a co-founder and managing partner at Apis. “Cashfree has solved that pain point for merchants. Then, using that as a hook, they have built other services.”

The additional services are myriad, with recent product launches including same day settlement, cross-border payments, merchant lending, e-point-of-sale, bill payments, split payments for marketplaces, subscription payments, payment pre-authorization, and bank validation. Ultimately, the plan is to organize the data flow for merchants by bringing every conceivable payments-related service under a single omnichannel interface.

This convenience is seen as particularly in-demand in India’s thriving online delivery space, where doorstep payments via point-of-sale machines are re-blurring the lines between digital and traditional commerce. “In order to facilitate that, you must have the ability to pay online and offline through effectively the same data channels,” Goyal says. “You’re aggregating those transactions and providing them back to the merchant as a single data stream.”

Cashfree was processing over $12 billion in annualized payment volume as of March via more than 100 channels including credit card, debit card, net banking, the government’s UPI payments system, and various wallets. Clients include Shell, HDFC Bank, Big Basket, Xiaomi, Zomato, and Delhivery.

For Apis, much of the upside is underpinned by the market backdrop. Cashfree gained its initial momentum with the introduction of India’s demonetization policy in 2016, which took about 80% of the country’s physical currency out of circulation. Now that COVID-19 is further accelerating retail digitization, growth in payments is by no means predicated on having a dominant market share.

“This is not a market where you necessarily have to compete with other players for business,” Goyal says. “This is a market where because the penetration levels are rising, there is an enormous market opportunity that you can fill through that growth.”

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