Payment service provider PayU's SMB vertical sees 70% jump in revenues

Powered by over 500,000 small and medium businesses (SMBs) on its platform, payment service provider PayU saw its revenue and transactions from the segment increase 70 per cent and 80 per cent, respectively, in 2021 compared to the previous year. 

“We are looking to onboard 100,000 SMBs on our platform in 2022. At present, we have 500,000-800,000 SMBs. The variance is because an SMB merchant may remain inactive for a while and then return. 

Also, these are seasonal businesses which may sometimes pause and restart after a certain period of time,” says Mohit Gopal, senior vice-president, PayU India.

“When we just compare the first half of fiscal year 2021-2022 (FY22) against the second half, we see a 56 per cent growth in revenue. And gross merchandise value is growing even faster than that. It is not commonplace for a tech company to grow at this rate on a big base,” he added.

In September last year, PayU agreed to acquire payments gateway BillDesk in an all-cash transaction of $4.7 billion. But the deal hasn’t got the regulatory approval yet. “Until such time, PayU and BillDesk will run as separate entities and it is business as usual for us,” says Gopal.

The proposed acquisition will help PayU, the payments and fintech business of Prosus which operates in more than 20 markets, become one of the leading online payment providers globally by total payment volume (TPV). The combined entity will have a total of 4 billion transactions annually, Business Standard reported earlier.

With a large portion of the digital payments growth in India happening at the storefronts, the company has shifted its focus from being only a payments gateway. “We have also started offering offline products like united payments interface QR codes or point of sale (PoS),” says Gopal.

One of the impacts of the emergence of multiple modes of digital payments over the years has been a decrease in margins on an individual transaction basis. While some of the payment aggregators still charge a 2 or 3 per cent transaction fee, India’s zero merchant discount rate policy for UPI has also created a downward pressure on non-UPI transaction fees. 

“In most parts of the world, there has been a decreasing trend in payment margins, not just in India. This means if you continue to do only payments – either become so large that the wafer thin margins do not matter or look at providing ancillary products to the same merchant base,” he said.

To overcome this, PayU is also working on a slew of new features and products for SMBs — dashboards to monitor transactions, automated onboarding processes, tie-ups with the likes of Shopify, Magento, Wordpress, WooCommerce which help SMBs digitise their businesses, among other things. The payments company also has an NBFC arm called PayU Finance which backs credit products of buy-now-pay-later platform LazyPay, and online loan platforms KreditBee and PaySense, among others. 

“Unlike the traditional payments services, these ancillary offerings will not bring in as much revenue as the volumes will be much lower. But with time, what any smart payment company would try to do is try and increase the percentage of ancillary services against your traditional payment services,” says Gopal.