B2B fintechs turn to M&As to expand business lines and enter retail market

Mergers and acquisitions are emerging as the next big play for business-to-business (B2B) fintechs, as they look to open new revenue streams and gain a foothold in the retail market.

   

B2B fintechs are increasingly turning to the consumer side of the payments market, using third-party UPI applications (TPAPs) as entry points.

   

The move is driven by consumer acquisition cost. Unlike market leaders and challenger apps, which spend heavily on customer acquisition and build scale, B2B fintech players are looking to repurpose their existing base for their TPAP arms.

   

Consider Zaggle, which last month acquired Rio.Money for ₹22 crore. In June, UPI app POP raised $30 million from Razorpay. Meanwhile, Infibeam Avenues, which operates payment aggregator CCAvenue, secured NPCI approval to launch Rediff’s TPAP under the brand name Rediff Pay.

   

Zaggle, a spend management platform, plans to tap its base of over three million corporate customers through a new retail programme built on its latest acquisition. It has issued more than 50 million prepaid cards.

   

“We sit with a very large base of consumers which we so far haven't really monetised. Today, my engagement with the employees of a company is sporadic because they don’t have a reason to come to my platform unless it is related to reimbursements, company expenses, or allowances,” said Avinash Godkhindi, managing director and chief executive officer (CEO), Zaggle. 

   

Godkhindi explained that the company’s ability to engage with all its registered customer base increases multi-fold when an offering like retail cards is extended to them. “The biggest issue in a retail programme is the cost of acquisition (CAC). We are able to drive the CAC down because we already have acquired these users,” he added.

 

Rio.Money has more than three lakh downloads. It had issued around 10,000 credit cards at the time of acquisition.

 

The strategy is akin to a verticalisation play, concentrating on specific business segments rather than the traditional fintech approach of horizontal expansion.

   

Gandhinagar-based fintech Infibeam Avenues, too, is banking on a high number of customers acquired through its acquisition of Rediff, thereby, not burning capital to expand on UPI payments and extend financial services.

   

“We can build out specialised workflows, sector-specific payment solutions, among other things thinking how one can use UPI with some value-added services,” said Vishal Mehta, chairman and managing director, Infibeam Avenues.

   

The company expects to draw its daily active seven to eight million free email users onto RediffPay. The company also sees an opportunity to drive traction for its UPI app through the merchants onboarded via its payment aggregation business.

   

“The answer to if we can promote RediffPay TPAP on CCAvenue merchants is yes. We have a large base of customers, but the UPI volume on us is still in the lower double digits. But, the end-user is always going to self-select,” Mehta explained.

   

He added that RediffPay “should have an aspiration to get into the top three UPI apps by volume" once UPI payments are live on the application.

   

“The advantage with Rediff is that we have got a lot of customers coming to us every day. The advantage that we have is to do a lot more without burning capital,” he added.

   

Rediff’s ecosystem of offerings includes Rediffmail, an enterprise-grade email service; RediffPay for digital payments; and RediffOne, an integrated suite of business tools, which will now include e-commerce platform technology.

   

It is also evaluating capital-raising opportunities, including a potential initial public offering, to expand product growth and strengthen its position in the market.