Sometimes a chat between friends can germinate a business idea. This is what happened in the case of Reeju Datta and Akash Sinha. During one of their interactions, both kept bouncing off ideas for starting a social chat platform that finally led them to launch fintech start-up Cashfree, which ranks among the top three digital payment platforms in India.

Reeju, an engineering graduate from IIT-K and who previously worked with FabFurnish, and Akash, an IIIT-H graduate, who earlier worked with Amazon and BankBazaar, realised that to complete disbursals, an e-commerce website required quite a good number of accountants as he process was not automated unlike payment collection.

“We saw an opportunity there especially in the 3-4 billion bank transfers that take place in India every year,” says Akash. They also realised that most companies were not satisfied with their online payment service providers. “To penetrate the market, we had to ensure we solved their existing grievances and establish credibility and a market for our offerings,” says Akash.

They realised there was a need for solutions for the payment part of the function of the e-commerce website but as it was not part of the core business of the companies, not much attention was being paid to it and, hence, was not robust enough to take any spike in transactions. This is where Cashfree saw an opportunity and built a solution around this platform and several companies started outsourcing it to the start-up. Cashfree has around 55,000 merchants and processes over one million transactions daily. It processes more than $12-billion worth of transactions on an annualised run rate basis, a 25 per cent monthly growth, and hopes to take this to $30 billion by December-end.

Digital drive

Reeju says that when Cashfree was launched in September 2015, the team was digitising offline cash on delivery (CoD) payments but soon got into the online space completely. “We were making prototypes but they didn’t work out because a lot of hyperlocal e-commerce companies were using CoD and there was no way to pay digitally. That’s how we came up with this idea to use digital payment modes such as credit card, debit card and net banking,” says Akash. It was a major turning point in Cashfree’s journey as they identified the pain-points around online payment and created solutions to address them.

Even though they had managed to partner with close to 300 offline stores in Bengaluru, scaling up was becoming difficult. But when they started interacting with several online businesses, they figured out that one of the major issues the industry faced was that of bulk movement of money in the online space.

In January 2017, they carried out a few changes to their business model one of which was from being a customer-facing digital payment solution provider to a technology platform that digitises both inward and outward bulk payments for merchants. This resulted in Cashfree becoming a single platform where merchants could collect and disburse money automatically with ease. This is what distinguished Cashfree from the rest and it could penetrate the online space faster, primarily the gaming, fintech, travel, e-commerce sectors, say Akash and Reeju. Cashfree’s clients include Xiaomi, Zomato, Cred, ClubFactory, Drivezy, Furlenco, Dunzo, ixigo and Metro.

How does the model work

Big businesses and hyperlocal companies employ gig workers who have to be paid the same day or in a few hours. For this to happen, the accounts team would ideally create an excel file and enter the workers’ account numbers, then upload it to a bank portal and wait a few hours to get the response.

There is scope for errors and oversight. For instance, if a payment fails due to entering an incorrect account number, one has to re-initiate the payment. If the same task has to be repeated every day, it becomes cumbersome and is not a scalable. Cashfree identified this problem and built an API (application programme interface) for businesses to automate the process and reconcile the data. Assuming a certain payment does not get made, then the entire process gets re-initiated eliminating the cause of the glitch.

Funding

Cashfree is set to raise Series B funding of $40 million. The start-up was incubated by payments pioneer PayPal and raised $120,000 in seed funding from Silicon Valley-based accelerator Y Combinator.

Cashfree is working with banks to rebuild the digital payments banking infrastructure, thereby enabling the entire payments ecosystem. This will help them onboard five lakh merchants by this year-end.

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