Daybreak - A hair away from unicorn status, but Juspay just can't catch a break

Episode Date: February 17, 2025

It has been a confusing year so far for the payment processor, Juspay.  On the upside, it is one step closer to unicorn status thanks to a possible 150 million dollar funding round. But at the same time, it has also been getting the cold shoulder from several fintechs that once were a core part of its business. It all began just a few months ago, in December, when the Walmart-owned payment aggregator Phonepe said it would discontinue support from all third-party payment orchestration platforms. Soon after, Razorpay and Cashfree followed suit and severed ties with Juspay. So now merchants have to decide – do they stay the course with Juspay or jump ship? The stakes are at an all time high. Because their decision could reshape the very structure of the payments industry. Tune in. Listen to 'One Billion in 10 Minutes', our new mini series based on The Ken's inaugural case competition. The Ken app Apple Podcasts Spotify

Hi, this is Rohan Dharma Kumar. If you've heard any of the Ken's podcasts, you've probably heard me, my interruptions, my analogies, and my contrarian takes on most topics. And you might rightly be wondering why am I interrupting this episode too? It's for a special announcement. For the last few months, I and Sita Ramon, Ganesh, my colleague and the Ken's deputy editor, have been working on an ambitious new podcast. It's called Intermission.

We want to tell the secret sauce stories of India's greatest companies. Stories of how they were born, how they fought to survive, how they build their organizations and culture, how they manage to innovate and thrive over decades, and most importantly, how they're poised today. To do that, Sita and I have been reading books, poring over reports, going through financial statements, digging up archives, and talking to dozens of people. And if that wasn't enough, we also decided to throw in video into the mix. Yes, you heard that right. Intermission has also had to find its footing in the world of multi-camera shoots in professional studios, laborious editing, and extensive post-production.

Sita and I are still reeling from the intensity of our first studio recording. Intermission launches on March 23rd. To get an alert as soon as we release our first episode, please follow Intermission on Spotify and Apple Podcasts or subscribe to the Ken's YouTube channel. You can find all of the links at the ken.com slash I am. With that, back to your episode. It has been a confusing year so far for the payment processor, Just Pay.

On the upside, it's one step closer to Unicorn status thanks to a possible $150 million funding round. But at the same time, it has also been getting the cold shoulder from several fintechs that once were a core part of its business. It all began just a few months ago in December when the Walmart-owned payment aggregator PhonePay said it would discontinue support from all third-party payment orchestration platforms. Now, the thing is, just pay is the big boss of the payment orchestration space. It has monopolized it for years now. You can think of orchestrators sort of like traffic signals at a busy intersection. They are in charge of routing payments across multiple payment aggregators, the likes of phone pay or razor pay.

They decide which payment aggregator to root the payment through based on their commission rates and payment success rates, apart from the method of payment. So, Just Pay is essentially an aggregator of aggregators that partners up with merchants and ensures that their payments go. through. So if one aggregator is down, Justpe is responsible for ensuring that the merchant can continue accepting payments through an alternative. Great for the merchant, but not the most appealing prospect for payment aggregators, right? Because it puts a certain distance between aggregators and the merchant. Now, things got even more complicated when the Reserve Bank of India approved JustPay's application for a payment aggregator license in early 2024. One person close to razor pay, told the Ken that JustPay then started rooting payments to its own aggregator, hyper-PG,

at everyone else's expense. Now, this was when others in the ecosystem started seeing it as a threat, because now it was competition, which is why phone pay decided to go its own way back in December. But here's where things get interesting. Soon after, Razor pay and cash-free, which are among the country's top five payment aggregators, also followed suit and severed ties with Just-Pay. And that shook everything up. Now more than ever, payment aggregators are pushing to integrate directly with their customers, the merchants.

Razor pay and cash-free entered the orchestration space over a year ago and are now pitching to merchants as an alternative to Just Pay. So now, merchants have to decide. Do they stay the course with Just Pay or do they jump ship? The stakes are at an all-time high because their decision could reshape the very structure of the payments industry. Welcome to Daybreak, a business podcast from the Ken. I'm your host Rahal Philippos and I don't chase the news cycle. Instead, every day of the week, my colleagues Nikda Sharma and I come to you with one business story that is worth understanding and worth your time.

Today is Tuesday, the 18th of February. Let's talk about payment orchestrators and how they fit into the whole fintech ecosystem. For starters, not every merchant needs a payment orchestrator. Generally, those who aren't operating at a huge scale. instance, a D2C brand, would opt to integrate directly with payment aggregators. But if you're processing transactions worth several crores every day, that is where an orchestrator comes in. Because in that situation, you can't compromise on the overall payment experience. Your objective is ensuring a majority, if not all the payments go through.

Which is why the likes of Swiggy, Book My Show and Indigo engage just-based services. And thanks to these big ticket clients, orchestration accounts for more than half of JustPay's operational revenue of 319 crore rupees. So, Razor Pay and its peers severing ties with the company could potentially hurt business. But where does that leave these aggregators? Well, Razor Pay is looking to get merchants to plug into it directly. Direct integrations are ideal because that way the platform can ensure that all of its latest innovations reach its customers as swiftly as possible. cash-free has a similar transition plan. But the thing is, from the merchant's perspective,

it isn't that straightforward a decision. Because the whole transition is a cumbersome process that can affect their businesses for several days, if not a couple months. They will have to put in much more effort to monitor any issues that may come up along the way. Now, the biggest issue is that companies that handle hundreds of cross-in payment every month

can't afford the risk of being dependent on any single place. Even if a payment aggregator has a 100% success rate, it's still too risky to root 100% volumes to any of them because all of them have a downtime. Just take the cosmetics brand minimalist, for instance. It's directly integrated with two payment aggregators, raise a pay and pay you, and ask customers to choose one of them to make their payment.

But turns out this extra step reduces conversions and creates friction. And apparently it's affecting business. A product manager handling payments for the brand told the Ken that an orchestrator usually helps the user avoid making a choice. But razor pay and cash-free have already come up with a workaround. Stay tuned. Two months ago, we posed a challenge to some of India's brightest and most creative minds at the country's top business schools. In three sentences, the challenge before you is, number one, you're a quick commerce company. number two, you have $1 billion.

Number three, how will you win? That's it. Tune into 1 billion in 10 minutes. A podcast by my colleague Rahil Filippos, based on the Ken's inaugural case competition, organized in collaboration with Zaroda. You just heard Praveen Gopalakrishnan, the CEO of the Ken and the author of our popular newsletter,

The NutGraph. For the case competition, our in-house team headed by Praveen, shortlisted 10 teams out of nearly 100 competing for a 10-lac-rupy grand price. Over six episodes, you will hear parts of their ambitious and creative pitches all 10 minutes long, rooted in the real world and centered around five quick commerce platforms that have completely changed the way we all shop. You can listen to the miniseries on the Ken's app, Apple or Spotify. The links are in the show notes.

And now back to the episode. Both Razor Pay and Cash Free have launched their own orchestration services. Razor pays is called Optimizer, while CashFrees is flow-wise. Both were launched just months ahead of RBI clearing JustPays payment aggregator license. Yet, when they are pitching their product to a client, they aren't claiming that it's a substitute. When the Ken spoke to someone close to Razor Pay, they explained that Optimizer is pitched as a value-added feature on its core payment aggregator to meet merchant's needs for a failsafe

and not necessarily to become a full-fledged competitor in the orchestration space. Meanwhile, flow-wise is more of an engine to help merchants scale their payment operations of which routing is just one aspect. But even so, the intent is clear. Offering payment

aggregator services is essentially commoditized, so players are now pushing hard to set themselves apart by becoming a one-stop shop for payment solutions. So that naturally means trying to push out Justpe. But dislodging a market leader of over a decade

isn't an easy task, even if it has lost some of its appeal. The Ken spoke to Sheetal Lalwani, Jaspe's co-founder and Chief Operating Officer. He explained that Justpe is currently integrated into 40 payment aggregators. He also said that many merchants have

assured the company that they will continue to use its platform. And it isn't just orchestration that Justpe is taking care of. You see, the Company is embedded in the payment infrastructure of major customers thanks to its long-standing relationships with them. So it ends up building a lot of small features for large merchants for whom payments are not their core business. For instance, it provides some merchants with biometrically authenticated one-click transaction. The bottom line that many people in

this space agree to is that Justpe has an edge. They understand their customers and their pain points far better than anyone else. And given that, why would a lot of? an enterprise choose any other product. Well, if you ask the aggregators, they will tell you that the concept of payment orchestration is no longer necessary. More on that in the next segment. Let's imagine a scenario where razor pay and cash freeze

orchestration services actually do take off. Why would they eventually allow the other's payment aggregators on the same platform? That very fair question was asked by an executive from the payments industry. Now, for industry stakeholders, just pay's hyper-pg isn't a direct threat to razor pay or cash-free. But the two definitely are to each other.

That makes it all the more likely that the whole thread of orchestrators could unravel, leaving each one as a lone wolf. Especially now that the payment aggregators hunger to be a one-stop shop, let them to set a precedent by unplugging from Just-Pay. One person close to Razor Pay said that that is the inevitable future that payment aggregators envision. Orchestrators made sense in the late 2010s when there were far fewer payment aggregators

and success rates were lower all around. But the ones that exist now are more technologically advanced. The thing is, not everyone feels that way. Merchants are pretty skeptical about the whole thing. In fact, one fintech product manager told again that internally they were all quite clear that they would not integrate with a standalone payment aggregator. As for Jaspé, Lairobi,

Lalwani made his position clear too. When the Ken asked him if Jaspe would on board with razor pay or cash-free's platforms, he simply chuckled and said, if merchant's value in our payment aggregator being on them, absolutely. But there are so many better payment aggregators. Daybreak is produced from the newsroom of the Ken India's first subscriber-focused business news platform. What you're listening to is just a small sample of our subscriber-only offerings.

A full subscription unlocks daily. long-form feature stories, newsletters and podcast extras. Head to the ken.com and click on the red subscribe button on the top of the website. Today's episode was hosted by Rahil Filippo's and edited by Rajiv Sien.