Leading payment gateway Razorpay has received approval from the Reserve Bank of India (RBI), confirming it can now rapidly onboard new merchants. This ends the year-long licensing logjam that severely impacted major digital payment firms including Razorpay. The fintech sector is rejoicing as the RBI embargo imposed in December 2022 is lifted.
Firms Receiving Approval
Other than Razorpay, Cashfree has also officially confirmed receiving their final licence as payment aggregator.
Prominent gateways like GooglePay, EnKash, Paymentz, and Open Financial have also received the green light from RBI and joined the league of these industry pioneers.
This puts an end to a year-long uncertainty for these firms which were clogged from onboarding new merchants and were facing stiff competition from Juspay, CCAvenue, Billdesk, and more.
Impact on the Online Payments Sector
The RBI approval is going to have an enormous impact on payment gateways like Razorpay. Both Razorpay and Cashfree has confirmed that they going to onboard 10000 new merchants on their platform to serve industry-first payment solutions. This rapid merchant acquisition has so far been halted as companies were restricted from growing while their license applications were being processed.
The industry can expect an advanced surge of innovations in the digital payments space adhering to the end of the regulatory roadblock. Payment service providers can leverage India’s top-notch payment systems upgraded services to attract and retain merchants.
The RBI approval also levels the playing field by enabling interoperability between payment aggregators, digital wallet providers, and banks. This will provide customers with a vast choice of digital payment platforms that cater to their specific needs.
Road Ahead Still Challenging
Although the outlook of the online payments sector seems bright, the road ahead may still persist with some challenges for firms. The market is already crowded with more than 200 licensed payment aggregators and is expected to continue to be crowded. This implies that there can be intense competition and that profit margins can be squeezed. As a result, payment aggregators may face challenges in their quests to acquire merchants successfully amidst margin pressures.
Additionally, the long-term existence of these firms in the accounting records of RBI would also depend largely on their strict compliance with regulations.
Outlook Positive for Payments Space
Despite the challenges, Razorpay is strongly positioned to ride India’s high growth digital payments market. A recent report by Statista states that India’s digital payment market is expected to grow at a CAGR of 16.62% to reach US$370.50Bn by 2027. This exponential growth is being driven by increasing smartphone penetration, ecommerce expansion, favorable regulations, and innovation in serving diverse customer segments.
Specifically for Razorpay, with digital adoption accelerating, it expects to grow transaction volumes by over 50% annually. Razorpay is gearing up for rapid expansion by bolstering teams, forging partnerships and enhancing tech infrastructure.
Having established market leadership, Razorpay is likely to attract major investments as investors up their bets on payments sector. This access to capital will fuel Razorpay's ambitions of broadening product portfolio into payrolls, lending, expense management and global remittances over coming quarters.
The RBI approval positions Razorpay as a frontrunner to acquire merchants rapidly, catalyse innovation and cement its leadership in India's booming payments market.