The evolution of Citrus Pay - it wants to underwrite consumer transactions, but will it work?

In 2011-12, when Citrus Pay was just a year old, its technology had no champions. But that changed when the world’s largest e-commerce firm – Amazon – arrived in India. Their IT team approved Citrus Pay’s technology to manage the check-out process for consumers and the rest as they say is history. Since then, Citrus Pay has signed up with 10,000 + merchants and manages, which is around 12 per cent of the Internet commerce market, valued at $24 billion, in the country. It handles a total Gross Business Value of $2.2 billion (or Rs 14,000 crore) and close to 10 million transactions a month across its merchant and consumer businesses.

Now, after five years of making products in the form of Prepaid Payment Systems (PPS) and payment gateways, Citrus Pay wants to stay ahead of the game by offering new kinds of payment solutions. The bet it is taking is grand and risky. But if it works out, it will increase the company’s top line and make payments convenient. The strategy is to simplify the payments on mobile with a combination of data and technology, which will be used to separate the purchase and payment experience. This solution called Lazypay will allow Citrus Pay to become an underwriter of transactions by charging consumers, on a fortnightly basis, for transacting with merchants. The consumer can also bundle payments to buy grocery, cinema tickets and food under this platform and provide convenience to consumers. Settlements will be made by Citrus Pay to merchants immediately. This is almost like a postpaid bill which you experience for your phone connection. The Citrus Pay team believes it can change payment experience for consumers transacting on mobile.

However, this product will be offered to customers with good credit scores, which Citrus Pay derives with the help of its analytics engine. The platform profiles the customer’s stickiness to a merchant and then decides to make this payment service available to the consumer. “We have built the rail road in the form of payment stacks for merchants and we will continue building these new products to blur the transaction lines between merchant and consumer,” says Jitendra Gupta, Founder of Citrus Payment Solutions. This evolution has taken five years and it wasn’t a walk in the park.

The moorings 

Last year, when the company was flush with cash, it almost went ahead with a television creative that was worth $4 million. It would have been a colossal mistake. Jitendra Gupta and Amrish Rau sat down in a restaurant and wondered if a TV commercial was worth it all. They met the next morning and drove to the studio to pull out the advertisement. They had spent three months in overseeing the creative and to pull it out at the last minute was a big decision. “It was the best decision that we made and did not fall in to the trap of spending money. We are a technology company and that is what we decided to focus our money on,” says Amrish Rau, Managing Director of Citrus Payment Solutions.

No wonder the money is being put to good use. Citrus Pay is preparing itself for the era of a sharing economy where any individual can sell a product using a chat app. This micro-business is going to make every individual an entrepreneur. Just to illustrate how this consumer-to-consumer model works, let’s say a luthier wants to sell guitars. He or she can register with Citrus Pay as a seller and generate payment URLs as and when customers order guitars. The settlement will happen on a Citrus Pay gateway. “All this can happen on a chat app or social media platforms,” says Amrish Rau. The company is also working on payments through wearables to integrate the offline and online worlds. In the future, retailers could allow payments through a wearable, at the store, as part of their omni-channel strategy to win consumers and make brick-and-mortar retailing relevant to the modern customer.

The company has defined its revenue and solution stream into four buckets.

• Airlines: About seven airline companies use the payments stack of Citrus Pay to handle multicurrency payments on a global scale.
• Marketplaces: It works with several e-commerce market places to offer a payments stack with services such as split payments, network wallets, full checkout, and analytics services
• Offline to Online payments: Citrus Pay offers mobile software development kits to merchants who serve their consumers with apps. The company also offers API integrations and provides online onboarding of merchants
• Micro Transactions: Enabling chat-based payments

The payments industry on the consumer side works on wafer-thin margins, as little as .40 per cent. But on the merchant side, it can work on an annual maintenance and per-transaction model, which is a steady revenue stream.

But customers are happy.

“Their easy integration has helped us improve our services and provide a seamless payment piece,” says Ashim Jolly, COO of Haptik Inc, a startup working with corporates to guarantee quick response to customer queries. Haptik uses Citrus Pay’s platform.

The company has raised total capital of $32.3 million in three rounds. It raised $25 million in October 2015 and the total burn for the company so far has been $11 million. The money has gone in to increasing its employee count from 200 employees , last year, to 283 employees today. The competition in the industry is immense and engineering talent is all that matters.

Flipkart has just acquired PhonePe to enable similar services for consumers. Shopclues acquired Momoe – another payment wallet – to service customers interacting with merchants. FonePaisa, another payments aggregator, is building its business and technology quietly. The business model for these startups are around merchant settlements by using the Unified Payments Interface, which is a number – assigned to the user – allowing the individual to settle with multiple merchants without having to worry about using a credit card or a debit card or a prepaid mobile wallet. CitrusPay has recently employed the entire team of the now defunct startup – Zwitch - to build payment technologies of the future. Today every organisation is a startup because of the ideas employees bring to the table.

Also read: A Startup attempts new payment solution

Competition and future of Wallets

There were at least 25 mobile wallets and payment gateway companies that cropped up in 2013. Now only five of them are thriving. PayTM, Oxigen, FreeCharge, MobiKwik and mRupee are some of the names that crop up. PWC, the consulting firm, estimates the payments industry in India to be $1 trillion in size and puts the volume of digital transactions to be close Rs 130,000 crore ($20 billion), currently. Compare this with China and the market is worth $650 billion.

The payment industry, like several business opportunities in India, is witnessing its share of growth. Every large bank from HDFC Bank to ICICI to consumer giants like AliBaba and Amazon are betting big on this industry. The Reserve Bank of India has laid out a road map for mobile payments. The National Payments Council of India, which is a consortium of Indian banks, launched the Unified Payments Interface, which will allow consumers to make payments without many layers of security and verification assigned to a digital transaction. Verification will be via the Aadhar number, which could soon be linked to all digital payments.

For Citrus Pay, the future is going be around consumer-to-consumer payments and underwriting payments. It is building a good hybrid payments system that looks at bringing merchants and consumers on to one platform. With more Indians transacting through mobile phones, which is today close to 200 million smartphone customers, the numbers are only going to get bigger by 2018. Gartner predicts that there will be close to 400 million smartphones sold in India by 2018. By then, the payments industry would have gone through consolidation or we can expect some of these companies to have raised large rounds of money to become a half-a-billion dollar businesses or even $1 billion businesses in revenue and not valuation.