[The Turning Point] From digitising COD to starting payment gateway: Story of fintech startup Cashfree Payments

Cashfree Payments — a Bengaluru-headquartered digital payments startup — is reportedly in talks to raise funds that would take its valuation to nearly $1.3 billion and get the startup into the coveted unicorn club. 

In June last year, the fintech startup had raised funding from India’s largest public-sector lender State Bank of India at a valuation of $200 million. 

It is also backed by startup accelerator Y Combinator, growth-stage financial services investor Apis Partners, and US-based financial services firm PayPal. 

Founded in 2015 by Akash Sinha and Reeju Datta, Cashfree helps businesses collect payments and make payouts through many methods, including bank accounts, UPI, IMPS, NEFT, cards, and native wallets.

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Eureka moment

Before starting Cashfree, Akash and Reeju experimented with different ideas such as “building a social network for workplaces or running a portal that would match entrance exam scores with the qualifying institutions,” Akash told earlier to YourStory.  

Started as a fintech solution for ecommerce companies who wanted to digitise cash on delivery (CoD), Cashfree wanted to help customers with an app as an alternative to the point of sale (POS) machines. They could pay through either a credit card, debit card, or net banking before the delivery executive arrived using the link on the app. 

“It was a fairly novel idea back then, and we had managed to partner with close to 300 offline stores in Bengaluru. But as a startup in its formative days, the idea was difficult to scale. We realised merchant aggregation was getting costlier and chose to shift completely to the online space,” he added. 

Cashfree’s “eureka moment” happened when it was trying to understand the pain points of online payments, thereby launching its payment gateway in April 2016.

Simultaneously, the company saw a bigger opportunity when it realised the issues startups and small and medium businesses faced with bulk bank transfers. 

“We saw a lot of businesses suffering from the problem of bank transfers, finding it difficult to pay vendors. Further, reconciliation was a major problem for B2B businesses, which cost them close to three to four hours of productivity every day. So we thought, 'Why don’t we automate the bank transfer problem?'” Akash said. 

Soon after, the company pivoted from a customer-facing digital payment solution provider to a technology platform for inward remittances and outward bulk payments for merchants.

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The journey

Cashfree offers full-stack payment solutions, including payment gateway integrations, a split payment solution for marketplaces, bank account verification, API, and auto collect, which helps match inbound payments to customers.

At present, the fintech startup works with over 100,000 businesses for payment collections, vendor payouts, wage payouts, bulk refunds, expense reimbursements, and loyalty and rewards.

Earlier this week, Cashfree Payments said it is doing peak processing of 1,000 payouts per second, and it processes transactions worth $20 billion annually.

The startup added that ecommerce and financial services merchants are leading the growth in disbursals, with its disbursal platform helping merchants make two million disbursals a day to beneficiaries.

Profitable since 2018, in FY21, Cashfree Payments’ net profit grew 48 percent to Rs 25.22 crore, as per the Registrar of Companies (RoC) filings. It recorded revenue worth Rs 228.75 crore during FY21, up 127 percent from the previous year. 

 “With the current momentum, we aim to grow 5X by 2025,” Akash said in a release. 

In November last year, Cashfree Payments invested $15 million in UAE-based payment gateway Telr to expand its footprint in the Middle East and North Africa regions as it plans to enhance operations globally. 

It already has operations in eight countries, including the US, Canada, and UAE, besides India.