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Two By Two Fri, 07 Feb 25 |
An abridged, narrative version of the latest episode of Two by Two, The Ken’s premium weekly business podcast. |
Razorpay, Phonepe, and others confront Juspay’s “white box”. Why is every major payment aggregator cutting ties with the payment orchestrator?
| 4 min read |
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A war has broken out in India’s e-commerce payments space. It’s hard to say who it’s between.
Razorpay, Phonepe, and Cashfree versus Juspay?
Or is it the power of India’s largest payment aggregators running up against the power of India’s largest e-commerce merchants?
Or the stymied ambitions of payment companies worth billions of dollars versus what they see as a gatekeeper blocking innovation and further revenue monetisation?
I stole those lines almost verbatim from a Linkedin post by Two by Two co-host Rohin Dharmakumar because I don’t think I can do a better job articulating the puzzle of why payment aggregators have suddenly lost their taste for Juspay, and are deciding to break ties with the orchestrator. They are also just a sample of the conflict’s many angles that we covered on this week’s Two by Two podcast.
The guests we had in the studio were all payments experts—Anand Balaji, former head of Stripe India and now co-founder of cross-border payments startup Xflow; returning guest Abhishek Madan, who used to be vice president of Product at Paytm*; and for a perspective from ground zero, Vimal Kumar, the founder and CEO of Juspay himself.
Tune in to the full episode for a multi-faceted view on the developing story.
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You can also listen to the 10-minute trailer version of this episode here if you want to get a sense of what we discussed:
Orchestrator, payment aggregator, merchant
It takes some time to fully understand how this particular battleground works, but this sharp illustration by my colleague Kashvi may help you get there faster. Even better would be reading last week’s longform feature on the subject.
TL;DR—Juspay sits at a place on the payments chain that makes payment aggregators uncomfortable. And feel threatened. The fact that Juspay secured a payment aggregator licence last year seems to have made those feelings all more intense.
Any merchant needs to work with a licensed payment aggregator to accept online payments. Many relied on Juspay as an orchestration platform—essentially, an “aggregator of aggregators” to help them integrate with different payment aggregators as a failsafe.
Put simply, if one payment aggregator goes down, Juspay automatically ensures that merchants can continue accepting payments through an alternative.
That’s hardly an appealing prospect for payment aggregators…
[…]
The issue became more contentious when the Reserve Bank of India (RBI) approved Juspay’s application for a payment-aggregator licence in early 2024. “It started undermining Razorpay’s service,” said a person close to Razorpay, claiming that Juspay has been routing payments to its own aggregator, HyperPG, at their expense.
Representatives of the merchant
We had the man who founded and leads Juspay in the studio, so it shouldn’t be surprising that a lot of sharp questions were levelled his way on this orchestrator-merchant-PA triangle. Juspay’s incentives came up, for instance.
Vimal: As I said, we look at ourselves as the extension of the merchant’s team. We work very closely with the merchants.
Rohin: Your incentives are aligned with the merchants?
Vimal: Merchants, yes. Merchants ask us to talk to the aggregators, and we talk to them on their behalf.
Anand: So, is there no independent relationship Juspay has with any of these aggregators?
Vimal: No, not for this.
Rohin: So you are an agent for the merchants when you have a conversation with the payment aggregators.
Vimal: Right.
Abhishek pushed back and he had a very interesting case, but it’s best listened to in full on the podcast.
Payment aggregators are willing to cut ties. Why?
Merchants need a smooth link with multiple payment aggregators to make sure payments go through. An orchestrator ensures just that, so severing ties with one as large as Juspay will come with costs for payment aggregators.
Yet, it seems pretty clear they’re willing to do it. And on a collective level, no less.
Abhishek: We’ve discussed this conflict, and we discussed aggregators not wanting to “integrate” with Juspay. It comes at a great cost to them. They’re losing a double-digit percentage of the business, at least, I’m assuming.
Praveen: It’s almost like they’re willing to cut off their hands…
Abhishek: Yeah! To save the body.
So it’s an important point in the sense that they’re okay with losing 10, 15, 20, or whatever the percentage is.
Rohin: You see, it’s not only one person doing it.
[…]
You will never see just one major party step back from it, because it knows that that volume will just go to its rivals.
Therefore, I think it’s important to understand why Razorpay, Cashfree, and from what I understand, PayU and Paytm, and of course, Phonepe, which kind of set the ball rolling, are all out.
All of this ties in with the thin margins involved for most players in the process, which makes any potential changes in the equilibrium (like the entry of a rival that could influence which payment aggregators get to process the most payments) all the more threatening for the incumbents.
This episode is a great dive into all the incentives and levers driving the conflict, so do be sure to stream it in full here. And big thanks, of course, to all our guests. Especially Vimal for accepting our invitation to be a part of the conversation, because it couldn’t have been easy when the subject of the discussion is your own company.
For now, this is a wrap. Write to [email protected] if you’d like to share any thoughts or feedback with us.
See you next week.
Regards,
Hari Krishna
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Hari works as a producer and researcher on Two by Two and First Principles. He’s from a “little village in Kerala where nothing much happens”, enjoys reading books (although he loves buying them even more), and appreciates films—be it on Netflix or Criterion.
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