In an attempt to capitalize on the profitable B2B cross-border payments sector, Razorpay, Cashfree, PayGlocal, and other newcomers scramble for the RBI’s PA-CB licence. A large portion of the $250 billion in SME exports is targeted by fintechs, who prioritize strong margins and service expansion.
Major domestic payment aggregators like Cashfree and Razorpay, together with more recent fintech companies like PayGlocal and Skydo, are racing to obtain a license in order to provide international payment services.
Applications for a payment aggregator-cross border (PA-CB) licence must be submitted to the Reserve Bank of India (RBI) by April 30 for both new businesses and established ones.
Observers of the industry estimate margins for overseas card transactions to be between 2.5 and 4%, compared to 1% in India. Aside from the fierce competition, the action will support the exorbitant valuations of these local firms. For B2B cross-border payments, the typical ticket size is thought to be $5,000.
“Razorpay is building a solution for cross-border business payments,” a senior industry executive said.
Smaller Companies also in Fray
A PA-CB license has been sought for by Cashfree. The initial focus will be on business-to-consumer (B2C) transactions, according to cofounder Akash Sinha. He told ET, “We can bundle international payments as an offering for our existing merchants. We already have a domestic payments business.”
Specific questions on cross-border business-to-business payments were not answered by Cashfree or Razorpay.
According to industry estimates, fintechs presently handle $10 billion of transactions, or a portion of the roughly $250 billion in exports that India’s small and medium-sized enterprises generate.
In addition to the industry giants, younger firms like Skydo and PayGlocal are vying for market dominance.
“We have applied to RBI for the cross-border licence. We are focused on the software and services export segment majorly, but we have some goods exporters among our clientele too.”
Movin Jain, cofounder Skydo
PayGlocal, which has an in-principle licence from RBI for the domestic merchant payments business, will soon apply for the PA-CB licence.
The RBI released the PA-CB rules in October 2023 in an effort to formalize the burgeoning international payments industry and include these fintech companies under its purview.
The US payment firms PayPal and Payoneer are significant participants in the international payments industry. Since PayPal closed its payments operations in India in 2021, it has concentrated on cross-border transactions for the export of products and services by Indian merchants.
