Harshil Mathur, Razorpay CEO: Building India's Dominant Payments Company

0:00Shashank Kumar: I sat down with Harshil Mathur, CEO and co-founder of Razorpay, one of India's most important fintech and tech companies. Ten years ago, nobody thought India's payments ecosystem could go fully digital. These days, the country runs the busiest real-time payments market on earth.

0:21Harshil Mathur: And today, 50 % of all real-time payments in the world happens in India. India was extremely cash-heavy when we came in, though. I carry zero-rups cash in my wallet when I go out. In fact, it's harder to use cash than to use digital payments in India now.

0:31Shashank Kumar: Razorpay powers about 85 % of India's largest and most important tech companies.

0:39Harshil Mathur: Out of 120 unicorns in India today, Razorpay powers close to 85 % of them. 90 % of those we started powering far before the baking unicorns. So we are the de facto payment player for startups in India.

0:53Shashank Kumar: Harshal has been an engineer his entire life. He started coding at age 12 and began building Razorpay in 2014, only one year after graduating college. But it wasn't easy getting the company off the ground. They had about 100 rejections until they got a single bank partner to say yes.

1:16Harshil Mathur: So we reached out to them, submitted a business plan, got rejected because we were two 23-year-olds, almost fresh out of college with no finance background with no background in banking who wanted to build a payments company the company today is india's dominant payments player

1:35Shashank Kumar: and harshal is one of the nicest and sharpest founders i've ever interviewed it became evidently

1:42Harshil Mathur: clear to me that the only way the hawkens continue to scale is that i can't be the point of failure right so the rule of thumb that i had is that if anything takes more than 30 percent of my time i need to dedicate it.

1:55Shashank Kumar: Arshal, welcome to FinTech Leaders all the way from India. Is that right?

2:00Harshil Mathur: Yeah, no, I'm glad to be here.

2:03Shashank Kumar: Well, thank you for joining. Let's get started and hear a little bit about your story. I think your story is well known in India, not so much in the U.S. and i want people to to really understand the the scale the depth and breadth of razor pay but before we go there let's understand where you come from right uh i understand you you were an engineer at schlumberger before uh building razor pay so maybe uh share a bit about your story

2:40Harshil Mathur: yeah no i grew up in jaipur in a small town in india and then went to iit one of the most prestigious colleges in india and when i graduated by i i i went into slumberger which is an oil field uh and worked there in middle east uh for i think about seven to ten months but i was always a techie i was all an engineer by background and i always used to love coding so i never really enjoyed that job and wanted to do something of my own so ran across this problem of payments while I was in my job because I was doing a side project and I thought it was extremely hard to accept digital payments in India and as a techie I thought like how hard could this be why is this so complicated and and that gave me that gave me the motivation to look deeper into it the more time I spent into understanding it the more I got convinced that hey this is a big problem to be solved it's not that there were no payment companies there are 100 plus payment companies in India but nobody was really solving for payments for young startups and young teams building let's say two people three people teams building and that was a trend coming up in 2014-15 in India a lot of startups were coming up and I thought okay if somebody solves for making it easy for these startups to accept payments on day one there could be a massive opportunity behind that and that's what gave the give birth to the idea of RazorPay so that's how I got fully full

4:12Shashank Kumar: time into it you you said that you were always a techie at what age did you start coding and do you remember the first tools that you built I started coding I think in my sixth standard

4:29Harshil Mathur: like when i was maybe 12 years old 12 years old um i mean actually that's i mean i started coding in some shape and form even before that but i didn't have a computer uh i was 20 years 20 year old when my dad bought me my first computer so i was able to uh do programming at like and coding at home i mean initially with build like i mean i used to love coding i didn't really care about what i built so i would build simple tools fun games and so on uh started with c plus plus over time moved to java then uh started moving to web development moved to php and built a lot of web applications then in my college i um i with a bunch of folks like-minded folks started a college group called sds labs the idea was that like people who wanted to code could sit together and build applications for the institute there's no purpose it was just things that people would use the and i started with a bunch of four five people friends as a student group the amazing thing is that the student group survives even today so so there are people there like the current batch of students join that group and run it but every year new batch of students join in and run that group so uh that's one thing i left behind in my institute which continues to today and in that i think the my first popular application that people started using was I built this platform for people to be able to watch cricket matches.

5:55Harshil Mathur: Cricket matches are extremely popular in India. And there's no Netflix or Hotstar at that part of time. So I built a platform so that people can watch matches from their rooms, from their dorm rooms. Hooking up a satellite TV to a computer and streaming it over the network. And that was my first popular application that I built. Like at least thousand students used to use it on a daily basis. You know,

6:21Shashank Kumar: what that reminds me of mark cuban he built something similar but for college football in the u.s and obviously that was a huge success but it was his first thing uh very very interesting and and so you you get started around was it 2014 with razor pay yeah so so before uh you tell us about the early days and have some questions about that just give us a sense of today the picture today volume whatever you can share any revenue numbers um how does a company look today and then

6:59Harshil Mathur: we'll talk about the early days uh we uh power millions of businesses but the interesting stat i love is out of 120 unicorns in india uh today razor pay powers close to 85 percent of them and I think and it's not that we power 85 % of them after the baking unicorns like 90 % of those we started powering far before the baking unicorns so we are the de facto payment player for startups in India and as these startups started using Razorpay as they went down to become unicorns we power a vast majority of them today I think that's that's essentially the gist of our journey we are the de facto choice for startups in India as they scale up to become 100 million dollar companies billion dollar companies 10 billion dollar companies publicly listed companies we continue to power payments in their journey and that's how we grow we grow when the in the district economy of india grows and that's why we essentially are an index of the

7:56Shashank Kumar: district economy of india that's amazing but let's go back to the early days how was raising your first institutional round and also i've read that you had to knock on about a hundred doors to find your first bank partner i never heard the bank part because that was honestly the hardest

8:17Harshil Mathur: part of the journey um as a techie building the prod was the easy part uh we both me and shishang used to love coding so we built a prod and we built the best experience we thought um payments should have in india but uh payments is not something that you can just build out of your garage and ship it out and people start using you need to partner with banks you need to get a lot of certifications approvals uh and obviously as a techie that was the hardest part for me so i remember walking into a bank branch next to my home one day and saying hey i want to start a payment gateway and the guy looked at me and like do you want a payment gateway i said no i want to start my own payment gateway and the guy had no idea like because people don't typically walk into a bank branch to start a payment gateway in india uh and it was a small town as in jaipur i started that then i went to a different bank and then i went to a different bank and then finally understood that okay this guy in delhi or this guy in mumbai handles this so we reached out to them submitted a business plan got rejected because we were two 23 year olds uh fresh almost fresh out of college with no finance background with no background in banking who wanted to build a payments company uh and they're not wrong their view was that you don't understand the risk you don't understand like the you guys know and share the tech part of it but you don't understand the finance part of it don't understand the risk of it so they kept rejecting us but every rejection we fed we'll find another bank or if we found somebody senior in the same bank and start reaching out to them and i think in that journey we would have seen i don't know almost hundred ish rejections by bankers um but every rejection i did because every time we got rejected we would ask them okay what is missing what do you think we should do who do you think we should speak to and we kept refining our page we kept refining our business plan i think it took almost a year before we met this relatively younger guy from a bank perspective who understood what we're trying to do one should what startups are startups was not a very known term in indian context in 2014 right so he understood what we were trying to do that we are a startup that we're trying to do something which is uniquely different and who gave us an intensible approval that hey you can that I can approve give an in-principle approval for you to start building this on top of my bank APIs I remember that day very well because the next day I went and left my job in Shlambhajir and went full-time into starting RazorPay because that's the only blocker that we didn't know that whether we can actually solve it we were getting rejected so often but once that blocker was away we were certain that hey now we can build this company out and we went down to full into starting RazorPay and as a funding thing i think that was equally hard i think we went to a lot of investors uh and everyone said that hey payments is a commoditized space like there are 100 plus payment players in india at least five six large players globally like how do you like what is the differentiation and we explained that hey we are building a pro-first payment company there were payment companies in india but most of them sold to enterprises they were not built in a pro-ert-led growth fashion and we felt that there's an opportunity to build that for startups and SMEs but it was very hard for anyone to see that PLG motions again were not very common in B2B spaces in India in fact even today very few companies in India have actually built a PLG motion on B2B in India at PLG motion on Azumar is fairly common they have like maybe handful of maybe three companies I can name which have a pro-led motion in B2B sales in India and that convincing that on was extremely hard but fortunately around that time we applied for Y Combinator with zero expectations because YC had not invested in Indic Omnis a lot before us so we applied in that and we got through YC so that was a big turning point for us we went to YC during Jan to March 2015 and I think post that it became and when we got enough traction it became relatively easier for us to raise funds so yeah

12:14Shashank Kumar: Do you remember any noteworthy founders that were also in your batch?

12:22Harshil Mathur: There were a lot of companies in our batch. YC, there was ReadMe, there was Deal. There were multiple strong companies that came out, but YC is known for some of the biggest companies in the world to come out of its batches. But the interesting part was we got to interact with some of the best mentors in the world because we got into YC. of course Paul Graham Paul Bukai Sam Altman was the president of IC during that time so I remember a lot of interactions with him and a lot of those shaped up Razor Pay in a very different direction I can tell one particular incident which happened with Sam when we were getting a lot of these bank rejections that I spoke about so we had this office house with Sam where he spoke about that hey we are getting rejected by banks a lot and he said why and he said that hey we are we are 23 year old we look very young we don't look from how people from finance backgrounds look so it's been hard so he said if that's the problem why don't you solve it he said like what do you mean so if you the problem is that you look young why don't you dress old why don't you dress the way bankers do why don't you speak the language they speak and and it was logical like why don't you do that so i remember after that i bought my first suit i started keeping a bigger beard uh so that i look older than i was and it does help because a lot of people judge the book by its cover it does work in a lot of those circles that if you look like them if you look that you belong it does but i don't know if that led to the final approval but we did change our approach to buying banks at least in the way we looked after that

14:04Shashank Kumar: I can relate to that when I was in banking I promoted but it didn't matter that I got promoted they wouldn't send me to see clients because I had a baby face and they were afraid that it was not going to work so at some point you start building a team and you start hiring other engineers and you start taking a step back from being the one building to actually the one leading the company maybe tell us about this transition because a lot of engineers who are founders and ceos go through that and it's not

14:44Harshil Mathur: always easy yeah definitely yeah it's the it's the hardest part of scaling as a founder that if you continue to do everything yourself you can't really scale but at the same time letting go is not easy because so many things are so core and it's always very hard for a founder to believe that somebody else will do as good of a job as i am doing on all of these things but as the org started scaling it became evidently clear to me that the only way the org can continue to scale is that i can't be the point of failure right so the rule of thumb that i had is that if anything takes more than 30 % of my time and I would evaluate every week that if anything is taking more than 30 % of my time, I need to delegate it.

15:30Harshil Mathur: Like somebody else needs to own that piece on a day-to-day basis. I think that's a rule of thunder. I've still applied today. Every week, almost, or every couple of weeks, I evaluate where am I spending most of my bandwidth on. Anything that crosses 30-40 % of threshold, I need to find a way to delegate it. It has multiple, outcomes a it makes of course a lot of scaling b it makes a company with a lot more resilient where the founder dependency is lower see it also frees me up right sometimes i will have some the company always has fires and uh the founder's bandwidth always has to go into those fires if i'm logged into my day-to-day bandwidth so much how do i take time out for fires and you can't predict fires but fire will happen every week something or the other will uh will be on fire and if you're logged into your day-to-day you can't take our time out for affairs or if you do take time out for fire something on the day-to-day will will suffer because of it so it allows me to constantly have enough space of on my calendar and whatever is the fire for that week i

16:35Shashank Kumar: can spend my time on that and what was your approach you mentioned that you're always afraid that no one's going to do it as well as you. Especially that's a thing that young founders have, right? How did you approach hiring? And did that process of hiring became a process that has stuck with the company today? Maybe share a little bit about it. Yeah, I think two aspects of that.

17:10Harshil Mathur: One is hiring and second is culture. And both of them go very hand in hand. I think on hiring, at least for the first 200 people, I interviewed almost every single person that got hired in Razor Pay. Because like the early team essentially sets up your culture. I think a journey has been that in the early first 50 till first 50 employees, the culture is what the founders say and do. Like people look at you, people, almost everyone interacts with you and they see what you do, they see how you act. You don't even need to put up culture values or culture into a book. We didn't even have that and it doesn't really matter because what founders say and do becomes your culture.

17:46Harshil Mathur: I think when it crosses 50 to 100 people, that's when we realize that not everyone will now interact with me. It's impossible for 100 people to work with the founders every day. So you need to start defining your culture values and need to set up your hiring process to hire people who match up those culture values very tightly. Because not everyone will also be interviewed by me anymore. I think once we cross 200-ish people, by that time, we had set up our hiring funnel very tightly to hire the kind of people that RazorPay needs and to have culture as a very strong question of hiring i think and at that point we very clearly define our culture values as well and it's not culture values or not a lot of founders come to me and say hey our culture is bad like how should you change your culture values the culture values that you put up on paper right honestly don't matter if those are not the ones already being followed so what you pay put on paper is essentially what is already a culture because the culture is already decided right what you put on paper is just to scale it uh to from 200 people to let's say 400 people 600 people so uh so i think you had to spend a lot of time thinking through that okay what do we really believe in what are we taking really decisions on the way one of the ways i put culture values is like because when people think of culture values they think of this like words on the wall hey honesty and integrity and like some cool working words that uh that you want to put in because other cognitions put it and honestly that is like a disservice it doesn't really create any value the other thing that happens is that the real value of culture is when there is a conflict between short-term outcomes and the culture values what do you choose yeah and if the answer is that hey you're not going to choose the culture value then it's not really a culture value so the culture values has to be something that you're going to choose because in spite of your short-term gains uh so the way i define culture values is culture values are essentially long-term success metrics for the company.

19:42Harshil Mathur: Short-term success metrics are very clear. Revenue, profits, all of those things. The long-term success metrics are your culture value because you believe that these things, if I do repeatedly, they will compound and create long-term value for me. For example, one of the culture values we have is customer first. A lot of companies put customer first. But the real reason you put customer first as a B2B company is that if we do well with our customers, over time it compound itself over, let's say, 4 years, 5 years, 7 years, 10 years. then those customers will tell other customers to use ways of pay and that creates more value for me then earning more profit from the customer in the short term now that doesn't mean that you don't make money from your customers i mean the worst thing you can do for a customer is bankrupt yourself but it does mean that when there is short term conflict for example a customer is overcharged and you have made revenues on it now should you return that money back or should you say hey i can't refund your money back because it's making me short term revenues you refund that money back because you believe customer first acting in the right way for a customer long term will compound.

20:41Harshil Mathur: If you do it thousand times, thousand times, maybe hundred of those times those customers will tell other people that hey, use Razor Pay because these guys did right by me. So, I think it was very important to define those culture values and create it in a way that it's scalable because now a lot of those decisions as a company scales from 200 people to 1000 people, a lot of these decisions will not come to me. They'll be taken by leaders on the ground. They'll be taken by teams on the ground. And if they don't understand and what framework to use, they will fall back to short-term goals. Hey, revenue is my goal.

21:11Harshil Mathur: Like this objective metric that you've set, the KPI that you've set is my goal. And when there is a conflict between KPIs and these culture values, unless it's explicitly clear that, hey, you have to optimize for culture value and not the KPI. The culture is not really set in, like words on the wall means nothing if you don't set that expectation.

21:32Shashank Kumar: It clearly sounds like you're speaking from experience can you recall an anecdote a time where you had to make that sacrifice like you know in the short term this might look attractive but are you know we're gonna we're gonna go in a different direction yeah multiple ones let me talk about one of the

21:55Harshil Mathur: generally the best test of culture value is when things are really bad so let me talk about one of those situations right we as i said we have to work on top of banks so one of the banks that was our primary partner for one of our core businesses which is settlements I mean it's still a large bank the Indian regulator shut down one night in 2020 February I think because the bank went through liquidity crisis the way I think STP went through in SF or some banks have went through generally globally they went through an insolvency and liquidity crisis so the regulator paused all withdrawals from the bank and nobody knew when it was going to come back.

22:37Harshil Mathur: It took about a couple of months before they came back. So a lot of our merchant settlements were stuck and this is like the funds of other merchants, right? Now we had a call, right? A lot of those funds were in other banks. A lot of those funds were in this bank and the notification of this pause came in 6 p.m. Everyone rolled into the office at like 8, 9 p.m. because we knew it was going to be a long night and we had to work through solving that crisis. one of the key decision making points that came in that time was that we had a choice to either settle the funds to our top 10 largest customers or to settle the funds for a last of the smaller 10 ,000 plus customers because it's always a Pareto in most payment businesses the top 10 customers have like a majority of the volume so you can either settle all their money or you can settle the large long tail because that's the amount of funds we had in other banks that we had partnership with.

23:31Harshil Mathur: Or generally the push from sales and sales teams or business teams is that center to the largest customers because those are the ones who make the most profit. Those are the ones who make the most revenue. The top 10 guys are the ones that really matter. You can lose a lot of small guys and it doesn't impact the company that significantly. I took that call and remember because it was a hard call to convince our executives on it. I took the call that we don't pay all our smallest customers first and whatever is left then we'll pay our largest customers and the reason was fairly simple the smallest customers even though their settlements were$1000,$5000 they would die without that settlement because a lot of these customers they rely on day-to-day cash flows the money comes in they pay their salaries the money comes in they pay their vendors the money comes in they pay their suppliers if we didn't pay them out for let's say this pause goes on for a couple of months if we didn't pay them for a couple of months a couple of months they could be out of business the large guys yeah some of the settlements were in million dollar one and a half million dollar and so on but even then they had enough liquidity to keep themselves afloat they would have access to credit they would have access to other channels and that's why even though it made more businesses to settle the large guys and we got legal notices from some of these customers who said that hey you paid all your small guys you didn't pay me out and they sent legal notices and they threatened to take us to court we said hey we have to do what we can and anyway we this is a larger ecosystem problem but if we don't pay out these small guys they're gonna die and that was a very hard decision to make the reason that's important is every single person in the org saw when we took that decision and it made them understand that how much these culture values are important to us over short term KPIs so and these are the points where your culture values are really tested if in that point I said yeah we have the culture value customer first but let's keep that aside because this is a crunch moment and let's pay these top 10 guys because that makes the business impact.

25:29Harshil Mathur: From next day, that's your culture value. Your culture value is not customer first anymore. Your culture value is business first. And no matter what you put on the wall, nothing is going to change that from that point onwards. Did you churn any of the top 10? I think we lost one in that situation. And we got legal notice from at least four.

25:55Shashank Kumar: let's talk about the product growth motion the plg motion that sounds like you set out to build from the very beginning um how did you build a product in a way that this would happen right

26:12Harshil Mathur: how did you engineer that yeah i think the hard part of plg motion in b2b businesses is that payback period is very long and especially in a payments kind of business because margins are thin right so the way you the pay plg motions work is that hey you spend a certain amount of money to acquire the customers and then you make that money over period of six months 12 months 14 months and you know in a high margin business those periods are small so plg motions make sense in a low margin business like payments the payback period is fairly long it's sometimes it can take two years, three years for the company customer to break even at a cohort level.

26:53Harshil Mathur: But we decided very early on that we are building this company to enable the small startups and SMEs to accept payments online. And there's no way to do sales to small startups except for PLG. You can't go and sell to them because they're very small when they start up. The only way is that they are able to discover that this is the best way to accept payments. So you had to build a PLG machine. Honestly, we didn't really spend a lot of time doing the math on it. When we started, we didn't really compute the CAG. We hadn't really computed the payback period. I learned those terms over time as we built this motion and people smarter than me on the marketing side joined.

27:28Harshil Mathur: But we just built it because that was the only way to achieve the objective that we wanted to become the de facto choice for startups in India. And the only way to achieve it is by building a PLG motion so that these people can discover us versus reaching out to them. So we took a lot of calls to build a brand, and built our presence in a way. like most payment gateways before that didn't really try to build a brand because it is very hard to build a brand in this space one of the interesting flips that i remember the way i measure it today is there is a google you can see a google trends report which shows you the keyword search the payment gateway category had no brand which means the payment gateway category keyword had more search volume than any brand in the payment gateway space so people didn't really care about the brand when they wanted to payment gateway they would search for payment gateway in india and they'll click the first or second or third result compare and buy nobody really cared it's like saying i want a t-shirt i don't really care which brand it comes from right we spent a lot of time and effort on building a brand in that space and in 2020 we crossed that keyword that razor pay had more search volume than the payment gateway category every other brand in the payment gateway space is far below the category search there's more people search for razor pay then they search for payment gateway as a category.

28:41Harshil Mathur: In fact, we are the category. So that we call our, like as the Xerox moment for a brand that when the brand name becomes synonymous with the industry to the point where people say, hey, just use Razorpay. I think that is one core metric that we tracked over the years and we continue to still put efforts into that, that when people think of a payment gateway, Razorpay should be the name they think even before they think of the word payment gateway, even before they know the word payment gateway. I think, and I think that that's the best test of having a strong PLG motion that you drive on top of the category versus you drive under the category.

29:15Shashank Kumar: I think an instance that illustrates how hard the payments landscape is in India is the fact that Stripe tried entering a few years back and actually failed, right? Do you have any any opinions and why do they fail they they i think they blame their regulatory landscape but i mean i'm not sure that's the full story yeah i think it's not just tribe i think

29:46Harshil Mathur: i'll broaden it to most global payment players have largely been unsuccessful in india and i think there's a story of almost all global players were pride and praying did some experiment did a lot of investment and then exited and i think and i'll say it's not like we operate on top of regulations i'll say it's not regulation is a very simple way to paint a picture it's not really the right way to paint it i think the thing is india is a very different market and it has made a very different choices for that market and regulation is an outcome of that and it'll maybe take too much to explain some of those choices right like in u.s uh the i'm just comparing the u.s market to india u.s the one of the most fundamental things about the u.s payment market is that the success rate of payments is extremely high but the fraud rate of payments is also extremely high it's a fraud is fraud and chargeback is part and parcel of the payment industry so you don't have any otps you don't have any complicated signing procedures you enter a card number you can close the transition so you get somebody's card number you can do a transition on their behalf and then you can raise a chargeback or a dispute to get your money back so fraud rates in us somewhere over around two to three percent but the success rates over around 95 to 98 percent india took the reverse call because india has a largely largely i'll say a used to be a very illiterate population which has changed over the years but you will say it's still a largely digitally uh young or digitally new population right we are not as digital natives as the western market is a lot of people are getting into technology but most of them are going to technology the last five to ten years what that means is that if you build a system where fraud is acceptable the people will lose trust very quickly and people the relationship with money that people have in india is very different than people have in the west right like uh like a thousand rupees fraud can almost impact somebody's life to the point that they can't buy next day's food right uh right and you don't have enough social security you don't have enough social net that if you lose that money the thousand rupees today which is $20 in US terminology right it might be so much for you that you can't afford to put food on a table next day right in that kind of ecosystem you can't take that approach that US did that okay some fraud can happen and people can dispute and get their money back after a couple of months so we took the reverse approach we said you have to mandatory have two-factor authentication which means fraud rates in India came down to less than 6 % from 2 % to 3 % in US but the success of transition also came down from 95 % to 98 % point to percentage it used to be about 70 to 80 percent we worked on a lot of things to take it up to 90 but still 90 percent was 95 to 98 percent videos right and that's the that's the choices that we took as a market and while i'm giving an example of otp as one of those choices but there are so many different choices that india took for example one of the choices india took is on recurring payments that in us like you can sometimes subscribe to a gym membership and you can keep getting charged about it a lot of people complain then it's there's no way to cancel it right india didn't allow recurring payments for a long time because they were worried that a largely tech illiterate population if they set up a mandate they can keep losing all of their daily savings and essentially again not put food on their table when they allowed recurring payments india made a law that before you are being charged 24 hours before you are being charged for a recurring payment you have to be sent a notification that hey you're going to be charged in next 24 for this and if you want you can press this button cancel it if you don't do anything you get charged but if you press a button you can so customer is always in control so you can't have a comcast type membership in india where you are betting charged five dollars a month and you have no way how to cancel it you are on calls and you can every time the customer has a control now you can say looking from the west a western company might say hey india has so tough regulations but if you look from indian context it makes so much sense in fact i believe this law should exists everywhere in the world because it's such a strong customer protection law all right so those are the things that a lot of global companies that have a hard time complying because it requires them to restructure the way they do payments in the west to comply with the guidelines in india and that's why you hear this terminology india has hard regulations but i believe a lot of those regulations are built because india is a very different market and if you are a company that's going to operate in this market you need to work with the with the with the framework of this market because that's what's needed.

34:13Harshil Mathur: India has these realities where people can essentially not be able to put food on the table if they lose$20 and you can't compare it to the West. To your point,

34:24Shashank Kumar: I think some of these regulations, I think the world needs to learn from this Indian framework.

34:34Harshil Mathur: Thanks for sharing that. That's what I add there. And in fact, that's the reason the way distributors grew in India in the last 10 years. And it couldn't happen if customers couldn't trust digital payments and they couldn't trust digital payments if India hadn't made these hard calls and there was enough pressure to not make these hard calls India took these hard calls and today 50 % of all real-time payments in the world happens in India it's because of the trust that people have built India was extremely cash-heavy when we came in the when we launched Razor Pay in 2014 people used to say hey how would digital payments make sense in a country where everything is cash to today there's a point where I don't carry zero I carry zero rupees cash in my wallet when i go out because you cannot in fact it's harder to use cash than use digital payments in

35:15Shashank Kumar: india now if you have a lot of cash it's almost like having no money yeah it's very hard to use it right right right right uh i was actually just gonna go there uh real-time payments is synonymous with upi in india sounds like it's completely transformed the the day-to-day spending habits how else has upi transformed the country i think upi has been the biggest tailwind

35:48Harshil Mathur: india india's digital payments market has seen in the last 10 years uh and a lot of growth for companies like us has come because um because of that infrastructure being available i think i want to first talk about like the some of the amazing aspects of upis it's this public private partnership infrastructure that is built as a public rail whereby players like us can build on top of it to deliver the last mile and the ecosystem is open in the sense that some other consumer company can solve the consumer problem of getting upai customers i go and solve the merchant side and both sides are interoperable so nobody can build a walled garden like let's say in us you will have a venmo where only if your customer and merchant both are on venmo you can pay in india google pay onboards customers i onboard merchants at razor pay and a customer who has Google Pay on their site can pay on a merchant that uses Razorpay without us or Google Pay having any interaction with ourselves.

36:39Harshil Mathur: And that's why the ecosystem compounded so rapidly because every player focused on their strengths and deepened their partnerships. Nobody had to convince other players to open their wall garden to them because it was all built on top of this. The second thing that changed because of UPI is like because of the way it is built. The reason UPI scales so massively is India never had deep adoption of credit cards. so so when upi came in mobiles were actually very deep everyone had like already had a smartphone so upi as a payment instrument was built on day one to be mobile first and what i mean by that is cards are not mobile first if you want to make a payment using cards on a mobile phone you have to enter your card number you have to enter your cvv you have to enter your ote you have to enter your expiry date you have to enter your name your address like that's not like if you're building a mobile payment instrument you're not built out of that in spite of all of that it's still not secure because somebody has a card number he can still do whatever it wants right there's no tightness of security right now we solve some of this through Apple Pay and all of that but those are layers built on top of the core card layer so when you onboard your solo Apple Pay you still have to do these things it's not built in the sense that it's not built as a mobile as a native instrument the security of the mobile transition is not there versus if you think of a mobile platform let's say like WhatsApp or Facebook right the login process you can't expect a mobile app to have a login process where you ask to enter your card number you ask you to enter an expiry date like a mobile login process should never require all of those things UPI was built on day 1 to be mobile first what it means is it uses a token to connect the app the app is deep linked using a SIM and there's SIM binding in place on day 1 what that means is that when a transition happens on UPI it is natively secured against the mobile that you're using it on versus being built in an era which had no mobile which had in fact In fact, cards were built in an era where there was not even a telephone line.

38:34Harshil Mathur: It was built so that people could Xerox the card number on top and do the transition. Then we added layers on top to comply with the newer guidelines. So I think that's one of the biggest advantages of UPI. It's built for today's era. It's built on mobile. And this has been very extensible. It started as a way to pay from your bank account to a bank account. Today, it allows you to pay from a credit card to a bank account. It allows you to pay from your UPI or from your PPI wallet from a stored value instrument to your bank account and so much more. and that's the reason is that because built as an authentication system on top of a mobile and for a smartphone generation it's the right instrument built completely without any overhead of complying with an older guideline with an older interface while the cards have over time moved to support things like tokenization and stuff they still have the backwards compatible which means you're still still I can take your card number and do a transition in spite of you having logged into your Apple Pay and so on right but since UPI doesn't have any of those deficiencies because it's built on mobile on day one.

39:32Harshil Mathur: So there's no way to steal your UPI credentials for that matter.

39:37Shashank Kumar: How much does a UPI transaction cost?

39:42Harshil Mathur: Yeah, so on the pure bank-to-bank transfer, UPI is free. Yeah, so the government has mandated the UPI pure bank-to-bank transfer to be free. For as a consumer, it's completely free. From our chin, if they are accepting UPI for auto pay, UPI on credit card and some of those flavors, or if they're doing a more complex integration, they might still might be paying a fee. But a consumer is completely free across the board. For small merchants, also most of it is completely free across the board. The large merchants typically use credit and a credit line and you auto pay and other things on top of UPI, which are generally charged.

40:18Harshil Mathur: But it's still far, far cheaper compared to a credit card instrument.

40:22Shashank Kumar: So was this a concern to you when UPI launched? because all of a sudden you have this method of payment that is free as opposed to previous ones that would generate a revenue.

40:37Harshil Mathur: So for us, UPAs 2 generates revenue when most instruments do because we front-end are the merchants. So we are able to charge merchants for other services and platform services that we provide. But I do agree, by the way, when UPA was launched, it was not free. It became free at least two or three years after that. Yeah, I think three to four years after that. but the the but there is one challenge i think the upi being free has disincentivized a lot of players who perform very critical functions on upi to invest in them so over time initially the taxpayer was funding it which means the government was paid the subsidy for it and over time we have reduced those subsidies the belief is that over time the ecosystem should sustain itself because long-term growth of any of any platform relies on its ability to sustain itself so i think i believe UPA should always be free for consumers UPA should always be free for small merchants but at a certain point large merchants should pay enough for UPA that it takes care of the platform because anyways most of the load on the system comes from large merchants so that the ecosystem becomes self-sustaining I think it was good for the government to subsidize it for the first 2-3 years to get the ecosystem kick-started but at a certain point the taxpayers should stop funding it

41:50Shashank Kumar: Speaking of transformative innovations let's talk a bit about ai because i i've read that you've you've publicly stated how ai is transforming several aspects of the company one of them being um coding right but i know there's a lot more so maybe uh tell us how is it transforming specifically razor paint yeah I think

42:22Harshil Mathur: start there and then go into RazorP AI is one of those transformational shift of our generation it creates massive set of opportunities it also changes a lot of opportunities available in the past it kills a lot of them and I think so to your first question that you asked how you delegated away and over time stepped away from building I think once I tasted the blood with clawed code and open claw and some of these things for the first time after maybe 5-6 years I'm back to building again and the only reason is that with AI so much is changing the only way to understand what is changing is by building yourself so spending a lot of time learning how to use these AI tools building it yourself I have 3 or 4 agents that help me do my day-to-day work now and from doing reviewing all my meetings reviewing my calendars reviewing my daily health metrics and everything to a lot more complex stuff as well because it's the only way to know the power of AI so start that from personal perspective from company perspective there are two parts one is the internal which is things like coding and coding is like hey giving I even cloud code is okay one thing but more complex stuff on how do you really change the way products are built because the build time now is significantly shrunk.

43:47Harshil Mathur: How do you make the entire product building part more like a factory? I think that's a massive change that we have been undergoing. And while we've seen great success, for example, we built a cloud agent similar to what Cloud launched, I think two days back. We built our own a couple of months back, which we have been seeing on how our business team can now tag a cloud agent on Slack and say, hey build this new thing and I can build it without any without any engineering environment of course there are people who still review anything that goes into production two more complex stuff which we are doing more front-end side and two big opportunities there are how do we use AI to bring more values to businesses that we serve and the biggest the two big areas that we are focusing on is agentic commerce and agent studio agent studio is a simple platform it allows a business to hire an agent on top of razor bit to do a lot of back end operations for them via an agent which they would typically have to hire a team for for example when somebody comes to your checkout and is about to buy something and decides to drop off you want to reach out back to that customer try to give them a discount offer something to get them back we now have an agent that people can roll up spin up on the fly there are at least 100 plus merchants that use it that they can spin up on the fly that will call every call or message or whatsapp every customer that drops off gives them an offer gives them a discount and try to get them back right so that's the agent studio which allows people to build agents on top of the space second is agent commerce and i'm personally very excited about that where people can now buy stuff using agents whether it is inside chat inside apps like chat gpt or inside merchant apps by talking to a voice agent or by their own personal agents the reason i'm very excited about that is it's similar to mobile commerce that i believe india can leapfrog on that far far far more rapidly than the west because in West commerce is already e-commerce is very deeply penetrated most people know how to buy stuff online and they're buying stuff online very frequently in India the penetration of e-commerce is still very thin right less than 50 million Indians actually do regular shopping on e-commerce although more than 50, 450 million Indians use UPI regularly less than 50 million use e-commerce regularly that is because most e-commerce apps are built with where you can search and browse and find products yourself that's not how Indians typically shop Indians are very conversational they're multilingual and they're voice first so most shopping apps are not built that way but AI allows us to build shopping experiences which are agentic first where people can talk to an agent decide what they want to buy ask a couple of questions talk in their own language and then buy something that they want to buy using their voice and I think that can be an amazing opportunity and I think it's true for India more than anywhere else like I think more than 50 % of all voice notes on WhatsApp are sent in India that can tell you how massive voice is in India.

46:36Harshil Mathur: I think so because of that, I think we believe agetic commerce can really shape up the way commerce happens in this country and can expand the time far more massively versus in markets like West where it will shape up, it will scale up, but it will not be expanding our time because most of the market is already deeply penetrated with e-commerce. In India, because the penetration is thin, there is a massive origin to penetrate it more by offering multilingual voice and conversational commerce. So that makes me very excited.

47:04Shashank Kumar: how close are we to that reality of agentic commerce so we are in the i'll say we are in

47:13Harshil Mathur: the early days we launched agentic commerce on chat gpt last year we launched it with cloud early this year and we launched agentic commerce on inside apps like zomato and sugi and linkedin which are the top three quick commerce companies in india and so we've seen rdu traction on it I think what we need is deeper support from some of the ecosystem players to enable that but on the brand side and merchant side there's a lot of excitement and we have onboarded a lot of merchants on these platforms so I'll say it's in the pilot and early PMF stage but the next couple of years are going to be very exciting right

47:56Shashank Kumar: to a point about the WhatsApp usage coming from India it's no coincidence that the new head of whatsapp is a prominent indian right um so he wasn't in

48:09Harshil Mathur: fact kunal was one of the earliest investors in razor pay he was one of our first angels and he's been a massive mentor for the company there you go uh why do you think they picked

48:20Shashank Kumar: him why why is he special and kunal is one of the most amazing consumer founders globally

48:28Harshil Mathur: the way he understands how consumers think the way he understands how consumers buy stuff and what motivates them he's a everyone he has a he's not a tech major he was a psychology major so he's a philosophy major so he understands how consumers think and how consumers interact and I think I think Meta is lucky to have him lead something as important as WhatsApp given whatsapp is largest customer basis comes from india i think having somebody understand this market even more deeply makes a lot more sense as well

49:08Shashank Kumar: so let's talk a little bit about india before we arrive at the time uh one thing i i read that i found interesting is that you actually re-domiciled razor pay from either the u.s or from the US to India at a high cost, sticker price, it's all relative, because of a few reasons. One of them, probably your upcoming IPO. But share about this decision.

49:41Harshil Mathur: Yes, I think we incorporate it. I think the question that should be asked is, why would you incorporate it in the US for an Indian company? I think that's the... Because as an Indian company, it makes sense for us to be domiciled in India. In 2014 or 15 when we were starting RazorPay and we were fundraising, we were mostly raising money from US investors which didn't understand the regulatory market. The exit opportunity for tech companies in India seemed really weak. And so there was a lot of, it was just easier to do fundraising if you were incorporated as a US company because it was easier for US investors to understand the market they operated in, the laws that they operated in versus India which was a relatively less invested market as a whole.

50:23Harshil Mathur: far forward to today a lot of those things have changed massively india is today one of the largest economies globally it is one of the largest ipo markets in the world it is one of the largest tech ipo market in the world in the in terms of number of new tech iqs that are happening every year and uh more importantly the rules and regulations and all that around fdi in india have streamlined to a point where there's a lot of comfort in global investors to invest in india market directly i think so for all those reasons for whatever reasons we had to incorporate in us have completely gone away now as an indian company where most of our customers are in india the market understands us the market knows us it's just easier relatively for us to be incorporated as a u.s as an indian company now where everybody knows what we do versus being a u.s company and try to list in a market where nobody knows what we do and we love to constantly explain it so i think those are the reasons yes it came at a heavy cost uh mostly we had to pay a lot of money to the ux u.s government uh to flip out but it made a lot of long-term sense uh for the company to be incorporated in the market where which is our home market essentially and in interestingly

51:37Shashank Kumar: as you mentioned a very strong capital markets system a very liquid capital market right

51:46Harshil Mathur: yeah massively and uh and i'll say it's getting stronger by every year it's getting stronger and stronger um because of all the efforts that have gone into making the ecosystem

51:59Shashank Kumar: stronger and stable far more stable in ever since harsh sounds like um now you're growing beyond is this how you grow to become a 100 billion plus company um uh you have aspirations to be one of the largest global payments companies you know with similar penetration uh in india

52:28Harshil Mathur: but around the world yeah definitely and so one of the things that we see ourselves is that because of the way we have scaled in India and the way we have grown on top of real-time payments in India, a lot of countries in Southeast Asia in particular are going through very similar journeys. They're launching their own versions of real-time payments because they realize that the Western instruments like cards don't work for the same reasons it doesn't scale in India. And then they're building their own versions of UPI. So that's why we went into Malaysia, we went into Singapore, we're looking to launch another marketing association.

53:02Harshil Mathur: Asia and a lot of stuff that we built in India makes a lot more sense in those markets. So we believe that over time we can become one of the largest payment provider for the emerging markets all of which have very similar problems and challenges as India. The example I give is that most of the internet companies come from the west because internet comes from the west. So if you're successful in US you're successful in any other market outside because most of the markets follow US in building their own internet ecosystems. in fintech in particular i believe a lot of emerging markets will follow the playbook that india has created and that's why a company like us which has scaled on top of that playbook in india has a right to win and a lot of those markets which are following a very similar playbook to scale their fintech ecosystems and that's why we're going into a lot of those markets and we believe it is a massive opportunity for us the second big opportunity of course is ai over the last 10 years we've built a lot of infrastructure on the fintech side because we believe one of the most important tools that startups and tech companies who start in the country need is ability to move money seamlessly and i think we have solved a lot of those the next 10 years one of the most important thing they think that startups will need to scale is going to be AI the ability to build agents the ability to build agents on top of your business problems and the ability to build agents on top of your automation problems I think Razorpay is in the right position to solve that problem as well so agent studio, agentic commerce and some of those tools that we are building are a massive domestic opportunity for us because a lot of those customers that we have enabled on making the financial operations seamless we can now make a lot of other parts of their operations seamless using agents so those are the two big opportunities and as a combination of those two I believe Razorpay can be a far more massive player global I don't know if I want to call it payments anymore, but I want to say in the global B2B ecosystem over the next couple of years because of the opportunity that these two tailwinds create for us

55:06Shashank Kumar: Harshil, to wrap up, I just have a few rapid fire questions favorite hobby? Go-karting that's how all Formula 1 drivers get started

55:19Harshil Mathur: yeah, hopefully that someday who's a leader that you deeply admire and why Elon Musk I mean the why is the why is primarily because of the the ambitious bets that he takes which look so crazy from anyone outside but he somehow finds a way to achieve them I think I don't think anyone picks up crazier bets and still achieve them like i mean SpaceX IPO is the best example of that you often recommend or that you thoroughly enjoyed a lot of them but one of the books i recommend to founders which is a very offbeat recommendation is a book called founders at work by Jessica Livingston uh because it's a story of a lot of founders in their early journeys like Steve Wozniak and others and how the early complicated parts of those journeys were shaped up i love it i'm gonna order it right after

56:14Shashank Kumar: this and then finally i know you're a cricket fan but uh who's gonna win the fifa world cup

56:25Harshil Mathur: honestly i'm not a fifa follower but the only person i really love is messi so Argentina for that reason uh just because we'll see love it well Harshil this has been

56:37Shashank Kumar: fascinating uh I can't tell you how much I've enjoyed this learning about not just Razorpay but the whole Indian FinTech and business ecosystem um congrats on everything you've done it's it's truly astounding we're talking about huge numbers but at the same time I can sit in

57:06Harshil Mathur: yeah definitely

57:10Shashank Kumar: thank you miguel nice talking to you thanks for tuning in and i hope you enjoyed this amazing episode with harshil from razor pay if you want more interviews please subscribe and leave a review on Apple, Spotify, YouTube, or wherever you get your shows. It helps and means a lot. And if you have any suggestions or thoughts about the show, just drop me a line on LinkedIn. See you next time.

57:53Thank you.

58:23Thank you.