Razorpay starts forex service for startups

RazorpayX, the business banking platform of fintech unicorn Razorpay Software Pvt. Ltd, has begun offering foreign exchange service to startups, joining other venture capital-backed startups aiming to solve cross-border payments and disrupting a segment dominated by banks. 

The service will allow startups to seamlessly transfer funds raised from global investors to India at a time when the country has become an attractive investment destination. 

During three months of its beta launch that ran till December-end, the service has enabled over 15 startups such as Virohan, Tortoise, and Coupl across the edtech, fintech, and financial services sectors, respectively. These companies raised funds translating to Rs 350 crore annualized run rate in the beta phase. 

Currently, forex transfers for startups are riddled with several gaps, as the overall process is expensive, slow and complicated. Multiple compliance paperwork adds to the challenges. “Getting funds into account could take up to two months or more, owing to the complex process. For instance, startups have to upload a lot of documents to the central portal of the Reserve Bank of India (RBI) before bringing the capital to India. It is a fairly manual process. There have been several instances where various errors have slowed down the process,” said Rahul Kothari, chief business officer, Razorpay. 

RazorpayX’s forex service looks to fix these challenges with a single window through which the entire documentation process can be automated while ensuring there are proper checks before uploading documents to RBI’s portal, said Kothari. “The platform helps startups complete the process in just 48 hours.” 

Startups in India also face higher forex rates, administrative fees and conversion charges. For example, if a startup has to pay 20 paise per US dollar for forex transactions, it could eventually end up losing nearly Rs 20 lakhs for receiving $10 million from global investors. 

“Razorpay’s research noted that eight out of 10 founders discovered that they could have received a better forex rate while bringing capital to India. We have been able to bring the cost down by a lot,” said Kothari. The Tiger Global-backed firm has joined hands with its existing partner banks such as RBL Bank for the forex service. It has also collaborated with forex experts specializing in working with startups. 

Razorpay, founded in 2014 by Harshil Mathur and Shashank Kumar, provides payment gateway services to businesses and e-commerce platforms as well as several business services under its RazorpayX platform. It claims to have over 30,000 RazorpayX clients and aims to grow the customer base three to four times by the end of FY24. 

Razorpay was keen to add cross-border payments to its product offerings by exploring acquisitions in this segment, Mathur, who is also the chief executive officer of the company said in an interview in February last year. “There are certain product capabilities and things that will take too long for us to build on our own and that is where we would look at acquisitions.” 

The overall cross-border segment is witnessing significant traction from VC investors, with the likes of Lightspeed Venture Partners, Sequoia Capital and Accel, among others, recently backing startups making remittances hassle-free while bringing the cost of the service. The cross-border payments ecosystem broadly includes investments as well as business-to-business (B2B), business-to-person (B2P), person-to-business (P2B) and peer-to-peer (P2P) transactions.