BILLDESK AND THE STORY OF INDIA’S PAYMENT ECOSYSTEM

To hark back to a time when digital payment services were unavailable seems inconceivable today, but getting people then to use a payment gateway to make bill payments or book movie or railway tickets was a Herculean task. In 2000, three former Arthur Anderson colleagues decided to build a payment services layer for the banking sector.

M N Srinivasu ('Vasu'), Karthik Ganapathy, and Ajay Kaushal started Billdesk in 2000. This was also when the Indian banking sector was going through a transformation, with core banking application becoming the focus and ease of access to financial services becoming the go-to strategy of banks.

Billdesk worked like an intermediary between banks, merchants, and utilities. It looked beguilingly easy since banks could reduce customer branch visits for payments and merchants could give a platform to customers to make quick payments. But it took the trio three years to convince Bharat Sanchar Nigam - one of the largest players in telecommunication then - to sign on.

The strategy of Billdesk has always been to be a business-to-business-toconsumer (B2B2C) player rather than be B2C, which a majority of payment players focus on these days. They started their journey by offering banks a platform that allowed their customers to view and pay their bills. It went on to build its payments offering by working closely with the regulator.

Today, it has over 20,000 billers from utility services and insurance payment to direct-to-home providers and has over 170 payment methods.

Rahul Khanna, co-founder and managing partner, Trifecta Capital, was one of the earliest investors in Billdesk. He was then part of Clearstone Venture Partners and was on the board of Billdesk from 2006 to 2011.

“I had known Ajay and Vasu from the early days of Billdesk, when they had created a payments solution for my old employer Hutchison Max Telecom. When I met them again as an investor, we took a bet because we knew the team and its focused execution approach.

What was unique about their strategy was their focus on locking up biller relationships and using the B2B2C model through banks rather than on B2C, which Bill Junction did,” reminisces Khanna.

Khanna said by adopting this strategy, the company could conserve cash and focus on long-term growth, rather than get into a cash-burn situation by targeting only consumers. “I think Tuesday's buyout of the company at $4.7 billion is the validation of the team's disciplined work. It has navigated 20 years of digital payment growth across regulatory changes and new structures. With competition coming in, its focus has been only on business,” he added.

The disciplined approach is also evident in how the company is one of the few payment firms that are profitable and also the largest players in its segment. Even its fund-raises look conservative, when compared to some of the current players.

The company’s first fund-raise or seed fund of $500,000 was from Small Industries Development Bank of India and Bank of Baroda. This stake was later acquired by TA Associates in 2011. In 2006, it raised around $7 million from Clearstone Venture Partners. In 2015, General Atlantic and Temasek raised the company’s valuations to $1 billion as they invested $200 million. In 2018, Visa acquired a minority stake in the company and its valuation almost touched $2 billion.

Its early play in Indian digital payment has paid out, with the company being acquired for $4.7 billion, the largest merger and acquisition deal in the Indian financial technology space. Even acquirer Prosus-backed Payu is expecting to gain access to a huge payment ecosystem.