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Leave No Customer Behind: How Zecpe Acquisition Helps Cashfree Tackle The Checkout Conversion Challenge  

Cashfree's co-founder and CEO, Akash Sinha, explains how its latest acquisition Zecpe will help D2C merchants avoid returns, have higher conversions and ensure higher customer retention

Leave No Customer Behind: How Zecpe Acquisition Helps Cashfree Tackle The Checkout Conversion Challenge  
Cashfree's co-founder and CEO, Akash Sinha
POSTED ON April 21, 2023 10:49 AM

Fintech start-up Cashfree Payments is busy driving home the value of newly acquired Zecpe to its 3-lakh-strong merchant ecosystem. At the same time, the online payments soonicorn is engaged in dispelling rumours about the layoffs that took place at the company earlier this year. Calling the job cuts an annual exercise to optimise team efficiency, co-founder and CEO Akash Sinha tells Outlook Start-Up that the rightsizing was necessary as the start-up had hired over 600 people in the past three years.  

Rather than get blindsided by all the gossip, Sinha is channelling his energy into preparing the ground for when the Reserve Bank of India (RBI) will give the company the go-ahead to onboard new merchants after having paused it last year. This cessation was to allow the fintech to complete all necessary audits before the regulator could offer it a payment aggregator and payment gateway license. 

Edited excerpts:  

Did Cashfree lay off around 100 employees from its sales and merchant onboarding teams this January to reduce costs and cash burn, as reported in the media?  

We did let go of people as part of an annual exercise, but the figures mentioned are wrong, and neither was the decision taken as part of any cost-cutting measure. After hiring over 600 people in the past three years, we had to right-size certain departments. This was based on our introspection on whether we were doing things efficiently and if our workforce had significant work.  

We currently have around 800 employees and await campus recruits to join us in June, following the offers we extended last year. We will continue to hire for engineering, marketing, business development and product roles.  

Last December, RBI asked Cashfree to step up checks, stop self-onboarding new merchants and undergo fresh audits. How has this affected your plans to expand your merchant ecosystem?  

We have completed the auditing but are awaiting RBI's confirmation to onboard new merchants. At the same time, we are serving our existing 3-lakh-strong merchant ecosystem, which is bringing in increasing transactions.  

Ultimately, RBI's goals and that of fintech partners are very aligned. These checks are standard procedures since the payment aggregator and payment gateway license is being given for the first time ever. So, it is imperative that a third party does audits, which is a fair ask. Moreover, this onboarding pause is not limited to us; it includes other large payment companies as well. 

How many payments does Cashfree process annually?   

We processed around $45 billion to $48 billion worth of payments last financial year and are currently at 1.6 to 2 billion transactions annually. We have about 40 per cent of new leads coming to us in the SMB segment and are seeing success in enterprise sectors like ecommerce, travel, education and hospitality.  

Since the market is vast, we are choosing segments that are fast-growing and require innovative products to provide excellent service to their customers. 

While Cashfree is doubling its transaction rate, can it maintain this tempo as ecommerce and D2C mature, or will this growth plateau? 

Firstly, the ecommerce market is estimated to be around $600 billion to $700 billion and is likely to hit $1.6 trillion within four years. We will capitalise on this growth for our payments business.  

Secondly, we also have a lot of headroom since there is a massive transformation from offline to online processes. For instance, the financial services market might not be growing but online payments are rising.  

Moreover, there is an increasing focus on localisation and compliance guidelines like 3-D Secure 2.0 because of RBI regulations, which even larger merchants find difficult to adhere to on their own. They need a payments partner to help navigate these complex regulatory compliances, and our role will become bigger.  

We are very bullish in the market for the coming four years because of these levers, and we will find newer avenues even after that. Many Indian merchants are going global and will require payment solutions in the countries they are launching in. Moreover, international players coming to India will also need innovative payment solutions to manage their export payments and taxes.  

We are building these capabilities on our platform to help a merchant holistically with all their payment requirements. This will help Cashfree gain higher growth compared to other players in the market.  

How will Cashfree leverage ONDC, which will see the inclusion of merchants from smaller towns? 

ONDC will have multiple players in the value chain—the seller app, an entity to onboard these sellers on the platform, and customer discoverability. Cashfree can play two roles in this ecosystem—collecting money from the end customer and financial settlement for sellers at a faster rate.  

We are not planning to create a B2C-facing app to collect orders. Instead, we will play a role in the money movement in the entire setup. That is the beauty of being in the payments domain; you find opportunities for innovations constantly. 

Recently Cashfree Payments acquired one-click checkout company Zecpe, months after picking up a majority stake in UAE-based payment solution provider Telr in 2021 for $15 million. How will you leverage Zecpe's acquisition to enhance your offerings for the D2C sector? 

Zecpe focuses on a core problem of the D2C merchant ecosystem—the checkout conversion challenge. Many of these companies are great at marketing and ensuring good customer traffic but lack an optimised flow when it comes to customer conversion.  

Indian customers are used to a very refined ecommerce experience because a couple of ecommerce players have optimised the online shopping experience. However, since smaller D2C merchants don't have the capability to optimise their checkout experience, they see a lot of dropouts. 

We tell them to focus on creating a great product and getting traffic, and we will take care of the conversion. When a user shares an intention to buy certain products, we ensure checkout occurs within 30 seconds so that the merchant sees minimal drop and customers also trust you as a brand. 

We are doing great in terms of one-click checkout and taking ownership of merchants' operations in-house. Now, we are enabling conversion by optimising cash on delivery (COD) and converting it to pay-on-delivery or prepaid orders. This will result in lesser returns for smaller businesses, which is operationally a challenging and costly effort for small companies.  

Zecpe is currently focused on helping merchants avoid returns, have higher conversions and repeat customers to their websites, and will expand into other areas soon.  

Few companies have cracked the conversion code to ensure customer stickiness. What minimal assurance does Zecpe offer merchants when it comes to conversion? 

We have demonstrated conversions by 10-15 per cent to our merchants. When it comes to retention or repeat orders, first-order experience is paramount, including product tracking, filing of return requests and processing the refund. These elements increase the customer's trust in a brand and are hard operations for the brands to manage on their own.  

Zecpe helps merchants set up a WhatsApp channel to inform customers about product tracking and delivery and even creates a chatbot to take their return refund requests automatically. This helps make D2C companies independent of processes and provide the same experiences as large marketplaces. 

Why did Cashfree also enter the co-lending space?  

We started this initiative six months ago, though it is not co-lending but more on the lines of embedded lending with cash advances. In co-lending, one also underwrites along with an NBFC. Instead, we are creating a platform to help lenders to disburse loans to Cashfree partners.  

Since Cashfree works with merchants, we make money when the number of payment transactions grows for our merchants. So, we wanted to increase their payment transactions. For instance, a marketplace with 100 sellers can process 100 orders because these sellers have that kind of inventory. However, if we can help these sellers grow their inventory, then the marketplace sales will go up, increasing Cashfree's payment usage.            

Providing these financial services will grow Cashfree's conversions in marketplaces where we are already processing payments. Since we have good visibility on their data, we can predict how much they are making, which helps decide the quantum of loans that can be extended to them.  

Moreover, since many lenders want to serve these sellers, it is a good match for us. Our embedded lending product is very scalable and can be integrated into a marketplace or platform. Sellers can discover us and share their intent to have our services. We can process the data and suggest the loan amount they are worthy of receiving.  

In that process, the seller can sell more on that platform, which boosts our payment conversion for that platform. We are not doing something that is independent of payments.  

Cashfree planned to raise almost $100 million at a nearly $1.3 billion valuation the past year. Do you plan to raise capital soon and enter the unicorn club? 

We were in the market for fundraising last year. However, the market has since changed direction, so we paused the plans. We are not raising any capital right now because the company is self-sustainable, and we don't have any imminent financial need. Moreover, the market is also not conducive.  

Have you identified the white spaces for more acquisitions like Zecpe? 

Our vision is to build the largest collection and disbursal platform in India and we are always on the lookout to associate with products or services that will help us to fulfil this vision. We will be aggressive on domestic growth this fiscal with acquisitions like Zecpe. The acquisition will depend on the company's success, the lifecycle stage they are in, etc.  

While Cashfree is financially sustainable, will you consider raising capital for these acquisitions since they are high investment decisions? 

Well, it totally depends on whether our balance sheet allows us to make such a decision. And it depends on market conditions.  

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