How Razorpay Became India’s Largest Payments Company

Harshil Mathur, co-founder of Razorpay, shared his journey from a techie with no finance background to leading India's largest payments platform. His story highlights the early struggles, pivotal decisions, and the unique challenges and opportunities in building a B2B fintech company in India. Mathur initially pursued a job in an oil company after graduating from college but found it unfulfilling. He spent his evenings and weekends coding side projects. It was during one such project, a social crowdfunding platform, that he encountered the immense difficulty of accepting digital payments in India. He realized that existing systems were not designed for techies or small businesses but for large corporations, creating significant friction. This experience sparked the idea for Razorpay, as he saw a clear problem that no one was effectively solving. He noted that in India, it was often easier to accept cash than digital payments, which, from a tech perspective, was a reversal of the democratization that technology usually brings. Initially, Razorpay's strategy was to target educational institutions for fee collection, believing it to be a large, untapped market. They even applied to Y Combinator with this plan. However, after getting into YC, they quickly learned that educational institutes in India didn't prioritize digital payment convenience. Customers would pay fees regardless of the collection method, making a smooth digital experience less appealing to the institutions. Simultaneously, they found traction by offering their payment solution to startups within their co-working space. This led to a crucial pivot: focusing on startups, a segment that, though smaller, was growing rapidly and genuinely valued an easier payment solution. This decision, in hindsight, was critical to their success. One of the most significant challenges Razorpay faced was navigating the highly regulated fintech industry. After getting an in-principle approval before YC, it took a full year post-YC to process their first live transaction due to the extensive approvals, certifications, and licensing required. This lengthy gestation period, unusual for most tech startups, was a constant source of doubt for the founders. However, Mathur realized that these hurdles, while difficult, also created a strong moat. The regulatory complexity deterred competition, ensuring that anyone entering the space would face the same arduous process. This inherent difficulty, he believed, would protect their business in the long run. Despite these challenges, the conviction to continue came from their customers. They constantly engaged with founders and potential users who uniformly expressed the need for a better payment solution. This consistent feedback, confirming that they were "making something people want," provided the energy to persevere through periods of self-doubt. Mathur emphasized that if a problem is hard for customers, it's a problem, but if it's hard for other reasons (like regulation), it becomes a moat, attracting fewer competitors while deeply satisfying customers once solved. Mathur recounted a "near-death" experience shortly after their YC demo day. Two weeks after launching and gaining investor interest, their enabling bank abruptly pulled the plug due to a customer complaint. This left 50 live merchants unable to accept payments. In a payments business, trust and reliability are paramount, and this crisis threatened to shatter their nascent reputation. Their response was critical: they decided to personally call every single affected customer, explain the situation transparently, and outline their plan. While many customers were angry, the act of maintaining open communication and showing dedication to resolving the issue helped rebuild trust. Mathur highlighted that in B2B, especially in finance, nothing replaces the human touchpoint of trust. This experience solidified Razorpay's commitment to prioritizing direct customer communication, even over efficiency, as a means of building lasting trust. He noted that even today, for complex support queries, they insist on human calls rather than relying solely on AI, as the human element fosters trust. Mathur also addressed the early competitive landscape, where larger, often global, payment companies dismissed them or even offered acquisition. His conviction stemmed from a deep understanding of India's unique and complex market. He believed that global players didn't fully grasp the long-term investment and tailored solutions required for India, which, in 2014-2015, was a $60 billion payment market (now $180 billion for Razorpay alone). He saw India as a future trillion-dollar market, requiring a long-term vision that many global companies lacked. Razorpay's refusal to sell was based on the belief that they could achieve their vision faster independently. Razorpay's rapid growth from 2017-2020, including a 40x expansion, was achieved with remarkable capital efficiency. Mathur explained that during a period when investors often expected high burn for growth, Razorpay maintained a lean operation. Their monthly burn was so low that the interest earned on their raised capital (fixed deposits) exceeded their expenses, making them profitable. This approach initially made investors "unhappy," as they expected aggressive spending. Mathur argued that B2B is inherently a logical business: you add value, and the business pays you. There's no need for excessive spending on customer acquisition or engagement if the product delivers tangible value. He emphasized that in B2B, businesses constantly evaluate if the value provided justifies the cost, requiring continuous innovation and a daily fight for market share. A prime example of their agility was the adoption of UPI. Launched in April 2016, UPI initially faced skepticism, with even the two largest banks delaying integration until after demonetization in November 2016. Most payment gateways followed suit. However, Razorpay, being a small player with nothing to lose, made an early bet. By September-October 2016, they became the first payment gateway to go live on UPI. When demonetization hit and demand for digital payments, especially UPI, surged, Razorpay was uniquely positioned. Major companies like Zomato, Swiggy, and BookMyShow quickly onboarded with Razorpay because they were the only ones ready to support UPI at scale. This early bet created a six-month window where Razorpay had a significant differentiator, allowing them to penetrate markets they otherwise couldn't have. Looking ahead, Mathur discussed the impact of AI. He acknowledged AI as a fundamental shift, personally engaging deeply with AI tools. He highlighted a recent exercise where they reimagined Razorpay from scratch, asking: "If I were to start Razorpay today, how would I build it?" This led to a complete reinvention of their platform with AI at its core. He stressed that companies must not act like incumbents waiting to respond to market changes, but rather anticipate and lead those changes. AI will drastically reduce the time to build, making "what to build" and "how to build it" the primary differentiators, not the act of building itself. Companies that wait to respond to AI-driven shifts will be "dead," he asserted. Reflecting on his personal growth, Mathur shared a common founder mistake: shifting to "manager mode." After scaling and hiring executives, he initially believed he could simply manage leaders. However, he learned that no one cares about the company as much as the founder, and core strategic decisions, especially product vision, must come from the founder's deep conviction. He emphasized the importance of staying in "founder mode" for critical aspects, while delegating others. Finally, offering advice to aspiring entrepreneurs, Mathur cautioned against chasing problems simply because AI makes building easier. He stressed that entrepreneurship, fundamentally, is about deeply connecting with a problem and being willing to spend 10 years of one's life solving it. While AI simplifies the "build" process, the "company building" aspect still demands long-term dedication to a problem one genuinely cares about.