Zomato – Should you order?

Hey @SP2022 – here’s my take on the potential impact on obtaining the payment aggregator license.

Who is a Payments Aggregator?
Like the name suggests, they are aggregators. They connect online merchants with banks to process payments.

So, in our case – let’s say you order something from Blue Tokai Coffee on Zomato and you make the payment on the platform. Zomato will act as an aggregator, collect all the payments pertaining to Blue Tokai and then settle it in Blue Tokai’s account.

What’s the hassle with the license?
Until recently, PAs were not regulated by RBI. But due to some issues with customer onboarding, KYC etc, RBI decided to step in to decide who got this license. Existing players were allowed to operate as PAs and got the in-principle nod from RBI.

But, if you were a new player – you had to get this license before you could start your operations.

Becoming a PA lets you handle the funds for the merchants on your platforms and allows you to build financial products on top of it. PAs can offer early settlements to select merchants based on their business volumes, which is a form of credit. They can offer term loans as well by partnering with NBFCs and banks.

What’s in it for Zomato?
After obtaining this license, Zomato will serve as a Payments Aggregator and issuer of prepaid wallets (Zomato Pay). As per several sources on the net, they don’t want to become a standalone fintech player – but use this PA license to provide various offering within it’s ecosystem.

Zomato has a cash chest of > 11,000 CRORE and they could rotate that capital to make money.

Some services I am assuming it could provide would be:

• Loans / Extended credit lines to restaurants / HyperPure clients
• BNPL to Zomato users
• Zomato powered credit card

Management commentary in the upcoming quarters should provide better insights on this to see just how BIG this opportunity could be, because Zomato could easily replace players like SIMPL and cross sell various financial services to it’s diverse set of partners / customers.

Sources:

1. licence: ETtech Explainer: The headlong rush for a payment aggregator licence – The Economic Times
2. zomato online payment aggregator: Zomato, Stripe secure final RBI nod for online payment aggregator – The Economic Times