For Madhusudanan R. and Muthukumar A., who were colleagues at Visa Inc from 2010 to 2012 in Mumbai, tea breaks were when they vented out about how major banks’ were lagging behind in digitizing their services. These discussions always circled back to how they might solve this problem for the financial industry. Eventually, an idea for a startup formed between them.
With combined experience of more than a decade working with Visa, Citibank, and Paypal, they had learnt how banks function in India. These institutions’ reluctance to create new digital products blocked access to a whole new set of customers.
In 2015, Madhusudanan and Muthukumar, along with Prabhu Rangarajan, started their own B2B fintech company, YAP (Your API Platform). The founders established their base in Chennai.
With its proprietary API (application programming interface), YAP provides the tools to build new payment platforms for banks and fintech companies. This speeds up these institutions’ process of acquiring customers who demand light and fast options for their electronic payments.
“When we started, banks in India didn’t use any of these APIs. In other markets, like the US, this phenomenon started ten years ago. In India, it started around 2014–15, when a few digital payment companies started to grow,” Madhusudanan, co-founder of YAP, told KrASIA.
Madhusudanan pointed out that banks in India “largely relied on the franchise of middle-class salaried families, their foundation layer, on which they built other products like credit card and different types of loans.” Until recently, innovation has not been a priority.
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But since the digital payment ecosystem in India has matured over the past five years, and because the National Payment Corporation of India (NPCI) launched its Unified Payments Interface (UPI) in 2016, people in the country are now used to the idea of fintech-based transactions. In turn, it is becoming easier to convince banks to adopt new technologies.
Currently, the company claims to work with 15 banks in India. Apart from offering its API for payment integration, including UPI payments, YAP helps them acquire corporate clients that are often digital financial institutions, like neobanks or the fintech arms of major companies. “They don’t have to spend any capital on this, they can reach out to a much bigger audience without spending on customer acquisition,” Madhusudanan said.
Aside from major banks, most of YAP’s clients are fintech companies as well as digital consumer companies that offer financial services to their customers. Madhusudanan said there is no ready-made product that the company offers to these platforms. YAP can mix and match features for customized solutions.
For example, he said, YAP works with fintech companies to rope in customers that are unserviceable with an alternate product. “A digital lending company rejects multiple customers because their credit score is not good. So, instead of rejecting them, we figure out how to create a product that can engage that customer. We work with the platform provider to build a secure credit product,” Madhusudanan said.
In partnerships with banks, YAP enables lending companies to provide a bouquet of financial products. “We ask them to buy gold or invest in a liquid fund or put some money in a fixed deposit, against which a credit card is issued. It does two things: the customer doesn’t go away, and she is also given an opportunity to create a better credit score,” he said.
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More broadly, YAP’s services help its clients provide virtual credit cards, digital wallets, QR code-based payments, and other familiar fintech products. It also acts a bridge between banks and fintech companies. “When companies build these financial products, they don’t understand the bank side of the process—not just from the tech standpoint, but risk management, compliance, and KYC, requirements of banks,” Madhusudanan said. When that happens, YAP works with banks to set rules of engagement, fast-tracking the process to launch new fintech products.
At the moment, YAP’s API is used by more than 200 companies, including Ola, Swiggy, MakeMyTrip, Cred, and Paisabazaar.
Angels from the fintech space
For the first four years, the three founders ran YAP without raising any institutional funding. Late last year, the company raised a seed round of USD 1 million from a group of angels led by Amrish Rau, co-founder and CEO of fintech company PineLabs, with participation from Cred co-founder Kunal Shah, Jupiter Money founder Jitendra Gupta, and others. In April, Singapore-based venture fund Beenext invested USD 4.5 million in the company.
In 2018 and 2019, the company started to look at overseas markets and landed in the UAE and the Philippines. And this year, it launched in Nepal, Singapore, Australia, and New Zealand. It claims to have partnership with nine banks in these countries, but Madhusudanan said 95% of YAP’s business comes from India.
“These expansions were purely to spread our wings and make sure that we are present at a time when business platforms need something that we offer,” he said.
Although the company is operationally profitable, its growth is dependent on that of other companies, like any B2B service provider. If a firm using YAP’s services ends up in a cash crunch and goes bankrupt, or simply fails to sustain its operations, that impacts YAP’s revenue stream. “We see a lot of attrition happening in our business. Out of 100, 60 businesses would carry over in the next year,” he said.
Madhusudanan said the company is exploring long-term solutions for this, and this in turn fuels YAP’s overseas expansion so that the company isn’t dependent on clients from a single market. “In a market like India, we don’t see much scale beyond the top 20 companies. That depth is still not there,” he said.
This article is part of KrASIA’s “Startup Stories” series, where the writers of KrASIA speak with founders of tech companies in South and Southeast Asia.