Indian start-up Payzello combines debit, credit and forex into one card

Payzello, a Hyderabad-based start-up, is hoping to tap the pan-Indian market with its three-in-one card offering.

The Hyderabad-based fintech plans to raise an $8m Series A in the next nine months

Combining debit, credit and forex capabilities into one card, Payzello’s app will allow users to switch between them – the default being credit.

Gearing up to launch later this month, the tech-heavy team of 12 raised an undisclosed round of seed funding back in 2018.

It has since used the funding to build out its tech stack over the last two years and roll-out Payzello’s beta.

Backers include Indian investor Axilor Ventures and a selection of family office funds.

The plan is to raise a further $8 million Series A in the next nine months, and grow the team three-fold to 35-40 by January.

Tapping 260 million students

Payzello was founded by 26-year-old college dropout, Pruthiraj Rath. He comes from a small town a few kilometres away from Bhubaneswar, a city in eastern India.

Founder and CEO Pruthiraj Rath

Rath tells FinTech Futures that millions of India’s student graduates are ignored by the private sector banks, and therefore have to go public.

That’s because India’s private sector banks often require a balance minimum too high for graduates to afford outright.

“It’s better to catch them early and build that banking relationship early too,” says Rath.

Whilst challenger rivals like Jupiter focus on the white-collar segment, Payzello will focus on the graduates from middle-class families. It also requires a lower deposit minimum than Jupiter, starting at INR 5,000 ($67). Jupiter’s larger deposit requirement is not public knowledge, but Rath says it is at least ten times the size of Payzello’s.

There are some 260 million students in India, according to a 2018 World Education Services (WES) report.

“Banks give them a debit card and thinks their job is done,” says Rath.

“You don’t get guidance to invest properly. There’s no wealth management service for the masses or middle-class families, because they’re seen as lower-generating revenue customers [by incumbents] and therefore ignored.”

Challenger Slice, which FinTech Futures spoke to in July, is also targeting young users and acknowledges a similar issue. That young people starting new jobs in a metro city, particularly if they come from a rural area, often face rejection when they apply for credit.

This is down to the lack of a credit repayment history, which causes the banks to view this customer segment as a credit risk.

Three-in-one card

The long-term vision at Payzello is to combine a number of banking services into one, affordable place.

This includes a savings account, spend management, lending via its credit capability, and abroad spending through a foreign exchange setting.

The start-up’s technology can analyse the transaction codes of payments made and deduct it from the right card – hence automating expenses in the process.

“Cash management hasn’t been digitalised in India yet,” says Rath

“Cash management hasn’t been digitalised in India yet,” says Rath.

And though it doesn’t have a licence to sell investment products, the start-up plans to link in third-party investment offerings into its app which it will earn commission on.

Payzello won’t reveal the identity of its bank partner but does say it’s one of the largest banks in India. The fintech is also connected to the country’s national Unified Payments Interface (UPI).

Rath points out that to get “proper financial management”, you want your savings account to link to the UPI – but that a lot of players still don’t offer this connection.

“That’s made it an open market for us in terms of acceptance and new financial products.”

Five revenue streams

Typically, opening a savings account in India with a traditional bank can still take days and involve paperwork. Incumbents also require a certain amount of liquidity for customers to earn interest on their savings.

So, if a customer’s savings is the same as their outflow, then they won’t fall into the interest-earning bracket.

Alongside its hybrid card, Payzello has also spent the last two years building a chatbot. “You can use it for basics like asking it to tell your balance, or transfer money,” explains Rath.

But in the future, the founder envisions it acting much like a wealth management helper – or robo-adviser. Customers will be able to ask what the best funds are, or which investments have the highest returns, for example.

Payzello will have at least five revenue streams upon launch. As well as earning on interchange fees, it will also earn float interest – that is, 1% of the money deposited in its partner bank by customers.

It will earn a commission on savings too. As for its credit service, Payzello plans to earn 2-3% interest on what it lends out. And its third-party investment product market will also earn it commission.

Read next: India’s large FIs “don’t believe in their youngsters” says Slice CEO