[Update]: LazyPay clarifies buy-now-pay-later service halt to merchants

13 Nov 2024, 10:56 AM

A source claims LazyPay recently received a letter from the RBI flagging issues in its customer onboarding process, but the company strongly denies receiving any such communication.

Arti Singh

Story has been updated with a clarification issued by LazyPay that it has not received any such letter from RBI

On November 12, LazyPay -- a brand operated by PayU Finance -- halted its buy-now-pay-later (BNPL) service. The Gurugram-based fintech informed its merchant partners about the shutdown through an official communication.

In a letter to its merchants, reviewed by The Head and Tale, the company stated: "We are writing to inform you that due to some internal re-organization of our businesses, we will be halting the offering of the LazyPay BNPL option that forms a part of our integrated offering under the above service agreement." 

"The halt will be implemented on 12 November, 2024," the email read.

According to a source, PayU Finance recently received a letter from the Reserve Bank of India (RBI), flagging concerns about lapses in LazyPay KYC processes for customer onboarding. The communication from the regulator, the source suggests, may have prompted the company's decision to shut down LazyPay BNPL service.

"LazyPay has sent a letter to its merchant partners, informing them that it is halting its BNPL service temporarily. The company recently received a letter from the RBI, where the regulator identified some anomalies in its KYC processes during customer onboarding. It will take time for them to align its processes, so they have decided to suspend the service with immediate effect," the source added.

Another source, who is a senior payment official, said, the decision to halt LazyPay, in-fact, is triggered by KYC lapses in customer onboarding.

However, LazyPay strongly denies receiving any such letter from the RBI. 

"LazyPay clarifies that it has not received any such letter from RBI as has been alleged in your report. We do not normally comment on regulatory matters. And we advise you to refrain from fuelling any speculations about regulatory matters," LazyPay spokesperson said in its response to The Head and Tale query.

The Head and Tale could not independently verify the RBI’s communication to LazyPay as of press time.

"We understand the importance of the LazyPay BNPL option forming part of the Technology Enabled Settlement Service (TESS), which is getting halted, for your business and will be working diligently to achieve the re-organization at the earliest," the letter to merchants further mentions.

However, at present, the company -- in the letter -- said, it is "not in a position to provide exact timelines."

This does not impact the Settlement Processing Services that will continue to be offered in accordance with the terms and conditions of the service agreement.

"We wish to clarify that the LazyPay mobile application will continue to operate as usual, allowing our customers to transact with merchants without interruption. We have made some operational changes to the product, and our recent communication to merchants pertains to this," LazyPay spokesperson responded after the story was published.

On November 13 after the story came out, LazyPay shared another communication with their merchant partners. 

Here's the excerpts of the communication, accessed by The Head and Tale:

"In continuations of our below communication regarding LazyPay services, we wish to clarify that LazyPay mobile application will continue to operate as usual. We have made some operational changes, pursuant to which the process for onboarding new customers has been streamlined.

This communication has been issued since we have received certain queries from our partners, and we wish to provide our clarification in relation to any confusion caused consequent to below communication.

We sincerely apologize for any inconvenience this may cause and appreciate your understanding and patience during this time."

LazyPay BNPL -- a facility allows customers to make purchases immediately and settle payments at a later date -- is available across more than 250 merchants, including Blinkit, Zomato, Swiggy, MakeMyTrip, Goibibo, BookMyShow, BigBasket, Flipkart, Rapido, TataSky, and Dunzo. 

An email sent to RBI still remains unanswered.

A year ago, PayU India had shut down its LazyCard, a prepaid payment instrument backed by a credit line. This was LazyPay's foray into the card segment, which was launched in 2022 after the RBI said that loading of credit lines into non-bank prepaid payment instruments (PPIs) like prepaid cards and wallets is prohibited.

Also, in 2022, LazyPay BNPL was suspended "to comply with the RBI directive."

In September this year, The Head and Tale exclusively reported that PayU Finance -- the non-banking financial company (NBFC) unit of payment service provider PayU  -- laid off around 100, or a third of its staff. LazyPay is also a product from PayU Finance. The PayU Finance team consisted of around 300-350 members before the layoff.

“In line with the changing market dynamics, we at PayU are repivoting our Credit business strategy and sharpening focus on strategic priorities that will continue to drive success and growth for our business and enhance customer experience. This realignment is leading to some departures and we are dedicated to fully supporting all colleagues during this transition." said PayU spokesperson, without confirming the number of layoffs," PayU spokesperson had then said.

The layoff comes as PayU India has been gearing to float its initial public offering (IPO). In November last year, Ervin Tu, interim CEO of Prosus, which owns PayU, had said he was hopeful of a public listing for PayU India by the second half of 2024.

"However, Fabricio Bloisi, who took over as CEO of Prosus earlier in July was’t happy with the performance in India when he visited the country last month as the India business failed to improve profitability in FY24. The pressure to be profitable is too much so they are trying to cut costs from the business that is not generating returns for them,” one of the sources told The Head and Tale then.

According to Prosus’ annual report, its revenue from India –  the largest market in PayU’s payment service provider (PSP) business –  grew 11% to $444 million in FY24 despite being unable to onboard new merchants due to the noted embargo during the year. Revenue growth was driven by increasing volumes from existing merchants and growing value-added services such as affordability, it added. However, while its payments business in India achieved a 3% trading profit margin in FY23, this worsened to -3% in FY24 due to the change in merchant and payment method mix, it noted.

"India remains a highly attractive strategic market for PayU, given that it is expected to become the third-largest economy by nominal GDP within the next decade," its latest annual report noted.

It added that it has continued investing and building new opportunities such as credit in India. "The credit business revenue has grown 12x since FY21, translating into a revenue CAGR of over 128%. This growth has been coupled with cost reductions, ensuring that the trading-loss margin continued to improve YoY," it explained.

Earlier in April this year, PayU received in-principle approval from the Reserve Bank of India (RBI) to operate as a payment aggregator after RBI's 15 month-ban from onboarding new clients.

The author is Founder and Editor of The Head and Tale. She can be reached at [email protected]
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