In January 2020, India saw its latest entry to the unicorn club—startups valued at over $1 billion—when payments solutions provider Pine Labs raised funding that could amount to as much as $300 million. This financing round values the company at over $1.2 billion.
The emergence of yet another unicorn is a marked change from a time not so long ago when this was still a rare milestone. However, over the last two years, there has been a steady increase in the number of unicorn startups. Worldwide, the count stands at nearly 500. Pine Labs is #29 in India.
But Pine Labs isn’t just another Indian unicorn. It is quite unlike many of its peers.
For one thing, Pine Labs has a real business—one with real revenues, and even occasional profits. Pine Labs offers cloud-enabled point-of-sale (PoS) payments solutions that allow merchants to accept payments through credit or debit cards, e-wallets, QR codes, and real-time payments system UPI (Unified Payments Interface).
Over the last decade, the Noida-headquartered company has established itself as India’s largest PoS solutions provider. Nearly 15% of retail card payment volumes flow through its network. While most Indians wouldn’t immediately recognise the company’s brand, it has become almost ubiquitous with over 400,000 PoS terminals in the country. These are spread across over 100,000 merchants, ranging from large retailers such as Shoppers Stop and the Future Group to small neighbourhood mom-and-pop stores.
Using payments as a thin wedge, the company has expanded its solution portfolio to include data analytics, loyalty, and gifting programs for retailers (it also acquired gift card solution provider Qwikcilver for $110 million in March 2019). In addition, Pine Labs offers customer credit solutions and has recently expanded to international shores by launching operations in Southeast Asia.
With its latest fundraise, Pine Labs is on a decidedly upward trajectory. How it got here, though, is a less savoury story.
Not your average unicorn
A large part of Pine Labs’ success can be attributed to the smart way in which the company has ridden and capitalised on macro market trends over the last six years.
In 2013, the Reserve Bank of India (RBI), India’s central bank, issued a diktat to banks to enhance debit card security. It mandated the need for a personal identification number to complete a transaction. Banks used this opportunity to tout high safety to their customers and started routinely offering debit cards to every account holder, leading to an explosion of debit cards in India.
RBI also rationalised the Merchant Discount Rate (MDR)—the charge retailers pay to card companies on each transaction—capping this figure to 1% of the transaction value.