Last fortnight, application programming interface (API) infrastructure platform M2P Fintech was in conversation for a $80M fundraise at a valuation of $900M.

Taking a Leap

In 2014, Madhusudanan Rangarajan and Muthukumar Ayyakkannu were working in Mumbai as software developers at VISA, the global payments behemoth.

Madhu earned his chops at Citibank, managing a portfolio of affluent credit products and corporate cards. At Visa, he was responsible for product development and market seeding for financial inclusion products.

Muthu followed a similar path, working in core tech roles after graduating from BITS Pilani.

The two possessed a deep understanding of financial systems. They frequently exchanged notes on the Indian payments landscape and deliberated business ideas during tea breaks.

However, the comfort of well-paying jobs kept them from taking the entrepreneurial plunge.

Around this time, Prabhu Rangarajan, an acquaintance of Madhu’s who worked at Cognizant, approached him with an idea.

Ride-hailing apps were the new thing in town and had caught Prabhu’s attention. However, he noticed that booking a cab often required juggling between multiple apps such as Uber, Ola, Fasttrack and TaxiForSure. 

Prabhu’s naïve vision was to build an aggregator that could connect all these apps, combining the players' forces while simplifying the customer experience.

However, a few years his senior, Madhu cautioned him that his direct-to-consumer idea would require substantial capital to get off the ground, given the challenges around branding and customer acquisition.

Even if it were to scale, the degree of value addition would be limited and heavily dependent on the incumbents. The lack of any proprietary advantage would further expose them to competition. 

Madhu advised Prabhu to let go of his grand app-of-apps pipe dream. Instead, he offered to collaborate on isolated payments as a problem statement, albeit not limited to ride-hailing apps.

The timing was opportune. Flipkart and Snapdeal had already captured the urban youth. Amazon had just entered the country, validating India as e-commerce’s next big pit stop.

Moreover, food delivery, mobile recharge, beauty & personal care, and healthcare were all moving online, collectively shaping India’s fledgling internet economy.

The new ecosystem demanded reimagined payment solutions. Prabhu and Madhu were ready to dive in.

Fellow enthusiast Muthu soon joined the duo. Yap – pay spelled in reverse – was born.

Breaking Down Walls

The trio noticed that the online insurgents of the day were eager to roll out new products, with finance embedded into the core offering in many cases.

However, RBI regulations allowed only banks and prepaid instrument providers to collect and retain money from the public.

On the other hand, India’s banking system was grappling with its bad loan woes. It lacked the agility and willingness to tailor its offerings for the new class of businesses.

Yap identified this white space as a place to build an intermediary layer and orchestrate a mutually beneficial relationship between digital players and traditional banks.

This would enable digital players to launch fintech products faster without the hassle of partnering directly with banks. For the banks, this presented an additional revenue stream, with Yap handling the heavy lifting of program management.

In 2015, India was still a year away from UPI becoming a household name. Reliance Jio was still in stealth, mobile internet usage had yet to explode, and QR codes had yet to gain omnipresence.

It was the era of digital wallets.

Paytm, Freecharge, Mobikwik, and Oxigen led the charge. Users could top up their wallets and make cashless payments on the go but with one major caveat—the counterparty also needed to use the same wallet.

Each wallet operated as a walled garden, resulting in zero interoperability.

Madhu, Muthu, and Prabhu saw the potential for an aggregator yet again. This time, the plan was to lay down the infrastructure for others to use rather than try to reach consumers directly.

The primary use case was the wallet, but now as an operating system.

They built a wallet and white-labelled it, allowing any online business needing wallet functionality to leverage Yap’s API stack off the shelf.

This solution freed up valuable engineering bandwidth and facilitated seamless integration. Online businesses could focus on compliance and branding while Yap handled the backend.

Yap added a prepaid card to the wallet to boost interoperability further.

With a winning product, it was time to go to the market. Madhu’s and Muthu’s hard-earned goodwill soon led them to their first customer.

Striking ‘Gold’

The team building the prepaid card was lean—only half a dozen individuals trudged along to build an enterprise-grade product. 

The trio was clear that they did not want to reinvent the wheel. In May 2015, the team borrowed the readymade card issuing layer from DCB Bank and approached IIFL (India Infoline) with their co-branded wallet + prepaid card combo. 

The value proposition for IIFL was simple. It operated a flourishing gold loans business. Individuals without a formal credit history, often without a bank account, pledged their family heirlooms in gold ornaments to borrow cash against that. 

IIFL would disburse the loan in cash or cheque. However, the borrowers preferred to keep their credit situation a secret from family members. Prepaid cards allowed them to keep such loans off their bank account statements. 

The product found instant traction.

Back then, RBI guidelines for KYC for prepaid cards were less strict than those for opening a savings account. The government aggressively promoted Jan Dhan accounts, and banks were given steep targets for new account opening. 

However, banking was still a closely guarded corridor, accessible only to people with white hair. Madhu and Muthu did not give up.

During their time at Visa, they met numerous key decision makers in the banks. Through their interactions, they built goodwill for themselves, coming across as individuals who understood the business well. 

They called upon that network and approached them for business with a solid plan that generated bank revenue from day one. 

Banks earn an issuance fee with every disbursal. MDR (Merchant Discount Rates) is another revenue stream whenever the cards are used for transactions. If ATMs are used to withdraw cash, the banks earn a convenience fee. There are multiple avenues for them to make money. 

All coming with no incremental bandwidth.

DCB Bank welcomed the IIFL partnership. It unlocked new revenue streams for DCB and allowed them to hit their target of bringing a wider social network into the formal credit system. 

IIFL won - it saw an uptick in their disbursals and higher NPS. 

Yap won, too—they did not need to build portals and interfaces for their consumer-facing product. Instead, they reused the front end available with their partners and deftly used APIs to stay behind the scenes. They forged partnerships with the established players of the ecosystem and earned revenue as a proportion of the interchange fees charged by the banks. 

More importantly, the founders, who took no salary for the first year of their operations, could remain bootstrapped with the money they had pumped in. 

Buoyed by the success, Yap contacted NBFCs and more gold lending companies. They had found their ideal customer profile and the go-to market. It was time for the cofounders to step on the pedal.

Within a year, about 100K cards were issued. Their success story attracted the interest of their friends. 

Many wanted to be entrepreneurs but had to stay away for various reasons. They wanted to see the trio fulfill their dreams, so they came forward to help them raise their first round. Initially slated to raise ₹50 lakhs, the round got oversubscribed to ₹70 lakhs. 

The friends were persuasive, and the founders wanted to have a safety margin to never default on salary and vendor payments.

Manifesting Serendipity

Yap had survived by building its products as a bouquet of solutions already in the market. 

But the architecture was losing its flexibility. The world was awakening to an innovation—payments infrastructure is coming to the forefront. 

At that point, hardly anyone was building this infrastructure. Marqeta had attained some scale in the US, building its modern card issuance stack. 

Yap wanted to use the funds it had just raised to build this entire infrastructure. To that end, it hired a few new tech team members. 

Madhu and Muthu were convinced that the world was moving fast towards pull-based payments. The world was one where buyers would transact with merchants without their cards physically interacting with any merchants' hardware (such as POS terminals).

In other words, they saw that QR was coming and digital payments would be the future.

When demonetisation was announced in November 2016, there was suddenly a huge push for digital payments. Paytm dashed to capture a huge market share with its aggressive feet-on-street army.

However, the QRs being installed did not use standardised technology. Paytm developed its standard, and so did Mobikwik. None of these QRs were interoperable.

The founders thought they should integrate all of these gateways so that payers do not need all the apps on their phones. 

Yap was ready quickly with their product. They had seen this wave coming from a distance and immediately pounced on this opportunity.

Their technology stack was ready in a matter of days. 

When the government announced one unified standard—Bharat QR—to simplify QR payments in February 2017, of the 14 banks that moved first, 8 were already Yap’s customers. 

Yap’s product was straightforward. 

It primarily banked on three APIs - one for payment, another for status check and the third for payment reversal. It could easily integrate with the legacy tech of the banking partners. UPI took off, and with that, Yap too.

With every transaction, M2P made money on MDR.

Stepping into the World

The government wanted to encourage a wider audience to adopt digital payments, so it removed MDR for QR-based UPI payments. 

Yap had to pivot to a SaaS revenue model, charging banks a flat subscription fee for enabling QR capability. 

UPI gave them scale, user data and transaction volume. But nobody made any money there, pushing Yap to think of more products to monetise.

In 2018, the team built the infrastructure for multi-currency travel cards. Madhu had launched the forex card product for Thomas Cook. Since then, they have realized nobody has innovated in this space for the last 10-15 years.

Travellers faced many challenges abroad. ATMs charged a hefty surcharge—a convenience fee for withdrawing cash. There would also be a series of currency conversions right from when the money was loaded onto the wallet. 

MDR on forex transactions, currency spread and markup fees were other areas how a cardholder would be charged. M2P was sitting on a gold mine, which they had mined before with shovels that had previously built the multi-wallet product.

They enabled this new product for BookMyForex, DCB and Yes Bank. It accounted for 20-25% of the revenue until covid stalled global travel. 

A similar problem existed in the credit card industry as well. Renting this infrastructure was costly, and the new generation of fintech in India found this to be a significant barrier. 

Until Yap came forward to build another frugal solution that made credit card issuance much cheaper.

Parallelly, in 2020, they partnered with SBM India to build their entire banking stack (core banking solutions), which included a full-blown credit card, debit card stack and neo-banking stack. 

2020 was all about scaling these products globally. 

The India business was self-sufficient, with INR 5-7 Cr of revenue. But they wanted to raise external capital to set up shop globally. 

The first international office was in Abu Dhabi. They partnered with First Abu Dhabi Bank and Emirates NDB to gain unfettered access to customers in the UAE, Bahrain, Saudi Arabia, Qatar, and Egypt. 

It launched co-branded products and BNPL solutions for online e-commerce players in the region. However, their products needed to be fine-tuned to cater to Islamic law. 

Charging interest was considered haraam, but banking was a business with the interest spread as revenue. Yap demonstrated that their nimble team was agile in adapting to the changes.

Singapore was the next stop. Very soon, they were in South Asia and Asia Pacific too.

Adversity into Opportunity

As it went global in 2020, the company underwent a significant rebranding.

The company changed its name from Yap to M2P Fintech. The rebranding reflected its evolution from a payment solutions provider to a comprehensive API infrastructure platform supporting various financial services.

The new name, M2P (Mobile to Payments), emphasised the company’s mission to enable seamless financial transactions across borders and platforms.

This rebranding was also strategic, aligning with M2P’s expansion into new markets and product lines and reinforcing its brand identity as a leader in the fintech industry.

M2P began the year by raising a significant seed round four years after its start. This capital infusion was crucial for the company, allowing it to expand its product offerings and scale its operations.

The timing of this funding was strategic, as it positioned M2P to capitalise on the impending shifts in the financial landscape due to the COVID-19 pandemic.

The funds were primarily allocated to enhance M2P’s API infrastructure, underpinning its core banking and payment solutions.

The onset of the pandemic triggered an unprecedented shift towards digital and cashless payments. With physical transactions declining due to lockdowns and social distancing norms, consumers and businesses increasingly adopted digital payment methods. 

M2P Fintech, with its robust API-driven payment solutions, was well-positioned to meet this surge in demand.

The company saw a significant uptick in transaction volumes, driven by the accelerated adoption of digital payments across sectors.

This surge validated M2P’s business model and highlighted the critical role of fintech in maintaining economic continuity during the pandemic.

Later that year, M2P started going global by entering a strategic partnership with the State Bank of Mauritius (SBM) to develop and deploy neobanking and credit card solutions.

This partnership was a significant milestone for M2P, marking its entry into the neobanking space. Through this collaboration, M2P provided SBM with a comprehensive neobanking stack, enabling the bank to offer various digital financial services.

The partnership also included issuing co-branded credit cards, further expanding SBM’s product portfolio.

In addition to neobanking, M2P became the switching partner for SBM’s remittance and cross-border payment products with Mastercard.

This partnership leveraged M2P’s advanced payment infrastructure to facilitate seamless cross-border transactions, a critical service for a bank with a significant international footprint like SBM.

By handling the transaction processing and switching, M2P played a crucial role in enhancing SBM’s operational efficiency and customer experience.

Capitalizing on its expertise in neobanking, M2P expanded its footprint to the Middle East and North Africa (MENA) region in 2020. The company launched its neobanking stack, tailored to meet the unique needs of the MENA market.

This launch marked M2P’s first major international foray outside South Asia and was part of its broader strategy to become a global fintech player. 

With its large unbanked population and growing digital economy, the MENA region presented a lucrative opportunity for M2P. 

‘Stack’ing up Favourable Odds

By 2021, M2P had firmly established itself as a critical enabler in India’s rapidly evolving fintech landscape. 

To fully appreciate M2P’s journey, it’s essential to consider the backdrop - the rise of India Stack. India Stack, which began with Aadhaar and expanded through UPI, transformed India’s economy and positioned the country as a global leader in digital public infrastructure.

M2P’s early success was deeply intertwined with the growth of the India Stack.

As fintechs sought to launch embedded finance products, M2P effectively bridged the gap between traditional banks and new-age businesses. 

Their API-driven solutions enabled companies to bypass the cumbersome processes of legacy systems, facilitating rapid product launches.

Building on top of India Stack and making APIs for e-KYC, DigiLocker, and the Account Aggregator (AA) framework easily accessible, M2P developed a comprehensive Core Lending Suite. 

This suite included lending, onboarding, and credit management services, allowing financial institutions to deploy lending solutions quickly with the scalability and security that India Stack provided. 

M2P created a one-stop-shop solution for lenders, offering a plug-and-play option to democratise lending.

M2P's product offerings extended beyond lending. 

The company was launching products across the financial services spectrum at an unprecedented pace, quickly gaining traction among traditional banks. 

One standout product was the Turing Core Banking System (CBS), which enabled traditional banks to digitize their offerings and process payments faster. 

Turing CBS natively integrated payment processing systems, including Card Management System, AEPS (Aadhaar Enabled Payment System), UPI (Unified Payments Interface), and IMPS (Immediate Payment Service), effectively catering to the burgeoning payment ecosystem.

Additionally, Turing CBS streamlined time-consuming back-office tasks, including Treasury systems, Digital Identity, Centralized KYC processing, Loan Origination Systems, and compliance tracking with Anti-Money Laundering controls.

North East Small Finance Bank was one of the early adopters of Turing CBS. Thanks to M2P’s robust technology base and low-code platform, the bank successfully transitioned its 220+ branches in Assam to digital operations in under three months, achieving a smooth and efficient upgrade.

As India Stack laid the foundation for a digital financial ecosystem, M2P was at the forefront, empowering companies to harness its potential seamlessly. 

M2P’s diverse offerings powered critical advancements in finance, enabling secure BNPL solutions with Risk-based Authentication (RBA), streamlining neo-banking operations, and ensuring regulatory compliance in prepaid card services through integration with DigiLocker and Aadhaar.

The brilliance of their innovation lay in its flexibility - clients could seamlessly integrate any service from any suite to power their financial operations. 

They were truly helping every company become a Fintech.

Adding to Repertoire

M2P Fintech underwent a period of rapid growth and strategic acquisitions, significantly enhancing its capabilities and market position.

The journey began with a critical Series B funding round in 2021. This infusion of capital enabled M2P to focus on expanding its Buy Now, Pay Later (BNPL) capabilities, which were becoming increasingly popular among consumers seeking flexible payment options​

Soon after the funding round, M2P made strategic acquisitions to bolster its offerings. The acquisition of Wizi, a credit card sourcing platform, was particularly noteworthy. By integrating Wizi into its ecosystem, M2P enhanced its BNPL stack, providing more robust credit solutions to its customers.

Around the same time, M2P acquired Origa.ai, a repayment and collection analytics platform. This acquisition aimed to improve the efficiency and effectiveness of its loan recovery services, ensure better risk management, and increase customer satisfaction​.

The momentum continued into October 2021, when M2P raised $35 million in a Series C funding round, providing the financial muscle needed to pursue further strategic acquisitions and expansions.

In January 2022, M2P raised another $56M in a series C1 funding round and made a series of strategic acquisitions that further solidified its position in the market. In June, M2P acquired BSG ITSOFT, a core banking solutions provider. This acquisition was crucial as it bolstered M2P’s integrated core banking system (CBS) and payment stack, allowing it to offer more comprehensive solutions to cooperative banks and other financial institutions​.

Later, in 2022, M2P acquired Syntizen, an identity verification service provider. This acquisition added valuable e-KYC and Aadhaar verification capabilities, enhancing M2P’s onboarding solutions.

Integrating Syntizen's technology into M2P’s infrastructure enabled the company to provide seamless and compliant onboarding experiences, a crucial factor in the rapidly evolving digital banking landscape​.

The acquisition spree continued with Finflux, a cloud lending platform. 

This move strengthened M2P’s digital lending solutions, including its BNPL services. By incorporating Finflux’s technology, M2P was able to offer a more robust and scalable lending platform to its clients​.

M2P continued to invest and Goals101, a transaction behavioral intelligence software maker, was acquired in December 2023. This acquisition allowed M2P to integrate data-driven personalization into its digital banking products. Goals101’s algorithms and analytics tools provided insights into consumer transaction patterns, enabling M2P to offer highly personalised banking experiences. This move catalysed M2P's enhancement of customer engagement and service delivery​.

From almost nowhere, M2P Fintech had suddenly arrived. 

Happily Invisible

These acquisitions were strategically aligned with the vision of enabling a comprehensive and integrated fintech ecosystem. 

M2P built a more versatile and scalable infrastructure by acquiring companies with complementary technologies and capabilities. This approach enhanced its service offerings and positioned it as a leader in the fintech space, capable of meeting diverse customer needs across different markets.

This period set the foundation for M2P's emerging as a significant player in the fintech industry, offering a comprehensive suite of financial services and solutions​.

By 2024, M2P had achieved impressive growth and established a substantial global footprint.

Operating in over 30 markets worldwide, M2P boasts a client base of more than 200 banks, 300+ Lenders, and 800+ fintechs. This expansive reach underscores the company's influence and capabilities in the fintech industry.

M2P’s potential new round of funding is set to support enhancing M2P's technology infrastructure and facilitate expansion in domestic and international markets​.

The firm's ability to attract significant investment highlights the potential in "invisible" infrastructure businesses within the fintech sector. By focusing on providing API infrastructure and strategic partnerships, M2P Fintech has unlocked large opportunities essential for modern financial services yet often go unnoticed.

M2P Fintech is well-positioned to continue its growth trajectory, leveraging its robust client base and strategic acquisitions to solidify its market presence further.

This anticipated funding round validates the company's business model and provides the capital to fuel its ambitious expansion plans​.

M2P’s revenue has also followed its trajectory. The company’s most recently disclosed revenue is INR 490 Cr in FY23, 2.5x of the year before. It is likely to be growing extremely fast to justify the valuation it is raising at. It took the company 6 years to raise its first round, but just 2 additional years to get to INR 100 Cr. 

From a group of friends trying to solve a problem, M2P sells shovels to financial services firms participating in the gold rush. 

As the finance world becomes more tech-enabled, M2P will become the invisible force powering it.

Writing: Nikhil, Raj, Samarth, Tanish and Aviral Design: Omkar and DALL-E