India’s large pure-play digital payments companies are increasingly expanding into lending and other financial services as they look beyond the low-margin payments business to build sustainable profitability.
Companies such as Paytm, PhonePe, Razorpay, BharatPe and MobiKwik, which started out as digital wallet, UPI, payment gateway or merchant acquiring platforms, have over the past few years diversified into consumer and merchant lending, insurance distribution, stock broking, wealth management and other fee-based financial products.
The shift comes at a time when the core payments business is facing mounting pressure. The absence of merchant discount rate (MDR) on UPI transactions has limited revenue opportunities, while margins in payment processing remain thin. Recent regulatory changes governing prepaid payment instruments (PPIs) and wallets have also prompted companies to rethink their business models.
Industry executives said the next phase of growth for payment companies will increasingly be driven by monetising their large customer base and merchant ecosystem rather than relying solely on transaction processing.
Paytm has emerged as one of the strongest examples of this transition. Since expanding aggressively into financial services, the company has significantly improved its operating performance. Financial services distribution revenue-including merchant and personal loans, insurance and wealth products-has become one of its fastest-growing businesses, while subscription revenues from merchant devices have also strengthened recurring income. Paytm reported its first ever full year net profit in FY26, aided by higher contribution from financial services and tighter cost controls following the disruption caused by regulatory action on Paytm Payments Bank in early 2024.
PhonePe has similarly expanded beyond payments through insurance distribution, mutual funds, stock broking and consumer lending partnerships. The Walmart-backed company has also built a sizeable merchant lending ecosystem by leveraging transaction data from millions of merchants on its platform.
Razorpay, originally focused on payment gateways for businesses, has expanded into working capital loans, payroll, banking services for businesses and other financial software offerings. BharatPe has also built a significant merchant lending franchise after establishing a large QR-code based merchant acceptance network across the country.
MobiKwik, one of India’s earliest digital wallet companies, recently received approval from the Reserve Bank of India to operate as a non-banking financial company (NBFC), enabling it to expand its own lending operations alongside its existing financial product distribution business.
Industry executives said the common thread across these companies is access to rich payments data generated by millions of consumers and merchants. Transaction histories allow companies to assess creditworthiness, cross-sell insurance and investment products and generate fee income that is significantly more profitable than processing payment transactions.
The strategy also reflects the sheer scale achieved by digital payments in India. Unified Payments Interface (UPI) now processes more than 18 billion transactions every month, while prepaid payment instruments, including wallets, continue to facilitate hundreds of millions of transactions despite losing market share to UPI. Wallet companies still maintain a large active user base for transit payments, online commerce and merchant transactions, providing a ready distribution network for financial products.
Industry officials expect further diversification over the next few years, with payment companies likely to deepen their presence in secured and unsecured lending, wealth management, insurance distribution and merchant financial services. As competition intensifies and payment revenues remain under pressure, financial services are increasingly expected to become the primary driver of profitability for India’s leading fintech payment companies.
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