India Payments Research

India’s United Payments Interface (UPI) is a bit of an anomaly in the world of fintech, which is typically dominated by high-flying startups and deep-pocketed venture capitalists. UPI was launched in 2016 by a specialized division of the Reserve Bank of India, the National Payments Corporation of India (NPCI), to create a unified real-time payments platform for the subcontinent’s retail payments. Governments are usually not seen as leading fintech innovators, but in this case, UPI has been so successful that other countries are keen to learn from its success; it is expanding internationally and India’s leading e-wallets compete for the largest share of UPI payments.

It is important to take what Paytm founder Vijay Shekhar Sharma says with a grain of salt. For many years, he has talked up Paytm’s potential and deep-pocketed backers like SoftBank and Alibaba have bought it. Yet Sharma’s bullishness has not been borne out by Paytm’s stock performance. Though Paytm’s IPO was India’s largest of all time, it nonetheless plummeted on the first day of trading in November 2021 and has since lost about 60% of its value.

In December 2021, Razorpay became India’s most valuable private fintech as it reached a valuation of US$7.5 billion, more than double the US$3 billion milestone it hit last April. Razorpay’s US$375 million Series F financing round raised more than all of its previous rounds combined. By eschewing India’s hyper-competitive retail payments market – dominated by the likes of Google Pay and PhonePe, with Paytm a distant third – Razorpay can best capitalize on opportunities in the fast-growing merchant payments segment.

India’s buy now, pay later (BNPL) market had a cracking 2021 and is charging full speed ahead into 2022. According to RazorPay’s The Covid Era of Rising Fintech report, the India BNPL market grew more than 637% in 2021, even better than 2020’s 569% growth. For its part, India BNPL firm ZestMoney found in a recent survey that BNPL is the top payment option for Indian consumers across all age groups – though most users of the service in subcontinent are ages 23-26. ZestMoney said that its BNPL transactions rose 300% annually in 2021.

India’s buy now, pay later (BNPL) sector is red hot and expected to grow exponentially over the next few years. India is certainly not the first country to experience a BNPL surge and it is tempting to say that we have seen this movie before, and that tough regulation is on the way that will curb BNPL’s growth as in Australia and the UK. But that may not be the case in India given the subcontinent’s low level of credit card penetration and the ability for BNPL to play a genuine financial inclusion role in the economy.

United Payments Interface (UPI), the National Payments Corporation of India’s (NPCI) flagship payments platform, had another stellar month in July. According to NPCI data, UPI processed a record 3.24 billion transactions in July, up 15.7% from June, while in terms of value the payments platform processed transactions worth Rs 6.06 trillion, up 10.76% from a month earlier.

India’s remittances market was supposed to contract 9% in 2020 per a World Bank forecast. It was a reasonable prediction given the turmoil wrought by the coronavirus pandemic on public health and the global economy. Yet the market was much more resilient than expected. Data from the World Bank show that remittances to India fell just 0.2% in 2020 to US$83 billion.

The United Payments Interface (UPI) has become a kingmaker in India fintech. The real-time payment system owned by the National Payments Corporation of India (NPCI) has grown exponentially since its inception in 2016, with varying estimates of its overall share of India’s payments market. PwC reckons that UPI could reach a 59% share of Indian digital payments by 2024-25, while Indian tech media site Inc42 says that UPI already has a 73% share of the market, up from just 9% in 2018.

If there is one thing Revolut excels at, it is growth. It would be hard to find another neobank with as many accounts in as many different markets. All that growth is expensive, as seen in the £107 million Revolut lost in FY 2019, which it attributed to a hiring spree. Whether the UK’s most valuable fintech startup is any closer to profitability is an open question. What we do know is that it is eyeing expansion across Asia in 2021-22, with India the first stop. 

Amazon may be the world's biggest e-commerce firm and a major player in India's online shopping market, but that has not translated into digital payments dominance in the subcontinent. In fact, Amazon's share of the Indian payments market is paltry compared to Google Pay, Walmart backed-Phone Pe and Alibaba-backed Paytm. But with India's payments market expected to grow more than 300% to Rs 7,092 lakh crore by 2025, Amazon sees plenty of room to boost its market share and eventually expand into more lucrative fintech segments.

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