India's major digital payments companies are undergoing a fundamental transformation as they seek sustainable profitability beyond their traditional low-margin payment processing business. According to reports from NDTV Profit, companies including Paytm, PhonePe, Razorpay, BharatPe and MobiKwik have expanded into consumer and merchant lending, insurance distribution, stock broking, and wealth management over recent years. These firms originally operated as digital wallet, UPI, payment gateway or merchant acquiring platforms but are now diversifying into fee-based financial products to monetize their extensive customer and merchant ecosystems.
The diversification strategy has yielded significant results for leading companies. Paytm reported its first ever full year net profit in FY26, aided by higher contribution from financial services and tighter cost controls following regulatory disruption. As reported by NDTV Profit, the company's financial services distribution revenue from merchant and personal loans, insurance and wealth products has become one of its fastest-growing businesses. PhonePe has similarly expanded through insurance distribution, mutual funds, stock broking and consumer lending partnerships, while building a substantial merchant lending ecosystem using transaction data from millions of merchants.
The strategic pivot comes as the core payments business faces mounting pressure from regulatory changes and margin constraints. According to industry executives cited by NDTV Profit, the absence of merchant discount rate (MDR) on UPI transactions has limited revenue opportunities, while payment processing margins remain thin. Recent regulatory changes governing prepaid payment instruments (PPIs) and wallets have prompted companies to rethink their business models. The Unified Payments Interface (UPI) now processes more than 18 billion transactions monthly, while prepaid payment instruments continue facilitating hundreds of millions of transactions despite losing market share to UPI.
Industry officials expect continued diversification as payment companies deepen presence in secured and unsecured lending, wealth management, insurance distribution and merchant financial services. As reported by NDTV Profit, the common thread across these companies is access to rich payments data generated by millions of consumers and merchants, allowing assessment of creditworthiness and cross-selling of insurance and investment products. MobiKwik recently received RBI approval to operate as a non-banking financial company (NBFC), enabling expansion of its own lending operations alongside existing financial product distribution business. The strategy reflects the sheer scale achieved by digital payments in India, with wallet companies maintaining large active user bases for transit payments and merchant transactions.
