Context:
With the Unified Payments Interface (UPI) continuing to offer zero-merchant-discount-rate (MDR) transactions, major fintechs are exploring credit products as alternative revenue sources. This includes a focus on co-branded credit cards, personal loans, and gold loans.
Key Developments:
- Google Pay is developing a co-branded credit card with Axis Bank, after previously launching:
- Gold loans in partnership with Muthoot Finance
- Personal loans ranging from ₹30,000 to ₹10 lakh (tenure: 6 months to 6 years)
- PhonePe, India’s top UPI app, has launched a co-branded credit card with HDFC Bank.
- Amazon already operates a popular co-branded ICICI Bank card with over 5 million users and is exploring an NBFC license via Axio (formerly Capital Float).
Fintech Revenue Strategy
- Fintechs earn commissions for sourcing credit customers for partner banks:
- Credit card sourcing: ₹1,000–₹1,200 per customer
- Personal loan commission
- Gold loan commission
- These credit partnerships also:
- Boost user engagement on the fintech platforms
- Open cross-selling channels across a wide customer base
Implications for the Fintech Ecosystem
- The shift marks a diversification from pure payments to credit-led monetization amid regulatory pressure on free UPI.
- It underscores the growing convergence between big tech and banking, especially in India’s fast-evolving digital finance sector.
