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Mobile Payment Apps Driving Fintech Frenzy In India

Mobile payment services in India are increasingly at the center of consumers' daily interactions, accumulating digital data and seizing opportunities to provide loans, insurance and other financial services.

S&P Global Market Intelligence's 2019 Indian Mobile Payments Market Report shows that mobile payments in India grew to more than 4.5% of India's GDP in the third calendar quarter of 2018 from almost nothing only two years ago. Transactions processed through mobile wallets and a fast-growing, Zelle-like interbank payments network exceeded $100 billion in 2018 and in January 2019 were on track for more than $200 billion in annualized payment value.

The report offers an overview of India's real-time mobile payment system and select large players, examines the collaboration opportunities between banks and fintechs, and evaluates the potential impact of mobile payments on consumer credit and card payments.

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Global tech giants gain a foothold in mobile payments

Leading the mobile payments landscape are technology companies whose business interests include financial services, e-commerce and online advertising. Payments processed through platforms offered by Alibaba Group Holding Ltd.-backed Paytm, Walmart Inc.-owned Phonepe Pvt. Ltd. and Alphabet Inc.'s Google LLC already exceed $100 billion in aggregate annualized transaction value. The mobile payments sector also features Inc., which has poured nearly $230 million into its Amazon Pay (India) Pvt. Ltd. business.

The large payment companies have attracted millions of digital consumers, offering feature-rich apps and digital transactions with cashback rewards and discounts. Payment apps facilitate activities such as travel booking, food delivery and bill payment.

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Most mobile transactions in India happen through the Unified Payments Interface System, or UPI, a real-time network that enables initiation and collection of payments. The mobile payment network in India bears some resemblance to Zelle, a popular payment network owned by leading banks in the U.S. that enables account-to-account transfers. Like Zelle, UPI exists as an integrated feature in mobile banking apps.

Bank-led model corners mobile payments

The Zelle comparison ends here, however. Unlike Zelle, UPI has opened itself up to nonbanks, allowing technology companies such as Google and PhonePe to build consumer apps offering payment features. Nonbanks, however, need to team up with banks to offer payment products.

With UPI, Indian banks have averted a China-like situation where the majority of mobile transactions occur through a pair of mobile platforms that offer stored-value wallets. Ant Financial Services Group's AliPay and Tencent Holdings Ltd.'s WeChat Pay have cornered the mobile payments market due to the popularity of their apps that combine e-commerce, banking and social media. When a Chinese consumer pays at a merchant store using a QR code, money moves between the stored-value wallets of the user and the merchant, keeping banks out of the loop. In India, however, UPI operates under a bank-led model and requires nonbanks to partner with banks.

Banks, fintechs need each other

Four large banks — HDFC Bank Ltd., State Bank of India, ICICI Bank Ltd. and Axis Bank Ltd. — collectively control more than 50% of the debit and credit card market, in terms of transaction volume, and have become a popular choice for nonbanks seeking partnerships to offer UPI apps. Yes Bank Ltd., which has a relatively smaller customer base, emerged as one of the leading bank partners for UPI, processing an estimated 22% of UPI payments in the quarter ended Dec. 31, 2018, thanks to its partnership with PhonePe.

With payment fintechs aggressively spending to drive consumer engagement on their UPI apps, data points emanating from their platforms could help banks and other lenders push forward their consumer lending initiatives.

Fintech partnerships afford banks opportunities to provide credit to previously untapped customer segments as transaction data generated by payment apps augment banks' underwriting models.


The full 2019 India Mobile Payments Market Report contains our estimates of the size of the mobile payments marketplace in India and market share held by banks and nonbanks. It provides an overview of India’s real-time mobile payment system and select large players, examines the collaboration opportunities between banks and fintechs, and evaluates the potential impact of mobile payments on consumer credit and card payments.

S&P Global Market Intelligence subscribers can click here to access the full analysis.

Non-subscribers can click here for an abridged version of the report or contact us for more information.

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