Bengaluru: Prosus-owned fintech firm PayU is preparing to broaden its consumer-credit business beyond checkout financing by exploring credit lines on the Unified Payments Interface (UPI), including a potential partnership with a bank to offer RuPay credit cards, according to Anirban Mukherjee, the company's chief executive officer. The assessment, however, remains at an early stage.
PayU would prefer to participate directly if its non-banking financial company (NBFC) is allowed to offer the product. Under current Reserve Bank of India (RBI) rules, only scheduled commercial banks and select small finance banks—not NBFCs—can originate pre-sanctioned credit lines on the UPI network.
“The RBI is considering, selectively, whether larger NBFCs can participate in credit lines on UPI. If that happens, PayU would be happy to participate. It is a powerful product. A customer could receive, for example, a ₹50,000 credit line and repay it over six months while using it at multiple merchants,” Mukherjee said.
India remains a credit-constrained market. RBI data showed the number of active credit cards crossed 120.45 million in May, with total spending reaching ₹2.03 trillion. Even so, credit-card penetration works out to only about 5-8% in a country of roughly 1.45 billion people.
The central bank has also said demand for small-ticket personal loans has grown rapidly, rising by around 20% by fiscal year 2026 (FY26). Digital NBFCs accounted for 19% of sanction value and 80% of sanction volume in the first half of FY26, according to the Fintech Association for Consumer Empowerment (FACE).
“Credit lines on UPI could be safer than some unsecured credit products because the lender knows the end use, can monitor transactions and can continuously re-underwrite the customer,” Mukherjee said.
Profit before growth
The expansion comes after PayU's lending business turned profitable.
Its credit business, comprising LazyPay, consumer lending and merchant lending, reported revenue of $204 million in FY26, up 19% from $171 million a year earlier. The business posted an Ebitda of $6 million, compared with a loss of $28 million in FY25.
On the payments side, including its payment gateway business, revenue rose 10% to $577 million in FY26 from $523 million a year earlier. Payments Ebitda improved to $12 million from $3 million in FY25.
Mukherjee attributed the improvement largely to a deliberate exit from lower-margin business, even as PayU expanded payment-processing volumes.
“We cannot identify the merchants or contracts because of confidentiality. But the principle is straightforward…we want every merchant to eventually be a paying merchant for PayU,” he said.
The same discipline is shaping PayU's merchant-acquisition strategy. Mukherjee said the company sees the biggest opportunity among small and medium businesses (SMBs) and small and medium enterprises (SMEs), particularly merchants with annual turnover below ₹25 crore.
PayU serves more than 450,000 merchants across India, ranging from small businesses to large enterprises.
"A merchant with turnover below ₹100 crore, or even below ₹10 lakh, may initially use only payment links as its first product. But with automated underwriting and better anomaly monitoring, we can build economically viable solutions for every segment," Mukherjee said.
PayU, however, has little interest in subsidizing growth by spending aggressively to win merchants.
Mint reported last month that competition in merchant payments is shifting towards startups, MSMEs, exporters and importers, with payment aggregators expanding more aggressively into those segments.
Mukherjee said larger industry players are becoming more disciplined even as some startups continue to spend heavily to gain market share. PayU, he said, will not follow that strategy.
The infrastructure layer
PayU's strategy extends beyond acquiring merchants. While it was among the first companies to receive a payment aggregator licence, the market has since become more crowded, with Cashfree, Juspay, Razorpay, Cred and Mobikwik expanding their merchant payments businesses.
As transaction fees come under pressure, payment aggregators are increasingly looking to adjacent revenue streams, including settlement tools, subscriptions, point-of-sale (POS) devices and rentals, reconciliation, lending, software-as-a-service (SaaS), and foreign exchange (FX) and collections for cross-border merchants.
In domestic online payments, standard card and payment gateway pricing is typically 1.5-2%. However, realized yields are lower after accounting for zero merchant discount rate (MDR) on UPI, enterprise discounts and pass-through costs.
Against that backdrop, PayU believes its edge lies in owning more of the payments stack. It has increased its stake in Mumbai-based digital payments infrastructure firm Mindgate Solutions to 70%, giving it majority control of a company that works with banks on UPI and real-time payments infrastructure.
Mukherjee said the investment would help PayU evolve beyond a merchant-facing payments company into a broader financial infrastructure provider. Mindgate Solutions develops digital payments infrastructure and real-time transaction banking technology for banks, financial institutions, governments and large enterprises, powering a significant share of India's UPI transactions.
“We wanted to help banks build and run UPI products, especially smaller and community banks that may not have the scale to digitize on their own. With Mindgate, PayU can move faster, build more products, and deepen its work with banks and NPCI beyond the largest lenders,” Mukherjee added.
Owning the infrastructure layer, he said, should also help improve conversion rates, enable greater customisation and make operations more efficient, with even small basis-point improvements having a meaningful impact at scale.
The combination also gives PayU what Mukherjee described as its own “manufacturing capability” as UPI evolves, including the ability to build Third-Party Application Provider (TPAP) solutions and remain close to new product launches.