These actions show a trend in which payment fintechs are progressively evolving into lending-based financial ecosystems.
The demand from neighborhood retailers and kirana stores with monthly sales under Rs 2 lakh is driving Chennai-based fintech IppoPay‘s loan division to exceed its payments division.
In an interview with Moneycontrol, founder Mohan K said that the company has released over Rs 120 crore over 24 months, provided 7,000 and more unsecured working-capital loans, and finished nine loan cycles. The company’s monthly disbursements have increased by more than 10% month over month. To far, its annualized payout run-rate has been close to Rs 250 crore.
Lending is becoming a major industry.
“It is a logical progression of what we now provide for the merchant environment we service, not a diversification,” Mohan told Moneycontrol. Credit is a way of life for our market, and any meaningful payments systems must provide a smooth, contextual solution to grant credit.
“We are among the few firms positioned to provide unsecured, contextual working-capital loans to micro-entrepreneurs,” he said, adding that lending was essential to creating “stickiness.” Our loss rate has continuously remained below 0.8% over 10 loan cycles, demonstrating the robustness of our repayment engine and making us a desirable partner for several lenders.
“We have always considered this as a collection-first company, not a disbursement-first one,” Mohan added, addressing risk in a low turnover area. Our sub-0.8% loss rates across all cohorts are a result of our Contextual Collection Orchestration engine, which creates repayment flows according to each merchant’s risk profile. This structure guarantees quick capital recycling and very strict risk management.
Wider change: Fintechs for payments are embracing lending
IppoPay is not by itself. Since UPI transaction margins are still low, a number of Indian payment companies are entering the loan market. Through agreements with NBFCs, PhonePe has introduced secured loans in areas including gold, vehicles, homes, education, and more. Since May 2023, the company has provided lending services for merchants, supporting over 20,000 loans.
In order to improve underwriting, Razorpay has purchased risk-tech start-up TERA Finlabs. Razorpay has a long history of lending to SMEs via Razorpay Capital. Additionally, it has introduced products like RazorpayX Digital Lending 2.0 to help NBFCs and fintechs increase lending in a more compliant manner.
These actions show a trend in which payment fintechs are progressively evolving into lending-based financial ecosystems. Mohan said that IppoPay would provide services beyond credit in the future.
“In their financial life, our merchants encounter three recurring gaps: credit, insurance, investments, and more… In order to close these gaps and create a lifecycle-led financial stack for this market, our product roadmap is purposefully changing,” he said.