Bajaj Finance Prepares To Take On Fintechs At Their Own Game
The digital payment service PhonePe, operated by Flipkart Online Services Pvt., is demonstrated during an arranged photograph in Bengaluru, India. (Photographer: Samyukta Lakshmi/Bloomberg)

Bajaj Finance Prepares To Take On Fintechs At Their Own Game

Bajaj Finance Ltd. is set to sharpen its focus on the hyper-competitive payments business in India.

It will launch Bajaj Pay for consumers in the fourth quarter of the current financial year, according to the company’s investor presentation. This will offer payment solutions via UPI, pre-paid instruments, EMI cards and credit cards.

Bajaj Pay will offer a combination of what individual payment service providers bring to customers. While the likes of Google Pay offer services based on UPI, others like Paytm have a mix of UPI and pre-paid instruments. Bank payment platforms like State Bank of India’s YONO bring together a wider gamut of options.

The company is looking to build open-loop universal QR-code infrastructure on Bajaj Pay, said Rajeev Jain, managing director of Bajaj Finance while speaking to analysts after the third quarter earnings. We want to allow customers to use UPI, credit card and EMI card on the same interface, said Jain, adding that at the checkout page, you will see multiple options to pay for things.

With a single app ecosystem, we will allow customers to buy a whole host of financial services and products, Jain said.

Digital payments have picked up substantially during the Covid-19 pandemic as consumers stayed home. In particular, UPI-based payments have surged to over Rs 4 lakh crore in December 2020.

“Going forward, the banking and fintech industry will see an increasing number of large players trying to build their business models around convergence of financial services, which would allow them to improve the touch points with their customer and turn into a one-stop shop to serve all their banking needs,” said Naveen Surya, chairman, fintech convergence council and chairman emeritus, Payments Council of India.

While targeting retail payments on the one hand, Bajaj Finance is also building a payment offering specific to merchants. This will provide access to over 100,000 merchants and “enable disproportionate growth in our market share from these merchants", the company said.

A large chunk of digital payments through UPI still remain peer-to-peer. However, peer-to-merchant payments have risen in recent months and now account for about 42% of transactions by value.

The push into payments will be followed by the launch of at least five marketplace platforms. Bajaj Finance said it will build five proprietary marketplaces — an EMI Store, an insurance marketplace, investment marketplace, BF health and a broking app.

The first phase will be launched in July, while the second and third phases will follow in August and September, Jain said.

Deepak Abbot, former executive at Paytm and co-founder of the fintech startup indiagold said that the credit landscape revolves around strong underwriting practices, and to underwrite loans better and reduce delinquencies, financial institutions require as many data points and interactions with customers as possible.

“Therefore, the bigger strategy for Bajaj Finance in building marketplaces and a payments ecosystem besides lending, is to improve their data collection on customers which will help them further strengthen their credit underwriting for a wider customer base,” Abbot said.

To be sure, the payment landscape is now crowded and commoditised.

The competition for Bajaj Finance would include all the large fintech players and top banks in the country who have aspirations to become 360-degree financial service providers, according to Abbot. “This would include firms such PhonePe and Paytm, along with banks such as ICICI Bank and SBI who are increasingly launching digital products to cater to a larger customer base.”

In the case of Bajaj Finance, the niche could be customers from be low-to-mid income socio-economic groups, considering they are strong in consumer electronic and vehicle financing, Abbot added.

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