PayU Ramps Up Credit Push as RBI Weighs NBFC Access to UPI Loans

The same discipline is shaping PayU's merchant-acquisition strategy. Mukherjee said the company sees the biggest opportunity among small and medium businesses, 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. With automated underwriting and better anomaly monitoring, we can build economically viable solutions for every segment," Mukherjee said.

PayU has little interest in subsidizing growth by spending aggressively to win merchants. 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.

As transaction fees come under pressure, payment aggregators are increasingly looking to adjacent revenue streams, including settlement tools, subscriptions, point-of-sale devices and rentals, reconciliation, lending, software-as-a-service, and foreign exchange and collections for cross-border merchants. In domestic online payments, standard card and payment gateway pricing is typically 1.5-2%. Realized yields are lower after accounting for zero merchant discount rate 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 solutions and remain close to new product launches.