Payments and infrastructure in India, explained
By Abha Lohia · Startup Decoded
Payments and infrastructure companies move money for people and businesses and build the software that lets others do the same. It is the largest part of Indian fintech by volume and the thinnest by margin.
What do payments startups do?
A payments startup helps one party pay another. Some serve consumers, such as UPI apps and wallets. Some serve businesses, such as payment gateways, which let an online shop take card, UPI and netbanking payments, and card terminal makers that sell machines to shops. Others, like Juspay or Neokred, build the technology behind the scenes for banks and other firms.
In StopDown's data, well-known examples include PhonePe, Paytm, Razorpay, Pine Labs and MobiKwik. They differ in focus, but they all sit between the person paying and the bank that holds the money.
Customers rarely think about any of this. They scan a code and the money moves. Behind that scan, several firms may be involved: the app, the bank that holds the sender's account, the bank that holds the shop's account and the NPCI system in the middle. Each link has a role, a cost and a rule to follow, and a failure at any link shows up as a failed payment for the customer.
The rails: UPI, cards and wallets
Three kinds of rails carry most digital payments in India. UPI is run by NPCI and moves money from bank account to bank account. Cards run on networks such as Visa, Mastercard and RuPay. Prepaid payment instruments, or PPIs, are wallets and prepaid cards where the customer loads money first and spends it later.
UPI is by far the most used for everyday payments. A startup does not own UPI. It joins as a third-party app provider, partners with a bank that has the UPI connection, and offers an app. NPCI has talked about limiting how much of total UPI volume one app can hold, a rule that has been postponed more than once, so check the latest position.
How payments companies make money
Payments is a business of volume. Each payment earns a tiny amount, so a company needs to process a very large number of them. The main income lines are merchant fees on cards and some other payment types, fees for the gateway or terminal service, interest on balances held for a short time, and add-on products such as loans to merchants.
UPI is different. Since January 2020 the government has had a zero-MDR policy on UPI, so merchants did not pay a percentage fee, and apps earned little directly from payments. They had to earn from other products. In 2026 the government has announced a small fee on some larger merchant payments while leaving person-to-person transfers and small merchants free. The details have changed more than once, so look at the current NPCI and Finance Ministry notices.
This pushes payments firms to become broader. Many add merchant lending, business software, insurance, wealth products or cross-border payments. Zaggle, which sells spend and rewards tools to companies, shows another route: charge businesses for software around the payment.
Payment aggregators and gateways
A payment aggregator collects money from customers on behalf of many merchants, holds it for a short time in an escrow account, and then pays the merchants. Because it holds other people's money, the RBI licenses it. A payment gateway only passes the data between the shop, the customer and the bank and does not hold the money, so it is lighter to regulate.
As of October 2026, the RBI's Regulation of Payment Aggregators Directions, issued on 15 September 2025, apply. A non-bank payment aggregator needs RBI authorisation and a net worth of ₹15 crore when it applies, rising to ₹25 crore by the end of the third financial year after authorisation. Firms already operating had to apply for authorisation under the new directions. Check the RBI text for the dates that apply to a specific company.
Infrastructure: the plumbing behind the apps
Infrastructure firms build things other companies rely on: payment orchestration software that routes a payment to the best bank, banking-as-a-service platforms, fraud checks and reconciliation tools. These companies often have fewer customers than consumer apps but deeper ties and larger contracts.
A recent StopDown headline said Juspay's revenue rose to ₹664 Cr but the company slipped into a loss, and another said Neokred widened a bank programme for UPI and card acquiring. Together they show that infrastructure can grow quickly, yet profit is not automatic.
Cross-border payments are another growing area. Exporters, freelancers and online sellers receive money from abroad, and specialised firms handle the conversion and the paperwork. Rules on this are separate, and the RBI has said that firms facilitating cross-border payments come under direct regulation, so those startups should check the latest directions.
Risks and what to watch
The biggest risks are policy risk, because one rule on fees can change the whole business, concentration risk, because a few players handle most UPI volume, and fraud. Competition is also intense, as banks and large technology companies offer payments too.
Watch the final UPI fee framework, the effect of aggregator licensing on small gateways, and whether payments firms can build steady profit from lending and software. This page is for learning and is not investment, legal or tax advice.
The breakdown
Business models
| Model | How it makes money | Who uses it |
|---|---|---|
| Merchant fee | Percentage of each card or non-UPI payment | Payment gateways and aggregators |
| Terminal and device sales | Sell or rent card machines and QR devices, plus fees | Point-of-sale firms like Pine Labs |
| Software licence | Charge banks or firms for routing and fraud tools | Payment infrastructure providers |
| Merchant lending | Lend working capital against a merchant's payment flow | Gateways and terminal firms |
| Wallet and consumer app | Earn from partner products, interchange and ads | Consumer payment apps |
The numbers that matter
- Take rate: a very small share of each rupee processed, so scale matters.
- Payment success rate: failed payments lose merchants, so uptime is a selling point.
- Share of revenue from outside payments: lending and software add margin.
- Compliance cost: audits, escrow accounts and security standards are fixed costs.
Rules and regulators
| Regulator or law | What it means |
|---|---|
| RBI Payment Aggregator directions (September 2025) | Authorisation needed; net worth of ₹15 crore at application and ₹25 crore by the end of the third financial year after authorisation. |
| RBI rules on prepaid instruments | Wallets need RBI authorisation and must follow KYC and limits. |
| NPCI rules for UPI | Apps and banks follow NPCI technical and business rules; merchant fee policy is set by the government. |
| Data storage rules | Payment data of Indian customers must be stored in India under RBI rules. |
Risks
- A change in UPI fee policy can reshape income overnight.
- Fraud and failed payments damage trust.
- A few large players dominate UPI volume.
- Licence conditions can stop a firm from taking new customers.
Payments & infrastructure: latest on StopDown
- Juspay revenue rises to ₹664 Cr, slips into loss 9 October 2026
- Neokred widens bank programme for UPI and card acquiring 8 October 2026
- PhonePe partners DPCGC on OTT compliance 8 October 2026
- Paytm and Visa launch cardholder discounts 7 October 2026
- RBI strikes Paytm Payments Bank off scheduled list 7 October 2026
- GoSense.ai launches AI app security platform 6 October 2026
- Razorpay teams with OpenAI on ChatGPT ads 5 October 2026
- Niyo income rises 78% to ₹178 crore 1 October 2026
Every Payments & infrastructure story →
Most active investors here
- Alteria Capital (3 rounds)
- Cornerstone Ventures (2 rounds)
- ESV-Arthya AIF (2 rounds)
- Innoven Capital (2 rounds)
- Prosus (2 rounds)
- Roots Ventures (2 rounds)
- Unicorn India Ventures (2 rounds)
- 100Unicorns (1 round)
Rounds StopDown covered in the last 12 months. Activity is not a measure of quality.
Questions people ask
How do UPI apps make money if UPI is free?
Most earn indirectly: through loans, insurance, investment products, advertising and business tools sold to the same users. In 2026 the government has announced a small fee on some larger merchant payments, so the picture is changing.
What is the difference between a payment gateway and a payment aggregator?
A gateway only passes payment data between the shop, the customer and the bank. An aggregator also collects and holds the money for a short time before paying the merchant, which is why it needs an RBI authorisation.
How much net worth does a payment aggregator need?
As of October 2026, a non-bank payment aggregator needs a net worth of ₹15 crore when it applies and ₹25 crore by the end of the third financial year after authorisation, under RBI's September 2025 directions.
Which Indian payments companies are well known?
PhonePe, Paytm, Razorpay, Pine Labs and MobiKwik are among the well-known names in StopDown's data, along with infrastructure firms such as Juspay and Neokred.
Which Payments & infrastructure startups in India raised money recently?
Kiwi ($30–40M); Fin.com ($20M, seed); Fundly.ai ($4.9M, pre-Series A); Slice ($100 million, late-stage); Phi Commerce (Rs 38.54 crore, Series B).
Who invests in Payments & infrastructure startups in India?
Among the most active backers in StopDown's coverage over the last year: Alteria Capital, Cornerstone Ventures, ESV-Arthya AIF, Innoven Capital, Prosus.
Which Payments & infrastructure companies are in the news?
Recent stories on StopDown cover Juspay, Neokred, PhonePe, Paytm, Paytm Payments Bank, GoSense.ai, Razorpay, Niyo.
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