Research Announcement:
Moody’s — Indian fintech payment firms will
face challenges extending payment dominance to other segments
Singapore, March 17, 2022 —
» Companies’ dominance over banks in digital payments may not lead to competitive advantages,
because the network currently used for transactions levels the playing field for all firms
» India’s major banks are also intensifying the competition by significantly expanding their digital
offerings
Fintech payment companies in India have led the rapid growth of digital payments in the country, but
their dominance may not translate to competitive advantages to expand into other financial services.
In addition, India’s major banks have significantly beefed up their digital product offerings and can
withstand the competition from fintechs, according to a new report by Moody’s Investors Service.
Privately owned fintechs have spearheaded the creation and growth of digital payments in India,
particularly with the introduction of the Unified Payment Interface (UPI) in 2017 that allowed funds to
be transferred instantaneously.
“However, their dominance may not lead to significant advantages over banks, because the UPI’s
open architecture means that a large user base does not necessarily make a particular service
provider more competitive than others on the system,” says Srikanth Vadlamani, a Moody’s Vice
President and Senior Credit Officer.
In addition, large private-sector banks and the industry leader, the State Bank of India (SBI, Baa3
stable, ba2), have ramped up their digital product offerings in other areas, which their customers
are adopting widely. This will help the banks fend off competition from fintechs outside the payment
segment. That said, public sector banks other than SBI have relatively weak digital offerings and will
be negatively impacted by the rising competition.
Banks’ margins will come under pressure as many fintechs will continue venturing into other financial
services, in particular personal loans and loans to small merchants. However, the overall market will
also expand as technology creates more opportunities, allowing banks to counter the pressure on
margins with business growth.
Subscribers can access the report at:
http://www.moodys.com/researchdocumentcontentpage.aspx?
docid=PBC_1312259
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updated credit rating action information and rating history.
Srikanth Vadlamani
VP-Sr Credit Officer
Financial Institutions Group
Moody’s Investors Service Singapore Pte. Ltd.
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
Graeme Knowd
MD-Banking
Financial Institutions Group
Moody’s Investors Service Singapore Pte. Ltd.
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Client Service: 852 3551 3077
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