Billdesk Payment Gateway: How Indian payments are changing traditional banking?

How Indian payments are changing traditional banking

The rapid growth of the Indian payments industry is profoundly changing the traditional banking business model in the following ways:

  1. The Rise of Digital Payments
  • UPI System Becomes Global Benchmark for Real-Time Payments, Exceeds 10 Billion Monthly Transactions by 2023
  • Third-party payment platforms (e.g., Paytm, PhonePe) divert a lot of banks' micro-transfer business
  • QR code payment penetration has reached 87%, reducing cash dependence

  1. Changes in account structure
  • Surge in number of zero-balance accounts (over 480 million accounts under PMJDY scheme)
  • E-wallet users reach 350 million, partially replacing savings account functions
  • Banks forced to lower minimum balance requirements in response to competition

  1. Credit service innovation
  • BNPL (buy now pay later) products grow at an annual rate of 160%
  • The rise of UPI-based instant loan origination models

  1. Bank branch transformation

    • Reduction of physical outlets by 15% (2020-2023), moving to a "digital branch" model
    • Traditional teller transactions replaced by mobile banking apps (e.g., SBI Yono handles 60% base business)
    • ATM cash withdrawals drop 22% in favour of smart self-service terminals

  2. Technology Architecture Re-engineering

    • Migration of core banking systems to cloud (head banks like ICICI have migrated 70% loads)
    • API open platforms become standard, allowing third parties direct access to account services (OCEN framework has connected 32 banks)
    • AI Risk Control Replaces Traditional Credit Models to Process 85% of Microloan Approvals

  3. Revenue model reversal

    • Payment processing fee income share reduced to 61 TP3T from 121 TP3T (RBI mandatory rate cut to 1.11 TP3T)
    • Digital channel contribution for cross-selling insurance/financial products rises to 41%
    • "Embedded finance" makes banking a value-added feature of e-commerce/social platforms

  4. Regulatory arbitrage challenges
    Differential regulation of payments banks and small financial banks has given rise to a new type of hybrid business:

  • Paytm Payments Bank users' deposits grow at 89% annualised rate
  • Airtel Payments Bank gains 21 million customers through telecom package bundles
  • RBI working on Digital Banking Framework to tackle blurred boundaries

8.Consumer behaviour change
The trend towards "Bankless Banking" among the younger generation has emerged:
- Users under 35 years old visit outlets only 0.3 times per month on average
- 52% of Millennials use social media to get information on financial products
- Open banking enables fragmented use of financial services

This change has forced traditional banks to:
✓ Invest an average of $1.8 billion per year in digital transformation (2024 estimate)
✓ Reorganisation of 30-40% Traditional Job Functions
✓ 200+ strategic partnerships with fintech (37 with HDFC alone)