Indian banks looking for a bigger stake in digital India via own QR codes

Lenders are leveraging partnerships with fintechs and technology service providers to manage their apps and QR codes

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Quick response codes, or QR codes, have had a big impact on India's digital payment landscape, owing largely to non-banking apps like Paytm, PhonePe, and Google Pay. Now, several banks are making bets on this market by deploying their own QR codes at retail locations, The Economic Times (ET) reported.

While ICICI Bank has led the way with its merchant-facing InstaBiz application, HDFC Bank and Axis Bank have also jumped in.

"In the past, banks would mostly pass on such leads to their fintech partners, but now they are trying to build the tech in-house and keep the customers within their ecosystem," a senior banker told ET on the condition of anonymity.

HDFC Bank's SmartHub Vyapar app, which serves as its merchant-facing platform, now has over a million downloads.

ICICI Bank has approximately 1.5 million active users of the InstaBiz app, and throughout has increased by more than 70 per cent year-on-year (YoY). As of March 31, 2023, over 122,200 new-to-bank merchants were onboarded on the InstaBiz app, said an ICICI Bank official.

According to Axis Bank, they deploy BharatQR code terminals and are now looking to go live with sound boxes as well. "This combination of QR code and sound box will provide great value to price-conscious merchants," said Sanjeev Moghe, president, card and payments at Axis Bank.

Other lenders, with the exception of ICICI Bank, are also leveraging partnerships with fintechs and technology service providers to manage their apps and QR codes.

By doing so, banks are attempting to reclaim territory in consumer payments that they had previously ceded to fintechs. The QR code market is dominated by players such as PhonePe, Paytm, BharatPe, and Google Pay.

A top executive at a fintech company that works with banks for payments said when payment apps were deploying QR codes, banks remained low, believing that current accounts would continue to be with them.

They also continued to focus on hardware point of sales (POS) terminals, assuming that large and serious merchants would stick with them, he added.

However, smartphone-based payments eventually surpassed card payments. These apps began offering credit and other financial services as well. BharatPe and Paytm are two major players who scaled up their merchant lending business by leveraging QR codes.

Paytm disbursed Rs 2,313 crore in merchant loans in the March quarter. It counts 6.8 million active merchants who subscribe to the Paytm platform.