Global artificial intelligence (AI) companies are emerging as a new growth driver for India’s fintech sector, as frontier model developers and application-layer firms targeting the local market seeking to accept payments through rails such as the Unified Payments Interface (UPI) and cards.
Fintech executives said AI companies are among the fastest-growing segments within their merchant base and are expected to remain a key source of growth in the coming years as demand for global AI services rises.
“AI would be growing at least more than twice of what other sectors are doing. In a year or so, I would not be surprised if the volume could be 10x of what we have right now,” said Rahul Kothari, chief operating officer (COO), Razorpay, a payment aggregator in India.
The focus on payments processing comes at a time when India is being counted as one of the lucrative markets for AI adoption in the world.
In February, Anthropic India Chief Irina Ghose said that the company’s revenue run rate in India had doubled in the last six months and the country is the second-largest user for Claude.ai globally.
In a report, OpenAI stated that India is one of the fastest-growing AI builder ecosystems globally, with a fourfold growth in Codex users in just two weeks after the launch of its Codex app in February.
Fintech chiefs said AI-driven cross-border payments remain at an early stage despite the growing opportunity and have yet to account for a significant share of overall payment volumes.
“When it comes to cross-border payments it will take maybe a year or two before AI becomes a very significant category of cross-border payments. My guess is that it will probably be 5-10 per cent of the total flow by the end of this year,” said Movin Jain, Founder, Skydo, a cross-border payments fintech.
The focus on cross-border comes at a time when domestic payments processors are eyeing attractive margins within the space. Cashfree Payments expects a 25 per cent contribution to revenue from cross-border payments alone, from its current 9 per cent, in the coming years.
Kothari of Razorpay said global companies were primarily focused on enabling UPI, improving card transaction success rates for international payments, and finding local partners to support their go-to-market efforts in India.
“Even when consumers have cards, international transactions are often disabled by default on newly issued cards in India, which tends to result in lower payment success rates. Some companies are so new to the India market and their focus is so heavily on the US that they need a partner in India who actually not only helps them in payments, but helps them in the go-to market of their products as well,” he said.
Jain of Skydo said payments for AI services were largely similar to those for traditional software-as-a-service (SaaS) offerings, adding that the relatively small number of AI merchants currently operating at scale limited margin opportunities.
He explained that the Bengaluru-based company would instead focus on enabling payments for small, global merchants engaged within the business-to-business (B2B) technology space.
“This is going to become a tight-margin market because everybody will go after the same hundred merchants. Where you can really make money are the small merchants but they are harder to find. Customer acquisition costs are higher, but these merchants don’t have different payment gateways waiting to serve them. We think there is opportunity there,” he added.
 "Fintech executives say AI firms are among the fastest-growing segments within their merchant base and may remain a key source of growth | Illustration: Ajaya Kumar Mohanty")