The Offline Merchant Opportunity in India’s Fintech Ecosystem
India’s 70 million offline merchants represent the largest untapped fintech opportunity in Asia. Despite UPI’s surge, many kirana stores and micro-retailers remain digitally underserved. According to RBI’s MSME Report (2025), nearly 45 % of small businesses still operate primarily in cash, while 72 % lack formal access to credit. For fintechs, the next growth wave lies in merging payments onboarding with instant credit activation under one digital journey.
Previously, these two flows—merchant onboarding and credit underwriting—were siloed. A shopkeeper could get a UPI QR code within minutes but waited weeks for a credit line. By integrating both steps, fintechs like Paytm, PhonePe, BharatPe, and Mintoak are redefining Merchant Onboarding Platforms for India’s offline economy.
As per NPCI’s Digital Payments Data (FY 2026), UPI merchant transactions crossed 3.4 billion per month, while merchant-initiated credits grew 68 % year-on-year. This shift shows how payments rails have become the new distribution channels for embedded credit.
Insight: Every merchant QR is now a data node — a gateway for transaction analytics, risk scoring, and micro-credit eligibility.For India’s fintechs, this convergence isn’t just convenience; it’s economics. Acquiring a merchant once for both payments and lending halves CAC and doubles lifetime value. For merchants, it transforms acceptance tools into financing tools — no paperwork, no collateral, no waiting.
Unified Onboarding: Payments First, Credit Next
The new fintech model treats payments and credit as one stack. A merchant signs up on an app, completes KYC via Aadhaar + PAN, links a current account, and within the same flow receives a QR code + credit offer pre-approved through UPI transaction data. Upi Linked Credit
This integrated onboarding uses five pillars:
- Instant KYC: e-KYC + GST API + PAN verification cut onboarding time from 3 days to 30 minutes.
- Transaction-based Scoring: Payments history becomes a live credit proxy — frequency, ticket size, settlement behavior.
- Embedded Consent: Merchants approve data-sharing for credit assessment within onboarding flows.
- Automated Credit Line: Algorithms pre-approve small working-capital lines based on average weekly digital sales.
- Unified Dashboard: Payments, settlements, and EMI schedules appear in a single app view.
By blending UPI, account aggregator, and OCEN frameworks, fintechs now underwrite in real time. RBI’s Digital Lending Framework (2025) and the Account Aggregator ecosystem enable secure merchant data consent, reducing default risk by providing verified transaction visibility.
For merchants, this means onboarding once, operating fully: receive payments in the morning, get working-capital credit by evening.
How Leading Fintechs Are Integrating Payments and Lending
Paytm: Among India’s earliest integrated players, Paytm Onboarding 2.0 combines QR registration with micro-credit eligibility using internal transaction data. As of 2025, Paytm disbursed ₹ 8,200 crore in merchant loans via NBFC partners, with 88 % of recipients under ₹ 1 lakh ticket size.
PhonePe: Its “Smart Merchant” initiative connects digital acceptance with cash-flow analytics. The platform pre-approves working-capital limits for merchants who process consistent QR payments. The merchant’s digital receipts act as income proof — no extra paperwork.
BharatPe: A pioneer in “payments + credit” bundling, BharatPe’s PayLater for Merchants model extends 30-day settlement credit. It uses merchant QR data for scoring and collects via daily micro-EMIs deducted automatically. Digital Kirana Credit
Razorpay & Mintoak: These B2B payment infrastructure providers power banks and NBFCs to embed credit into merchant apps. Razorpay Capital, for instance, leverages merchant payment data from its acquiring network to underwrite instant loans for SMEs and D2C brands.
FlexiLoans & Indifi: Focused on co-lending APIs, they integrate with POS systems and accounting software to predict future cash flows. Their partnerships with Pine Labs and Mswipe illustrate how lending can be seamlessly layered atop existing acceptance networks.
Policy Support: The RBI’s 2026 roadmap for Financial Inclusion 2.0 promotes digital onboarding for MSMEs via UPI + AA + OCEN frameworks. This formalizes the fusion of payments and credit ecosystems — ensuring consent-based, auditable data flows.
Tip: Every merchant app should track three metrics post-onboarding — QR activation rate, transaction consistency, and credit utilization rate.Beyond Tier 1 cities, fintechs are now deploying offline sales agents equipped with lightweight apps that onboard merchants via Bluetooth QR devices and vernacular UIs — reducing digital literacy barriers while keeping compliance intact.
The Road Ahead: Building India’s Next Billion Merchant Onboards
India’s fintech journey is moving from digitization to monetization. After saturating digital payments, growth lies in empowering merchants with cash-flow liquidity. Embedded finance, open APIs, and consent-driven data are the building blocks. Embedded Lending Ecosystem
Three key trends define the 2026 outlook:
- Credit-Ready Onboarding: Every payment QR registration will auto-trigger a credit-eligibility check via API.
- Interoperable Portals: Fintechs and banks will share merchant KYC and GST data across ecosystems using the Account Aggregator framework.
- AI for Risk Scoring: Merchant behavior models — payment timings, UPI refunds, dispute ratios — will refine risk prediction and reduce NPAs.
According to BCG–PwC Fintech India Study (2026), embedded credit at the point of payments could unlock an additional ₹ 3.2 lakh crore in MSME working-capital disbursements by 2027. This makes fintech merchant onboarding not just a payments play but a GDP-level productivity driver.
Global parallels are emerging: Brazil’s Pix and Indonesia’s QRIS networks are evolving similar “credit-via-QR” models inspired by India’s UPI. As Indian fintechs export infrastructure and capital models, the convergence of onboarding, payments, and lending may become a standard for emerging markets.
The future of India’s fintech ecosystem will not onboard merchants in steps — it will onboard them once, for everything.
Frequently Asked Questions
1. What is fintech merchant onboarding?
It’s the process of digitally enrolling offline merchants for UPI, QR payments, and additional financial services like credit and insurance within a single workflow.
2. How does combining payments and credit help merchants?
It offers instant access to working-capital credit using transaction data as proof of income — reducing paperwork and improving cash-flow cycles.
3. Which fintechs lead in integrated merchant onboarding?
Paytm, PhonePe, BharatPe, Razorpay, and Mintoak dominate through unified QR + credit offerings powered by data analytics and RBI-compliant frameworks.
4. What’s the role of Account Aggregator and OCEN?
They enable secure, consent-based data sharing between payment providers, lenders, and merchants to underwrite and disburse credit efficiently.
5. How big is India’s merchant onboarding opportunity?
With over 70 million MSMEs and rapid digital adoption, integrated payments + credit models could unlock ₹ 3 lakh crore + in new lending by 2027.