India's fintechs deliver on core as credit engines warm up

In the June quarter, listed fintechs, such as Paytm, PB Fintech, and MobiKwik, turned in a mixed performance. Their core businesses—insurance for PB Fintech, payments for Mobikwik and Paytm—remained steady and predictable. But the add-on vertical everyone’s betting big on, credit, is still in a holding pattern.

Today, lending isn’t the core business for them, but it’s the one probably with the biggest upside. In India, where access to credit remains limited, fintechs see lending as their breakout lever, but for now, cautious consumers, tighter regulation, and macro uncertainty are keeping risk appetite low.

The result: growth in credit remains sluggish, even as the rest of the engine hums. India’s fintechs are still waiting for their high-margin future bets to click, while relying on the old faithfuls to keep the lights on.

Paytm set the tone with a return to profit and a sharper tilt towards monetising its merchant network. Net payment revenue climbed as the company processed Rs 5.4 lakh crore of GMV and expanded its installed base of Soundbox/POS devices to roughly 13 million, helping the core processing business run around breakeven even in a largely zero-MDR UPI environment.

Management argues that the “full-stack” approach—hardware, software, and services—supports retention and upsell, adding that payments alone can become a bottom-line driver, as MDR-positive categories (such as RuPay credit card-on-UPI) expand and device rentals scale.

In its merchant portfolio, the company is also recalibrating how it works with lenders. Several partners have shifted portions of Paytm’s book from default-loss guarantee (DLG) structures to non-DLG, reflecting improved merchant portfolio performance and removing a notable cost line for the quarter—even if it moderates future trail revenue growth.

As for personal loans, the stance is patience. Management said it would “just wait for the recovery” rather than get ahead of the cycle, keeping the emphasis on merchant credit and the payments franchise in the interim.

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At PB Fintech, insurance continued to offset credit softness. Consolidated net profit rose 40.6% year-on-year to Rs 84.59 crore, while operating revenue increased 33.4%. Total insurance premium reached Rs 6,616 crore, led by a 65% surge in health; renewal revenue on a 12-month rolling basis climbed to Rs 725 crore, a high-margin annuity that is increasingly central to earnings quality.

By contrast, PB Fintech’s credit marketplace remained soft. Core credit revenue was Rs 102 crore, down 22% YoY, with Rs 2,095 crore of disbursals. Meanwhile, core online lending disbursals (volumes) were 33% lower annually.

“The credit business has lost about 15% on the contribution margin,” Chairman and Group CEO Yashish Dahiya said, while indicating the segment has likely bottomed with monthly growth and an expected turn from Q3.

In the previous quarter, Mobikwik—citing a wider slowdown in the credit landscape—decided to pause its short-term credit business (buy now pay later), which weighed heavily on its Q1 FY26. Revenue from operations fell 20.7% YoY to Rs 271.36 crore, and its quarterly loss widened.

Yet, the payments engine hit an all-time high—Rs 38,400 crore of GMV, Rs 213.1 crore in payments revenue versus Rs 58.3 crore in financial services, and a record contribution margin as the company cut gateway costs and user incentives.

UPI’s share of GMV rose to about 35% from just under 30% a year earlier. Despite the mix shift, management said processing margins held near 15 basis points (bps) and contribution margin around 28%—among the company’s best.

Executives reiterated that lending saw a downturn after Q2 last year and is gradually rebuilding. For now, most partnerships operate under the First Loss Default Guarantee (FLDG) framework of about 5%, which improve their lending volumes.

Read together, the quarter underscores how payments—and adjacent non-credit annuities—are doing the heavy lifting, while retail credit resets. For Paytm, device subscriptions, MDR-accretive flows, and bank incentives are cushioning earnings while lenders dial back the need for DLG on better-performing pools.

For MobiKwik, a record payments quarter and stable take economics are bridging the gap as it pares back riskier, unsecured credit and rebuilds underwriting. At PB Fintech, strong growth in health and term insurance and rising renewals are mitigating the drag from softer unsecured disbursals.

The outlook hinges on when personal credit normalises. Paytm says it will wait out the cycle on personal loans and lean on merchant credit, plus its payments/device subscriptions. PB Fintech is pushing deeper into secured lending via partners to cushion the personal/unsecured slowdown, while renewals underpin earnings. MobiKwik sees a gradual thaw—disbursals up about 31% QoQ in Q1 as it balances FLDG-backed loans with lead‑gen for users who don’t fit FLDG underwriting.

The RBI’s surprise 50 bps cut on June 6 lowered the repo to 5.50%, setting the stage for a credit revival in the short term, with the RBI governor signalling that further easing remains on the table if inflation keeps cooling.