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Bajaj Finance to enter the competitive UPI race

payments, digital payments

Non-bank lender Bajaj Finance is planning to enter the competitive Unified Payments Interface (UPI) market with its own third-party app called Bajaj Pay. The company will also launch a merchant-facing app targeting over 100,000 merchants, it said in its investor presentation for the third quarter of this fiscal.

Until recently it was expected that WhatsApp Pay’s recent entry into the UPI market would disrupt the dominant position occupied by Google Pay, PhonePe and Paytm. But with Bajaj Finance entering the race, the UPI market will have two new entrants, each with their own strengths. While WhatsApp’s strengths lie in providing UPI services to a proportion of its 400 million users in India, from the looks of it Bajaj Finance is pursuing a financial super app strategy with Bajaj Pay.

The app will integrate UPI payments, prepaid instrument, EMI cards and credit card into the app, providing a full set of services for borrowers and consumers. Further, given Bajaj Finance’s wider universe of products from home loans, investment options, general and life insurance, through Bajaj Finance, its UPI or payment app can offer its customers a whole gamut of services. Bajaj will be the first non-banking financier to pursue the super app strategy. Banks like Kotak Mahindra Bank, ICICI Bank, RBL Bank, HDFC Bank and State Bank of India have each launched similar app strategies.

In an earnings call with analysts on Wednesday, Rajeev Jain, managing director of Bajaj Finance said that within a single-app ecosystem, “customers will be able to buy a whole host of financial services and products”. The company is looking to build an open-loop universal QR-code infrastructure on Bajaj Pay, while on the merchant side it aims to ring-fence and tighten its offerings for the 100,000-odd existing merchant clients it presently has. Jain says that they do not aim to encroach on to the merchant base acquired by existing UPI players.

Update on digital business transformation

In October 2020, Bajaj Finance announced that it was developing a new business framework and would be upgrading its digital platform in a bid to more than double its customer base and improve its cross-sell business. “The omnichannel model will enable the customer to move between online to offline and vice versa in a frictionless manner,” it said.

As part of this strategy, Bajaj Finance is building four productivity apps, Sales One app, Merchant app, Collections app and Partner app. “These apps will significantly improve the productivity and efficiencies of our employees, channel partners and merchant ecosystem by May 2021,” it said. It also plans to build five proprietary marketplaces which would include an EMI Store, an insurance marketplace, investment marketplace, BF health and a broking app as part of its omnichannel strategy.

The first phase will be launched in July 2021, second phase by August and third by September-end, the company said.

“The productivity apps are inward facing and will seamlessly talk to customer and employee assets on a real-time basis. We do believe fundamentally that once these are delivered this will require much lower headcount addition as a proportion of growth as we get into the next few years,” Jain said. He added that the organisation is undergoing a structural transformation in terms o  changing operational processes and changing the core technology stack, which will be completed by May 2021, Jain said.

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