How online real money gaming and payment aggregator firms found a perfect match until it all came crashing down

The partnership between payment aggregators and real money gaming firms

The online real-money gaming ban by the government, imposed in a short span of 96 hours, set the payment aggregators (PA) back by a few years.

According to sources, Cashfree, PhonePe and Easebuzz are likely to see a significant drop in revenue during the current financial year. In absolute figures, Razorpay is also likely to see a substantial knock on its topline, though not as high in terms of percentage contribution as the others mentioned, but less than 10 percent, the sources added.

Unlike regular online merchants that work with PA firms, real money gaming (RMG) firms had special requirements, which made them work closely with payment firms to build products that suited their needs. This explains the success of this partnership.

For PA and RMG firms, the key was to successfully credit the customers' winnings in their accounts immediately, similar to the Unified Payments Interface (UPI) experience they have come to expect.

Most of the RMG transactions, from loading the wallet to play the game – called pay-in– and the withdrawals of winnings – called pay-outs, happen over UPI.

The value of UPI transactions for gaming was worth over Rs 10,000 crore every month, with the annual turnover in the range of Rs 1.2 lakh crore, according to NPCI data. Nearly two-thirds of these are estimated to be for RMG.

The monthly transaction count for online real-money gaming is around 400 million on UPI platform, which as a whole processes more than 19 billion every month.

The payment companies may have made cumulative revenue of Rs 1,500 crore during the last financial year, a back-of-the-envelope calculation shows.

PhonePe did not respond to Moneycontrol request for comments. Easebuzz, Cashfree and Razorpay denied that they will see any sizeable impact from the RMG ban.

"Our merchant portfolio is highly diversified, with our largest volumes coming from sectors such as ecommerce, BFSI, travel, and tourism. Real-money gaming companies account for a very small proportion of our overall business. Therefore, we do not expect the government’s ban to have any material impact on our revenues or payment volumes, and we remain on track to achieve our growth targets for the financial year,” Cashfree said in a statement.

"Easebuzz has very limited exposure to gaming businesses, with less than 2% of our overall annual GTV (gross transaction value). Hence, we don't see any noticeable impact on our revenues. Majority of our book is contributed by the core sectors of the economy like 50% of revenues come from BFSI, 25% from retail, 20% from education, and the rest from sectors like real estate, travel & tourism etc.", Easebuzz said in an email statement.

“Gaming has been one of the most exciting digital sectors in India, and we have always supported innovation. However, it represents only a very small fraction of Razorpay’s overall business, especially when compared to the significant growth in sectors like e-commerce, travel, education, and financial services, among others. Having observed the developments over the last few days, we can confirm that the impact on our business is negligible. As the online gaming industry pivots and adapts, we will continue to explore how we can work with them in future,” Razorpay spokesperson said in a statement.

The key to PA firms' success

Called pay-outs in the industry parlance, this channel was previously used by merchants for processing refunds and cashbacks.

For Cashfree, its Payout API (application programming interface) launched in 2018 was an innovation that propelled it to among one of the largest and preferred PA companies of RMG firms. APIs help connect two types of software to communicate with each other.

The winnings of the players were credited using the Payout API, which enabled RMG firms to process bulk automatic payouts, often several lakhs of transactions daily. These are micro transactions with an average value of around Rs 20.

In India, both banks and PAs can onboard merchants, and the former often ask merchants to work with them directly. But not in this case.

“Banks were referring RMG merchants to PAs because they did not want micro transactions to burden their systems. There was also the fear of regulations, given the previous experience of several payment firms’ poor KYC practices, resulting in the growth of Chinese money lending apps and gambling sites. It was difficult to monitor the micro transactions of RMG firms,” said a business development manager with a PA firm, who did not wish to be identified.

Certain states, like Tamil Nadu, had banned RMG or lottery in the state back in 2022.

A rare UPI revenue model

The gaming industry was a great opportunity for PA firms to monetise UPI payments. As per the government regulations, banks or any other financial institutions cannot charge commission for payments or a merchant discount rate (MDR) for UPI. However, banks and PAs charge a platform fee from online merchants, who provide the services free for the end customers as stipulated by the government in 2020.

The PA entities usually charge around 50 basis points or 0.5 percent per transaction for payment processing. Technically, PAs charge 2 percent platform free from merchants for all transactions; however, the larger merchants negotiate much lower fees, sometimes even below 50 basis points.

However, the bigger pie was the pay-outs. The PA firms were charging a flat fee of Re 1 per transaction. Pay-outs were almost a quarter of all RMG transactions. For a Rs 20 payout, a fee of Re 1 translates into 5 percent payment commission, much higher than the 0.5% that financial institutions charge merchants.

“Gaming companies did not have much choice but to work with the PAs that were willing to work with them. This was especially true for bulk automated pay-out, which was a key innovation for the industry, which helped PA firms make handsome profits, a rarity in the fintech world,” said a co-founder of another payment firm, which works closely with PA entities.

The rise of PhonePe

Interestingly, fintech giant PhonePe experienced a swift rise in processing RMG payments, thanks to its outsized share in UPI transactions. The Bengaluru-based mobile payments firm processes around 46 percent of all UPI transactions.

PhonePe launched its payment gateway business in 2023, which came at a time when most of its larger rivals, such as Razorpay, Paytm, Cashfree and PayU were on a moratorium imposed by the regulator Reserve Bank of India for around 18 months on onboarding new merchants, making it a potential partner for most of the newer and smaller firms.

Being the largest UPI player in the country with close to 50 percent market share, most of the RMG customers were using PhonePe app to pay-in the money needed to play the games.

“The company’s pitch was that for all the customers using PhonePe app for pay-in payments, using a PhonePe payment gateway will ensure faster processing with lower failure rates. This helped them stitch a strong partnership with multiple gaming companies, including Dream11, which had pre-existing relationships with other PA firms” said a co-founder of a payments firm.

For payments giant PhonePe, the payment aggregator business division reported around Rs 13,000 crore in GMV (gross merchandise value) monthly during the first quarter of FY 26, of which Rs 3,000 crore was contributed by the RMG firms, as per the sources.

A back-of-the-envelope calculation of 0.5% commission gives an average revenue of around Rs 15 crore per month from gaming, which translates into a revenue loss of around Rs 100 crore for the current fiscal (FY 26).

To be sure, PhonePe group had revenue of over Rs 5,000 crore in FY 24, and the current annual revenue run rate could be around Rs 7,500 crore, indicating minimal overall impact. However, as stated before, for the PA division, this is still a substantial impact.

The country’s largest PA firm Billdesk, was not active in the RMG circuit, as many saw the firm as old-school and aligned more with banks and large merchants.

The impact

For these four large players, it may take a couple of years to mitigate the impact of the RMG ban on revenue and profits, as per the industry sources cited.

In the startup world, gaming companies were among the rare sectors that made consistent profits. This also helped PA firms to make money from the businesses in the sector.

The PA firms are already facing a margin squeeze as larger merchants force them to offer lower commissions while banks hike the payment fees for using their infrastructure.

Coming off the RBI moratorium, some of the PA firms had seen good growth in FY 24, only to be undone by the online RMG ban. The financial impact of this move will not be known until September 2026, when the private companies are expected to file their financial statements for FY 26 with the Registrar of Companies.