Social ,30 Apr 2025

Shriram Finance Expands into Payment Services: A New Era of Growth

In a major strategic move, Shriram Finance, one of India’s largest retail non-banking financial companies (NBFCs), is all set to enter the payment services space. Known for its stronghold in vehicle finance, SME lending, and retail loans, Shriram Finance's foray into the payments sector marks a significant diversification of its business model.

This step aligns with India’s rapidly evolving digital payments ecosystem, driven by innovations like UPI, Bharat BillPay, and mobile-first banking. Let's dive deeper into what this new development means for Shriram Finance, the broader financial services sector, and consumers.

 

About Shriram Finance

Formed from the merger of Shriram Transport Finance Company and Shriram City Union Finance, Shriram Finance Ltd. is a diversified NBFC headquartered in Chennai. It serves over 6.7 million customers through 2,900+ branches, focusing on underserved and semi-urban markets.

The company primarily offers:

1. Commercial vehicle loans
2. SME financing
3. Two-wheeler and personal loans
4. Gold loans
5. Fixed deposits

Expanding into the payments space will mark a major shift towards becoming a comprehensive financial services provider.

 

Why is Shriram Finance Entering Payment Services?

Several strategic reasons are driving this move:

1. Diversification of Revenue Streams
   With loan businesses facing cyclic risks, entering payments ensures a steady stream of fee-based income.
2. Leveraging Existing Customer Base
   With millions of customers, especially in semi-urban and rural markets, Shriram can cross-sell payment services effectively.
3. Tapping into India’s Digital Boom
   India’s digital payment transactions crossed $4 trillion annually, and the trend is only accelerating with UPI, AePS (Aadhaar-enabled payments), and mobile wallets.
4. Enhancing Customer Stickiness
   Offering payments along with loans, insurance, and wealth services will make Shriram a "one-stop" financial partner for its customers.
5. Preparing for the Future of Finance
   As embedded finance and open banking gain ground, NBFCs need to evolve beyond traditional lending to stay relevant.

 

What Services Will Shriram Finance Offer?

Though detailed plans are being finalized, initial offerings are expected to include:

1. UPI-based Payments: Direct UPI transactions for peer-to-peer and merchant payments.
2. Bill Payments: Integration with Bharat Bill Payment System (BBPS) for utilities, insurance premiums, EMIs, etc.
3. Wallet and Prepaid Services: Digital wallet offerings for instant transactions.
4. QR Code Solutions: QR-based payment acceptance for MSME customers and small merchants.
5. Micro-ATMs and AePS: In rural branches, allowing customers to withdraw cash and make payments linked to Aadhaar numbers.
6. Payment Gateway Services: For SMEs to collect online payments easily.
7. Merchant POS Solutions: Easy-to-use point-of-sale systems targeted at small businesses.

Over time, Shriram could even expand into buy now, pay later (BNPL), co-branded credit cards, and embedded finance models for their customer base.

 

Regulatory Framework

Entering the payment services domain requires regulatory approvals and compliance with RBI guidelines. Shriram Finance has reportedly applied for necessary licenses, including:

1. Payment Aggregator License from RBI
2. BBPS Operating Unit registration
3. PPI (Prepaid Payment Instruments) approvals, if launching wallet services

RBI's tightening norms around digital payments (like higher KYC standards, IT audits, and grievance redressal norms) mean that Shriram must invest significantly in tech, security, and compliance.

 

Competitive Landscape

Shriram Finance will face competition from:

1. Large Banks (like HDFC Bank, SBI, ICICI Bank offering integrated digital payments)
2. Fintech Giants (like PhonePe, Paytm, Google Pay, BharatPe)
3. NBFC Peers (Bajaj Finance, Muthoot Finance expanding into digital products)

However, Shriram's strength lies in deep rural penetration, customer trust, and understanding of credit-linked products, which many fintechs still struggle to master at scale.

 

Challenges Ahead

While the opportunity is immense, the road isn’t without hurdles:

1. Technology Investment: Setting up secure, scalable payment infrastructure requires heavy investment.
2. Customer Education: Especially in rural markets, educating users about digital payments will be key.
3. Regulatory Risks: Strict RBI norms could slow down innovation or expansion.
4. Competition Pressure: Competing with well-funded fintechs will require agile strategy and continuous innovation.

 

Future Outlook

The launch of payment services marks a pivotal moment in Shriram Finance's journey from an NBFC to a full-stack financial services provider. Over the next few years, expect Shriram to:

1. Bundle loans + insurance + payments for holistic customer solutions.
2. Launch financial super-apps integrating credit, payments, and wealth management.
3. Collaborate with banks, fintechs, and government programs for rural financial inclusion.
4. Leverage AI and machine learning to personalize financial offerings based on user behavior.

This move not only augments Shriram Finance’s competitive advantage but also contributes to India’s broader goal of digital and financial inclusion.

 

Conclusion

Shriram Finance’s decision to provide payment services is both strategic and timely. With India's financial landscape evolving at a rapid pace, traditional lenders must innovate to retain relevance. By combining its core lending expertise with cutting-edge payment services, Shriram Finance is positioning itself to become a next-generation financial powerhouse catering to millions across Bharat and India.

The future of finance is integrated, digital, and inclusive — and Shriram Finance seems ready for it.