The move marks a radical departure from the company’s previous aggressive growth strategy, reflecting the challenges of balancing innovation and sustainable returns in a competitive and regulated financial landscape.
Under the previous five-year plan, Bajaj Finance has sought to establish itself as a dominant player in the payments and credit card markets. According to Rajeev Jain, Managing Director, Bajaj Finance, it has been aggressively expanding its offerings such as UPI, prepaid wallets, merchant QR codes, bill payment and FASTag.
The company was also targeting substantial growth in its market share in the payments space and strengthened its co-branded credit card partnerships with RBL Bank and DBS Bank India.
However, under the revised plan, the lender has tempered its targets, reducing its market share target for the payments sector to 1% of gross merchandise value (GMV) by FY29, falling compared to the previous target of 3%.
It also decided to end its co-branded credit card distribution partnerships, citing regulatory restrictions imposed by the Reserve Bank of India (RBI) that limit the role of co-branded partners to simply sourcing customers.
“Given the new regulatory environment where they’re basically saying you can only do (credit card) distribution and nothing else, it didn’t make sense for us to monetize our customer base for just ₹1,500 or ₹2,000 per customer,” Jain said Mint. “As a compromise, we found it more viable to focus on other, more profitable opportunities with our customers. »
Read this | Bajaj Finance poised for strong quarter despite RBI directive
Explaining the reason for re-evaluating Bajaj Pay, the company’s payments platform, Jain said, “After three years of work and if you use Bajaj Pay, you will find that the features are almost similar to Google Pay and PhonePe. It is the product of enormous inertia. And we are a public company. We must publish the results every quarter. We have invested nearly $100 million in building Bajaj Pay over the last three years. It made sense for us to focus on the viability of the payments industry. »
By the end of September, Bajaj Finance had facilitated 32.4 million UPI transactions, 8.57 million bill payment transactions and deployed 3.4 million QR codes for merchants. Despite these milestones, the company struggled to achieve profitability in the payments sector, even after investing $100 million in its Bajaj Pay platform over three years.
According to data from National Payments Corp. of India, Bajaj Finance ranked 24th in the UPI payments industry with 8 million transactions for the month of November. On the other hand, players like PhonePe dominated the market with 7.4 billion transactions, followed by Google Pay with 5.7 billion transactions and Paytm with 1 billion transactions.
PhonePe accounted for 47% of the transaction volume, while Google Pay accounted for 37% and Paytm 6.9%.
Read this | Even beyond UPI, the Indian payments space is evolving
Meanwhile, even as Bajaj Finance cuts its payouts, it has set ambitious growth targets under BFL 3.0. The company aims to double its assets under management (AUM) to ₹8 trillion and expand its customer base to 200 million by FY29.
Jain believes that the AI-based operating model will be instrumental in achieving these goals.
That said, Bajaj Finance is on track to achieve its previously set targets. The non-bank lender’s assets under management are expected to reach ₹4 trillion by fiscal 2025, a goal he set three years ago.
Bet big on AI-driven efficiency
At the heart of Bajaj Finance’s revised strategy is robust adoption of AI, aimed at improving profitability and productivity.
The company has moved 500 of its 6,000 agents to virtual roles, which Jain says will triple customer conversion rates and reduce costs by at least 40%. The non-bank lender also hopes to see its cost of credit, which is currently higher at 210 basis points, normalize to the pre-Covid level of between 185 and 195 basis points.
Bajaj Finance is also testing 29 AI use cases, ranging from customer interactions to product recommendations, and plans to expand these initiatives over the next 12-15 months.
Jain highlighted that AI-based links will soon accompany promotional messages sent via SMS and WhatsApp, allowing customers to interact with virtual agents.
Read also | GenAI will transform the banking industry with more targeted customer experiences: Deutsche Bank CTO Leukert
“Large-scale adoption of AI is not happening at the organizational level in many banks and non-banks. While the intention seems good, we will have to see how BFL progresses from here on,” said Ashutosh Mishra, head of institutional equity research at Ashika Equity Broking.
To support this transition, Bajaj Finance is investing heavily in recruiting talent with deep AI expertise, ensuring its capabilities match its ambitions.