AI-Powered Payments: Redefining Commerce in India’s Fintech Landscape

AI is emerging as the “new UPI” of India’s fintech era—making payments smarter, personalized, and seamless through intelligent agents, real-time decisioning, and conversational commerce.

At the Global Fintech Festival (GFF) 2025, held at Mumbai’s Jio World Convention Centre, over 40,000 delegates from 100 countries converged to explore the theme “FinTech for All: Bridging the Future.” A leading Indian payments gateway, processing over $1 trillion in cumulative transaction volume since its 2015 inception, shared insights on artificial intelligence (AI) as the next transformative force in payments and commerce. With India’s Unified Payments Interface (UPI) clocking 14 billion transactions in September 2025 (National Payments Corporation of India data), the stage is set for AI to build on this digital foundation, potentially becoming the “new UPI” within five years.

The AI Payments Paradigm: A Technological Leap

From UPI to AI: A Parallel Evolution

UPI, launched in 2016, revolutionized digital transactions by enabling instant, low-cost transfers, capturing 83% of India’s digital payment volume by 2025 (Reserve Bank of India). AI payments represent a similar leap, embedding intelligence into the transaction stack. Unlike UPI’s standardized rails, AI-driven systems leverage natural language processing (NLP), machine learning (ML), and agentic architectures to enable seamless, intent-driven commerce. For instance, a user could instruct a virtual assistant via a messaging app, “Order a blue cotton T-shirt under ₹1,000,” and the AI would parse the request, query inventory, and settle the payment without a traditional checkout. This reduces cart abandonment rates, which affect 70% of Indian e-commerce transactions (KPMG 2024).

Technical Foundations of AI Payments

The payments gateway’s infrastructure, built on a microservices architecture with Kubernetes orchestration, processes 10 million daily transactions at sub-100ms latency. AI integration involves:

• NLP for Intent Detection: Transformer-based models, similar to BERT, parse user queries for semantic accuracy.

• Fraud Detection: Federated learning trains models across anonymized merchant datasets, reducing false positives in chargeback predictions by 25% year-over-year, compliant with RBI’s data localization rules.

• Agentic Execution: Autonomous agents handle end-to-end transactions, from product selection to settlement, using reinforcement learning to optimize paths.

These advancements underpin upcoming AI product launches, set to integrate payments within apps and conversational interfaces, positioning India as a global leader after the US.

Transforming Commerce: AI as a Human-Centric Enabler

Conversational Commerce at Scale

AI’s impact extends beyond payments to redefine e-commerce, projected to reach $350 billion in India by 2030 (Redseer Strategy Consultants). Current recommendation engines frustrate 60% of consumers with irrelevant suggestions (PwC 2025). AI addresses this through agentic systems that act on user intent, such as finding and purchasing products via natural language. The payments gateway’s commerce platform, enhanced with NLP, reports a 40% increase in conversational query volumes since Q2 2025. This shift empowers small and medium businesses (SMBs), with 10,000 onboarded in the past year, boosting average order values by 18% through AI-driven upsell prompts.

Technical Implementation

The commerce stack employs a multi-agent framework:

• Semantic Search: Vector embeddings enable precise product matching.

• Dynamic Pricing: Game theory algorithms optimize negotiations.

• Secure Settlement: Blockchain-inspired ledgers ensure auditability, compliant with PCI DSS Level 1 standards.

These systems mitigate cyber risks, which cost Indian businesses ₹10.5 trillion annually (FICCI-NASSCOM 2025), while prioritizing user consent and explainability via SHAP visualizations.

Business Strategy: Scaling with Discipline

Financial Milestones

The payments gateway, valued at over $7.5 billion with 8,000 employees, is nearing profitability ahead of its FY27 IPO. With a 50% compound annual growth rate in gross merchandise value (GMV) and a 2.5% take rate, the firm leverages AI to reduce support tickets by 30% via predictive analytics. Diversification into lending (₹15,000 crore disbursed in FY25) and payroll (2 million users) strengthens its financial position, with positive cash flows expected by 2026, aligning with SEBI listing norms.

Regulatory Alignment

The RBI’s August 2025 payment aggregator guidelines standardize KYC, settlement timelines, and ₹15 crore net worth requirements, reducing compliance costs by 15% for licensed entities like the gateway. This fosters trust, with 70% of SMEs citing regulatory clarity as a growth driver (Deloitte 2025).

Challenges and Mitigation Strategies

Adoption Barriers

AI payments face hurdles akin to UPI’s early days, when volumes were below 100 million until 2018. Privacy concerns deter 45% of Indian internet users from voice-activated finance (IAMAI 2025). The gateway counters this with granular consent mechanisms and explainable AI, allowing users to query recommendation logic. The RBI’s April 2025 real money gaming ban, impacting less than 2% of revenues, underscores the firm’s diversified portfolio resilience.

Cross-Border Opportunities

With India’s remittances at $125 billion in FY25 (World Bank), cross-border payments offer growth potential. The gateway processes $5 billion annually, using AI for forex hedging to reduce volatility by 20%. RBI’s relaxed LRS limits ($250,000 per annum) and Swift GPI integration will drive fivefold volume growth by 2026, reinforcing India’s $5 billion fintech export revenue (NASSCOM 2025).

A Blueprint for the Future

The payments gateway’s AI strategy exemplifies disciplined innovation, blending technical rigor with business pragmatism. By prioritizing factual milestones—near-profitability, regulatory compliance, and imminent product launches—it avoids speculative hype. For merchants facing 15% logistics inflation and consumers seeking seamless finance, AI offers a humane solution: technology that anticipates needs while preserving agency. As India’s startup ecosystem, with 100,000+ ventures, scales globally, this model sets a precedent—innovate boldly, validate rigorously. In five years, when AI agents mediate daily transactions, these efforts may mark the dawn of a new era in commerce.