Daybreak - Why India’s online gaming ban could hit Razorpay and PhonePe harder than you think

Episode Date: September 8, 2025

The Online Gaming Bill 2025 has wiped out India’s real-money gaming industry overnight. But the ripple effects extend far beyond fantasy cricket and poker tables.For years, payment aggregators like Razorpay, PhonePe, Cashfree, and PayU quietly powered the industry’s explosive growth. They processed deposits, payouts, and billions of rupees in prize transfers every month. Real-money gaming wasn’t just another client vertical. It was their golden goose that delivered high margins in a hyper-competitive market.Now, with the ban in place, these fintechs face a sudden revenue void. For some, gaming accounted for as much as 30% of net revenues. The loss comes just as many are prepping for IPOs, making the timing even more brutal.So, what does the gaming ban really mean for India’s payments industry?Tune in.Daybreak is produced from the newsroom of The Ken, India’s first subscriber-only business news platform. Subscribe for more exclusive, deeply-reported, and analytical business stories.

Hi, this is Rohan Dharma Kumar. If you've heard any of the Ken's podcasts, you've probably heard me, my interruptions, my analogies, and my contrarian takes on most topics. And you might rightly be wondering why am I interrupting this episode too. It's for a special announcement. For the last few months, I and Sita Raman Ganeshan, my colleague and the Ken's deputy editor, have been working on an ambitious new podcast. It's called Intermission.

We want to tell the secret sauce stories of India's greatest companies. Stories of how they were born, how they fought to survive, how they build their organizations and culture, how they manage to innovate and thrive over decades, and most importantly, how they're poised today. To do that, Sita and I have been reading books, poring over reports, going through financial statements, digging up archives, and talking to dozens of people. And if that wasn't enough, we also decided to throw in video into the mix. Yes, you heard that right. Intermission has also had to find its footing in the world of multi-camera shoots in professional studios, laborious editing, and extensive post-production. Sita and I are still reeling from the intensity of our first studio recording.

Intermission launches on March 23rd. To get alert, as soon as we release our first video. episode, please follow intermission on Spotify and Apple Podcasts or subscribe to the Ken's YouTube channel. You can find all of the links at the ken.com slash I am. With that, back to your episode. India's booming online gaming sector is now bust and it has been the talk of the town for the last few weeks. In fact, just two weeks ago when the ban came into effect, we spoke about how the courts had allowed it to continue based on the whole skill versus chance to beat. But what we didn't talk about then was this.

You see, the real backbone of that industry was not just the gaming apps. It was the payments companies that powered every deposit, every cash out and every single price transfer. And now, with the online gaming bill of 2025 turning into law, those payment companies are staring at one of their biggest shock. yet. And as we know, nobody saw this coming. Overnight, real money gaming platforms, together valued at around $15 billion, have gone silent. Companies stopped taking deposits even before the bill was passed, anticipating what was to come.

And now they are figuring out how to return deposits worth an estimated $1,000 to $1,500 crore to users. Think about it. In July alone, online games accounted for around 300,000,000,000,000 million games accounted for around 350 million UPI transactions. In 2024, which was last year, Indian spent nearly 50 to 60,000 crore rupees on real money games, a number that was expected to double this year. No other sector has come close to growing this first. Which is why, for IPO-bound fintechs like Razor Pay and Phone Pay, gaming merchants were not just another category.

They were a way to scale up transaction volumes and boost margins. But now, these companies are staring at a gaping hole in their business. So how deep was payments companies reliance on real money gaming and what made these firms such attractive clients? Also, what happens to the payments ecosystem now that the tap has been turned off? Welcome to Daybreak, a business podcast from the Ken. I'm your host, Nick Da Sharma, and I don't chase the new cycle. Instead, every day of the week, my colleague Rachel Vargis and I will bring you

one new story that is worth understanding and worth your time. Today is Tuesday, the 9th of September. When the going was good, payment aggregators and gaming companies were natural allies. For platforms like pay you, Razor Pay, Phone Pay and E's Buzz, real money gaming merchants were the easiest way to rack up high transaction volumes. And not just volumes, margins too. Aggregators could charge gaming companies far more per transaction than they could an e-commerce giant, for example.

Here is how it worked. If an aggregator charged flip card just one to two basis points per transaction, gaming companies were paying 10, even 50 basis points. Because gaming was classified as a quote-unquote riskier business. It gave aggregators the license to take a bigger cut. And this made gaming an incredibly lucrative category. In fact, for new players like phone pay or easebuzz,

which started as a SaaS company, before pivoting to payments and raising $30 million in 2024, gaming was a crucial on-ramp to scale. And it wasn't just deposits. Aggregators could also build custom products for gaming merchants. Take payouts. Introduced in 2018, this feature was designed almost entirely for real money gaming companies. It allowed platforms to quickly distribute winnings to users.

By one executive's estimate, aggregators like cash-free and razor pay were handling 100 to 120 million payout transactions a month at the peak. For Razor Pay, which earned around 2,000 crore rupees in revenue in the financial year 2024 and posted a 35-crow-ru-re-profit, gaming accounted for somewhere between 3 to 30% of net revenue. For cash-free, which reported 645-crow-rups in revenue, the share was similar. Both companies insist today that gaming was only a small part of their overall business.

They say e-commerce, BFSI, travel, education and tourism account for much larger volumes. But insiders point out that the high margin boost from gaming was difficult to replace. And when regulators tightened the screws in 2023 by slapping a 28% GST on real money gaming companies, it was aggregators like Razor Pay that quietly cut ties with smaller stuff. startups offering betting services. The revenue share was already slipping. Still, most people from the industry did not expect that the entire stream would vanish overnight.

In fact, gaming had even kept some aggregators afloaturing rough badges. When the RBI banned payment aggregators from onboarding new merchants in 2022, revenue from gaming companies became a lifeline for them. As one executive said, if a ban had happened back then, it would have won. wiped out the revenue of many payment aggregators. The ban today is no less seismic. IPO bound razor pay and phone pay will need to plug a sudden loss of transaction volume and margin. And with over 30 licensed aggregators now competing for market share,

the battle for the next growth engine has already intensified. Stay tuned for more on this. The obvious fallout of the gaming ban has lost revenue for payment firms. but dig deeper and the impact spreads wider, especially into credit and consumer finance. One of the government's main justifications for the ban was the financial distress caused by real money games. According to estimates,

nearly 450 million Indians lose around 20,000 crore rupees each year by playing such games. And the stories behind these numbers are grim. Families sliding into debt, students resorting to credit, crime, and in some cases, people driven to suicide. IT minister Ashwini Weishnerv told Money Control, and I'm quoting him, if we hadn't acted now, it would have become unmanageable.

Debt relief companies actually confirm this. Freed, a platform that helps distressed borrowers, says that at least 10% of its users are struggling with real money gaming debt. Its founder, Rite Shivasovar, has seen borrowers sink lakhs of rupees into fantasy cricket or Rami in the hope of quick wins. Take one example. A 35-year-old automotive worker in Punei earning 1 lakh rupees a month, in just six months poured $6.5 lakh rupees into online Rami to pay off a $14-Lack debt.

Another case, a 22-year-old lost $1.5 lakh rupees on Dream 11. Now, these users were not just dipping into savings. They were borrowing. platforms like Fib, Navi, Punawala FinCorp, CrazyB and True Balance became invisible credit lines for gaming. Shivastava estimates that 6 to 10% of unsecured personal loans were being used this way. Since lenders rarely monitor end-use, the true scale is unknown. The numbers are striking. In July alone, online gaming drove 350 million UPI transactions worth 10,000 crore rupees.

that is more than India spends monthly on alcohol or cigarettes, though it is still less than the 60,000 crore or so spent on securities and trading. Fueling this demand was advertising. In FY 2020, real money gaming firms spent around 9,000 crore rupees on ads, from TV to streaming platforms, pulling in millions of new users. What kept them hook was the seamless payment experience. Quick deposits, instant withdrawals, low friction.

It was designed to be addictive. And that is why the government moved faster than usual. Most controversial bills go through committees and consultations. This one did not. The online gaming bill took just four days to pass. No prior notice, no debate. As one insider put it, where is the committee report or any report at all on which this bill is based? By legislating in a hurry, the government also preempted the Supreme Court,

which is set to deliver a verdict on gaming taxation later this month. Whatever the outcome, the message from the parliament is already loud and clear. It is game over. For India's gaming companies, the verdict is final, shut down, return deposits, move on. For payment aggregators, the picture is murkier. Gaming may not have been their largest vertical, but it was among their fastest growing and most profitable ones. Losing that overnight is no small adjustment. Some will downplay the impact.

Others will quietly look for new high margin categories to replace gaming. Lending, wealth tech, cross-border payments, the race is already on. But the bigger lesson may be this. When an entire industry depends so heavily on one sector, regulation can pull the plug in an instant. And for India's payments industry, that means that the search for the next golden goose has already begun. Daybreak is produced from the newsroom of the Ken, India's first subscriber-focused business news platform. What you're listening to is just a small sample of a subscriber-only offerings

and a full subscription offers daily, long-form feature stories, newsletters and a whole bunch of premium podcasts. To subscribe, head to the Ken.com and click on the red subscribe button on the top of the website. Today's episode was hosted and produced by my colleague, Sinkha Sharma, and edited by Rajiv CN.