Impact of Online Gaming Ban on Payment Gateways

The government’s prohibition on real-money online gaming is poised to significantly impact payment gateways, which previously relied heavily on the sector for revenue. As reported by industry professionals, gaming accounted for approximately 15% to 20% of transaction volumes and even up to 50% for certain processors. An insider familiar with the operations noted that gaming was not only substantial in scale but also high-yielding, stating that for some companies, half of their business has evaporated overnight.

Real-money gaming was one of the most profitable segments for payment companies due to the frequency of transactions and higher Merchant Discount Rates (MDRs) compared to other sectors like e-commerce and utilities. With the removal of this segment, experts anticipate a wave of consolidation within the industry. Smaller payment processors that thrived on gaming revenues now face survival challenges, while larger firms like Razorpay, PayU, and Cashfree may mitigate the adverse effects due to their more diverse portfolios.

Industry Consolidation in Response to the Ban

“Consolidation is inevitable; this resembles a demonetisation-like scenario for payment processors,” mentioned a source knowledgeable about the situation. According to estimates from Startup Superb, the repercussions of the ban are observable across three critical areas.

The Payout Side

Gaming companies such as Dream11, MPL, Winzo, and Mycircle11 are required to maintain distinct bank setups for transferring winnings, using gateways like Cashfree and Razorpay, which charge fees for managing these accounts. This revenue stream has now vanished.

In response to inquiries from Startup Superb, a Razorpay representative stated that the real-money gaming (RMG) sector does not contribute significantly to their total processing value (TPV) or revenue, indicating the impact on Razorpay is minimal. They estimated the overall industry transaction volume at 15,000 to 20,000 Crore per month, with Razorpay’s share being around 500 Crore. They added that although gaming has been an exciting digital domain in India, it represents only a tiny fraction of Razorpay’s total business. As the online gaming landscape evolves, they are eager to explore future opportunities.

A spokesperson from Cashfree echoed a similar sentiment, sharing that their merchant portfolio is highly varied, with a substantial portion deriving from sectors like e-commerce, banking, financial services, and insurance (BFSI), travel, and tourism. Real-money gaming companies contribute only a minor segment of their business; therefore, they do not foresee a significant impact from the government’s ban on revenues or transaction volumes.

The Collection Side

Users previously deposited funds into gaming wallets through UPI, cards, and wallets, generating significant transaction volumes for payment processors like PhonePe, Paytm, and Easebuzz. With the ban, these inflows have ceased abruptly. An Easebuzz spokesperson pointed out that the company has minimal exposure to gaming businesses, less than 2% of its overall annual Gross Transaction Value (GTV). The spokesperson highlighted that most of their business comes from essential economic sectors; BFSI accounts for 50% of revenues, 25% from retail, 20% from education, and the remaining from sectors like real estate and tourism.

Compliance Risks and Future Competitiveness

A further layer of concern involves compliance risks. Many gateways also serve merchants in the grey-area gaming market and are now compelled to ensure no illegal or offshore transactions occur.

The ban is expected to increase competition, prompting payment gateways to lower prices to attract merchants in other categories, such as direct-to-consumer (D2C), subscriptions, and Software as a Service (SaaS). Additionally, partner banks that previously shared nodal accounts with processors are now competing directly for the same clientele. A senior official at a payment gateway stated that price reductions are unavoidable as banks aggressively pursue this space.

Queries directed to Yes Bank went unanswered by the time of publication.

Transaction Volumes and Market Size

Data from the National Payments Corporation of India (NPCI) indicates that digital goods gaming recorded 1,610 million (1.6 billion) transactions valued at Rs 41,000 crore via UPI between April and July 2025. A considerable portion of this is likely linked to real-money gaming. In July alone, the sector processed 351 million transactions worth Rs 10,076 crore. These statistics pertain solely to licensed gaming platforms; however, several firms disguised as e-commerce or D2C businesses were also operating gaming activities to evade compliance. A source indicated that if these figures are considered, the actual market size would likely be nearly double the reported statistics.

Industry analysts have noted that Yes Bank had the highest exposure, facilitating over 60% of these transactions. Concerns have been raised that some gaming activities may transition to offshore platforms or crypto channels, thereby diverting business from Indian payment firms while escalating compliance risks. An individual directly involved in payment processing for gaming remarked that some transaction volumes may shift towards unregulated networks, which poses a clear risk to the entire ecosystem.

The real-money gaming sector handled transactions worth lakhs of crores annually and significantly contributed to GST inflows. Its sudden absence will affect gateway revenues, profit margins, and valuations and may lead to job reductions across the industry. In the longer term, the sector is likely to consolidate into fewer but more robust players. Meanwhile, payment firms are currently navigating the challenge of replacing a revenue line that was, up until recently, their primary engine of growth.