Smart Pay Revolution: How Razorpay, Cashfree & Others Are Harnessing Agentic AI To Transform Payments
Indian Fintechs Race to Integrate Agentic AI
The Indian payment aggregator (PA) ecosystem is witnessing a paradigm shift as leading players like Razorpay, Cashfree, and PayU embrace agentic AI to stay competitive and add value for merchants. By adopting the model context protocol (MCP), a standard created by Anthropic, these PAs are enabling AI agents to interact seamlessly with their payment gateways and APIs—paving the way for smarter, more efficient payment operations.
- MCP adoption allows seamless connection of AI models to proprietary payment data and services, facilitating advanced automation and custom workflows.
- This leap means merchants can now use AI-powered tools—like chatbots and virtual assistants—to directly manage payment links, process refunds, and check transaction statuses, all within existing messaging or enterprise platforms.
The Impact of MCP: From AI Chatbots to Payment Automation
Razorpay was among the first Indian fintechs to launch MCP integration for merchants. This enables business owners to embed AI assistants into their payment journey. For example:
- Chatbots can now trigger payments, initiate refunds, and generate invoices via simple prompts, removing the need for manual intervention.
- AI agents can act autonomously on platforms like WhatsApp or web chat, streamlining repetitive tasks for small and medium businesses (SMBs).
- APIs can be leveraged by external AI tools—such as Claude, Zapier, and VS Code extensions—for broader workflow automation.
Cashfree Payments and PayU followed suit. Their MCP-enabled platforms allow merchants to automate financial tasks such as payment link generation, status checks, and reconciliation. As PayU CTO Narendra Babu highlights, “MCP server integrations eliminate hours merchants previously spent filling forms for financial processes. Within minutes now, PayU merchants can automate their financial tasks.”
- Structured payment link management: Instantly generate, update, and share payment links.
- Refund and transaction automation: Initiate settlements and payouts through natural language prompts.
- Enhanced customer experience: Merchants can become more responsive and proactive in addressing customer payment issues.
Why Agentic AI Is A Gamechanger for Payment Aggregators
The payment aggregator market in India has become fiercely competitive, with over two dozen PAs licensed since 2024. With UPI leaders like PhonePe joining the fray and a trend toward closed, in-house solutions, PAs need fresh differentiators to retain and grow their merchant bases.
- Agentic AI enables hyper-personalised services—merchants can offer smoother, more engaging checkout and payment experiences.
- Workflow automation: Everyday operational bottlenecks are reduced, freeing up business resources and improving customer satisfaction.
- SMB-friendly solutions: Small merchants, who may lack in-house tech, can tap into advanced AI features via familiar platforms like WhatsApp.
Cashfree’s Mayank Juneja notes, “Cashfree’s MCP server is built around context-aware automation. It continuously listens for customer intent—like ordering or KYC—and autonomously maps to the right workflow.”
Regulatory Considerations: AI and Data Security in Fintech
With the rapid evolution of AI-first payment operations, regulatory scrutiny is increasing. India’s Reserve Bank (RBI) is already developing a framework for responsible AI in finance, addressing both data privacy and ethical concerns.
- Current reliance is on existing data protection laws, but the fintech sector should expect more AI-specific guidelines soon.
- RBI’s FREE-AI initiative will assess risks, ethical adoption, and safe deployment of AI in financial services.
The Future: Agentic AI as the Next Growth Inflection Point
MCP and agentic AI may represent the next big leap for Indian payment aggregators, moving the industry beyond traditional dashboards and manual workflows. With PAs acting as intermediaries, MCP integrations can:
- Allow real-time, AI-driven settlements for merchants.
- Enable third-party AI assistants to securely access payment APIs.
- Create a new era of intelligent, autonomous payments—raising the bar for what merchants and customers can expect from digital commerce.
As AI agents mature and regulations evolve, India’s fintech sector stands at the threshold of a smarter, more automated payment future. Will agentic AI set the new standard for seamless digital commerce? The coming months will be decisive.
Key Takeaways:
- Leading PAs like Razorpay, Cashfree, and PayU are driving MCP adoption for agentic AI integrations.
- MCP empowers merchants with direct, AI-driven access to payment functions—transforming workflows and customer experience.
- Regulatory frameworks are catching up to AI innovation, ensuring responsible and secure implementation.
Global Comparisons: How Indian Agentic AI in Payments Stacks Up
- US & Europe: Stripe and Adyen’s AI Integrations
- Stripe (USA) and Adyen (Netherlands) have led AI integration for payments globally, primarily focusing on fraud detection, risk analysis, and transaction optimisation using proprietary AI and machine learning models.
- Both offer developer-centric platforms, enabling businesses to build custom workflows with APIs, but until recently, AI assistants and autonomous agentic AI tools (like those using MCP) have been experimental rather than core offerings.
- China: Alipay and WeChat Pay’s Conversational Payments
- Alipay and WeChat Pay pioneered conversational payments using AI-driven chatbots and voice assistants, embedded within their super apps.
- Their approach leverages the ecosystem effect, combining payments with e-commerce, social, and financial services, but agentic AI tools with open standards (like MCP) are less common due to ecosystem lock-in.
- Singapore: GrabPay and Digital Financial Hubs
- GrabPay (Singapore) uses AI for personalised promotions, spend analytics, and fraud detection.
- Recent initiatives are experimenting with AI agents for customer service and transaction automation, but not yet at the open-integration level seen with MCP in India.
- UK: Open Banking and AI-Driven APIs
- The UK’s open banking mandates have made APIs ubiquitous, allowing fintechs like Revolut and Monzo to deploy AI for budgeting, smart recommendations, and transaction insights.
- AI agents for payment orchestration are under pilot, but regulatory focus is on consent and security, making rapid innovation slower compared to India’s PA sector.
- India: MCP-Driven Agentic AI as a Differentiator
- India is one of the first markets where leading PAs (Razorpay, Cashfree, PayU) are rolling out MCP-based agentic AI that allows external AI models (not just in-house bots) to securely access payment APIs and automate tasks.
- This open, standards-driven approach enables both large merchants and small businesses to leverage the latest in generative AI for custom payment workflows, customer support, and instant settlements—potentially leapfrogging Western fintechs in end-to-end automation.
- Global Summary
- While AI is widely used in payments globally for risk and fraud, India’s MCP adoption for merchant-facing agentic AI is among the most advanced.
- Other regions remain more closed (China), slower due to regulatory hurdles (UK, EU), or developer-centric without open agent integration (US).
Key Insight:
India’s PA sector is now among the global leaders in agentic AI integration, not just for backend optimisation but for direct merchant empowerment—making the Indian market a reference point for next-gen payment automation.
