PhonePe, in partnership with Mastercard, has launched a new Tap & Pay / contactless payments functionality in India.
Under this feature:
- Mastercard cardholders (credit, debit, prepaid) can store their cards in the PhonePe app and make in-store payments by tapping their NFC-enabled Android smartphones at merchant terminals.
- The feature also supports tokenised e-commerce transactions for more secure online payments.
- Payments are secured through tokenisation — the actual card credentials are masked, and only a device-specific token is used
- The rollout will be phased, meaning not all users will get it immediately. Business Standard
According to PhonePe’s press page, this “Tap, pay, and go” collaboration is now part of their product offerings.
Who Can Use It & How It Works
Eligibility
- Only Mastercard cardholders (credit, debit, prepaid) issued in India are eligible initially.
- Must have an NFC-enabled Android smartphone. (iOS / non-NFC or older devices may not support it, at least initially).
- The card must be tokenised and saved in the PhonePe app via a one-time process.
Transaction Flow
- Add & tokenize card
Users add their Mastercard to the PhonePe app; the app tokenises the card. - Tap at Point of Sale (PoS)
At a merchant checkout, the user taps their NFC-enabled phone to the terminal. - Authentication / Authorization
The transaction request is processed with the token; the actual card data remains secure and hidden. - Confirmation
Once approved, the merchant and user get notifications of successful transactions.
Why It Matters: Benefits & Impacts
For Users
- Faster checkout — no need to open app, scan QR, enter UPI ID or enter details.
- Security via tokenisation — reduces risk of exposing card credentials.
- Convenience — it works like contactless cards, but via your smartphone.
- Unified payments — users can manage more payment types (card + UPI) inside one app.
For Merchants & Payments Ecosystem
- Better adoption of NFC / contactless tech — more terminals will support NFC.
- Reduced friction at checkout — may boost in-store conversion.
- Strengthens PhonePe’s positioning — goes beyond UPI/QR to card + token-based payments.
- Competitive pressure — other fintechs, banks or wallets may accelerate similar features.
For the Fintech / Market Context
- This is part of a broader push toward device-based tokenisation in India’s payments infrastructure.
- NFC adoption is increasing; pairing that with a trusted fintech app adds momentum to the contactless movement.
- It helps diversify PhonePe’s capabilities beyond pure UPI/QR payments, giving it a more all-round payments portfolio.
Limitations, Challenges & What to Watch
- The feature is initially limited to Mastercard users—other card networks may be added later.
- Device compatibility: users without NFC support or older/low-end phones may not benefit.
- Phased rollout means many users won’t get it immediately.
- Merchant terminal readiness: not all PoS machines support NFC/contactless modes everywhere.
- User education: many users may not be familiar with using phone-tap methods, so awareness is key.
- Security & regulations: ensuring compliance with RBI/India payment security norms, token standards, fraud prevention, etc.
What Next & Strategic Implications
- Expect rollout to broaden: additional card networks (Visa, RuPay) may get integrated.
- PhonePe likely will push marketing/awareness to get users to adopt.
- Merchant tie-ups and terminal upgrades may follow to ensure coverage.
- This move strengthens PhonePe’s case ahead of potential IPO or valuations by showing product innovation beyond UPI dominance.
- Other players (Paytm, Google Pay, banks) might respond with similar tap & pay offerings to stay competitive.
