While transactions using the United Payment Interface (UPI) crossed 145-million mark in December, the market share of the government’s Bharat Interface for Money (BHIM) app fell to 6 per cent in the face of growing competition from private players like Tez, PhonePe and Paytm as well as banks.
UPI is a payment system developed by the National Payments Corporation of India (NPCI) that allows money transfer between two bank accounts by using a smartphone. It also enables a customer to pay directly from a bank account to different merchants.
A spokesperson for Google India said consumers were embracing UPI apps depending on their needs. “The government’s vision and the NPCI’s work have allowed a lot of players to innovate and build solutions for digital payments,” he said. Google’s mobile payments service Tez was launched in September last year.
Deepak Abbot, senior vice-president, Paytm, said, “Customer trust, care and overall user experience play a very important role in the adoption of a payments platform. An app that offers multi-use cases and takes care of all payment needs has an advantage over standalone UPI apps.”
Tez has processed 140 million transactions since its launch, constituting close to 40 per cent of the total volume of UPI transactions during the period. Tez’s entry coincided with a drastic drop in BHIM’s share.
Since inception, BHIM had enjoyed over 40 per cent share in the UPI volume till August 2017. However, PhonePe was reported to have overtaken BHIM’s share in August, to hold the highest share in the UPI transaction volume.
Abbot said the BHIM app was a great prototype for the government to demonstrate the usage of UPI. “But the government realised that merchant acceptance, which was a missing link in UPI, needed hand-holding. This was better left to private players, which have an existing merchant network,” he said.
Most major banks also have their own UPI applications, and e-wallet companies offer UPI as a payment option. Yes Bank’s Chief Digital Officer Ritesh Pai said UPI’s exponential growth could be attributed to a large number of private players that had leveraged UPI as a platform. “These private players have provided user-friendly solutions to consumers, building ecosystems for this unique payment solution and at the same time coupled it with exciting incentive schemes,” he added.
Wallet company Paytm joined the UPI bandwagon in November and was credited for the rise in UPI volumes by 40 per cent in December. PhonePe Chief Executive Sameer Nigam tweeted on Wednesday that Paytm was incentivising its customers to make low-value transactions and inflating the UPI transaction volumes. The tweet was deleted later on.
“Incentives are good for platform adoption and faster adoption,” said Paytm’s Abbot.
Industry experts agreed that discounts and other incentives helped attract customers to the app, but insisted that customer engagement was necessary to retain them.
“For payments applications to succeed in the long run, customer interface and engagement is necessary along with innovation, ecosystem and security,” said DD Mishra, research director, Gartner India. He said many features getting added to the network would gradually boost the UPI-based transactions and give it an edge over the wallets.
“A combination of open and instant payment capability has seen the service rocket in usage beyond simple peer to peer payments”, said a recent payments study by FIS. The report cited examples of Ola, Jet Airways as well as Whatsapp taking advantage of the UPI capability to allow real-time payments.