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With P2P transactions in place, UPI players shift focus to merchant space

NPCI is said to be running a pilot on proximity payments through UPI, which can invalidate the need of PoS machines for card-based payments

Nikhat Hetavkar  |  Mumbai 

UPI, mobile payments, cash transfer
Photo: Shutterstock

While (UPI) players have established their foothold in peer-to-peer transactions, they are now focusing on boosting merchant transactions.

The National PaymentsCorporation of India (NPCI) is reported to be working on two developments in 2.0 and While the previous developments were focused on strengthening the general infrastructure of the network, the new developments seem to be targeted at increasing peer to merchant (P2B) transactions.

Both 2.0 and geared towards merchant payments as it would allow a person to make payments without manually typing the merchant's number or code. will have additional features like Aadhaar-based payments, periodic payments of predetermined amount, scheduled payments, among others. These are features that other players like wallets already offer.

is also said to be running a pilot on through UPI. This can invalidate the need of machines for card-based payments. The cost of (PoS) terminals is one of the biggest deterrents to

Leading player's share in UPI merchant transactions
Players Sep-17 Dec-17 Mar-18
Tez 6.86 35.76 44.92
PhonePe 25.1 17.5 15.39
BHIM 41.2 27.7 21.78
ICICI 10.9 4.61 4.98
Paytm 2.68 3.44
Others 15.93 11.75 9.49
Figures in %age; Source: Insights

The government’s decision to waive (MDR) up to Rs 2,000 played a huge role in boosting digital transactions, especially UPI acceptance at terminals. Since the waiver only applies to and UPI transactions, it may deter merchants from accepting Payment processor saw a growth in UPI transactions from 25.48 per cent in September 2017 to 77.87 per cent in March 2018, with a corresponding fall in share of wallet transactions.

Various UPI players have already started tapping the scope of merchant transactions with the government’s app (BHIM) offering incentives to merchants accepting UPI Payments. On the other hand, market leader Tez in December, had announced its plans to target small merchants through partnerships with various Indian banks.

“We want to help offline merchants go digital. With two-thirds of our users beyond the major cities, we think there’s real potential to digitise the smaller merchants across India who so far have been slightly slower in going digital,” Diana Layfield, Vice President, Head of Finance & Commerce Products, Next Billion Users, told reporters earlier.

UPI has witnessed a huge growth of 188 per cent in the average transaction size as compared to the other mode of payments in the past six months, according to PayU’s report (average transaction size for credit cards grew by 11 per cent, debit cards by 19 per cent and wallets by 41 per cent). While the average transaction value for all UPI transactions stood at Rs 1,410 for March 2018, PayU’s UPI P2B average transaction value was higher at Rs 1,985 in the same month. Merchant UPI transactions, thus, show a huge potential for growth.

While Tez and seem to be leading the P2B merchant space, there will be chances of even greater competition going forward. Pay is currently restricted to peer to peer payments. However, the success of Pay and the integration of 'for Business' signals that it would soon venture into merchants payments as well.

Against the backdrop of UPI’s success is the struggle of the wallet industry with various regulations weighing them down. The (KYC) norms, as well as the data storage norms, are both acting as major roadblocks. UPI, however, is free from these troubles.

Dilip Asbe, managing director and chief executive, said that all UPI players are fully compliant with guidelines since April. He added that data sharing guidelines for UPI players are very clear. “No payment sensitive data is on these apps. The financial data is stored either on the bank’s app or the NPCI library,” he said.


Players Sep-17 Dec-17 Mar-18
Tez 6.86 35.76 44.92
25.1 17.5 15.39
41.2 27.7 21.78
ICICI 10.9 4.61 4.98
Paytm 2.68 3.44
Others 15.93 11.75 9.49
Figures in %age; Source: Insights

First Published: Tue, May 15 2018. 11:50 IST
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