PhonePe App (PC- Twitter/@PhonePe_)
Unified Payments Interface (UPI) transactions, one of the most popular ways to make mobile payments, crossed the Rs 5 lakh crore mark in value in March, touching a new high as digital adoption continues to surge in India.
According to data from NPCI, the payments processing body that operates the UPI payment rail, the month of March saw 2.73 billion UPI transactions, at a value of Rs 5,04,886 crore. During the same period, its other payment system, IMPS (Immediate Payment Service), which allows fund transfer instantly between banks, clocked 363.14 million transactions, at a value of Rs 3,27,234.
According to a recent report by Credit Suisse, digital modes of payment in India have grown 10X over the last five years - and have a 30 percent share, aggregating to $450 Billion, with acceptance of over 30 million merchants compared to 5 million who have traditional POS terminals. Over 200 million users in India are now active users of digital payments.
UPI, which has been clocking over two billion transactions a month since late in 2020, has ambitions of touching two billion transactions a day in the next few years. Currently, UPI payments are predominantly used for P2P (peer to peer) payments but it has been increasing its share on merchant transactions.
In January, for example, merchant transactions on UPI touched 1 billion, nearly double the amount of transactions that cards (debit and credit) clocked during the same period. The next shot in the arm for UPI is likely to come from standing instructions as more customers use their smartphone payment apps to set auto debits for bill payments, investments and subscriptions.
"In the next three-five years, AI and Blockchain will have a huge impact in the way payments are made. In terms of policy, increasing the limit of standing instructions for recurring payments to Rs 5000 is a great move by RBI as 90 percent of payment volumes comes from transactions with value of less than Rs 5,000," NPCI CEO Dilip Asbe said during a Clubhouse discussion hosted by Moneycontrol on March 31.
But, recent guidelines by NPCI on capping market share and competition from NUEs or new umbrella entities could pose challenges going ahead. NPCI recently introduced rules that restrict TPAP (Third Party Application Providers) from going beyond 30 percent market share. The popular TPAPs include PhonePe (with a 42 percent share) and Google Pay (36 percent share), while WhatsApp ay and Amazon are smaller players.
However, UPI apps run by banks (Paytm, Axis) directly are exempted from this rule. While the rules are effective from January 2021, market leaders such as PhonePe and Google Pay, who are well over the 30 percent trigger, have two more years to comply with the guidelines. NPCI said the rules would ensure a wider playing field with multiple players and bring down systemic risk.
PhonePe said it has crossed 1 billion transactions on UPI during March and that it clocked 1.3 billion transactions across UPI, card and wallet.
Paytm said it has clocked 1.4 billion transactions across all payment methods.
NPCI is yet to share the breakup of how various apps fared during March.