A top digital payments industry official on September 6 said that the industry, dominated by the unified payments interface (UPI), is facing the tough competition.
Sonika Chandra, vice president, consumer platform and payments, PhonePe, said that there is a need for more investments in the digital payments business.
“There is tough competition in the industry (UPI). More investments alongside some innovation in the operations can bring more players in the sector,” Chandra said at the Global Fintech Festival in Mumbai.
When asked about concentration of some players in the sector, Chandra agreed and said innovation can bring more players in the sector.
Earlier, in December 2022, T Rabi Sankar, deputy governor of the Reserve Bank of India (RBI), said that banks missed out on business in the UPI space.
“How is it that a system of transactions between two bank accounts has evolved in a way where most of the business is owned by non-banks? Clearly, banks missed a step here," Sankar said at the Eighth Banking Technology Conference organised by the Indian Banks' Association.
The deputy governor also said that this could be because banks viewed UPI as small-value transactions which they did not wish to invest resources and effort in.
Dominant players
The top four UPI players which, apart from a payment company, include three fintech payment apps have captured 95 percent of UPI transactions, according to a report published on September 5 by Bernstein, a global wealth management firm.
Paytm, in the April-June FY24 quarter, reported a net loss of Rs 357 crore, sharply narrowed from a loss of Rs 6,444 crore in the corresponding period a year earlier. According to PhonePe's filing with the ministry of corporate affairs, the company's revenue in the first nine months of 2022 jumped to Rs 1,912 crore. In FY22 (2021-22 or 12 months to March 2022), PhonePe reported a revenue of Rs 1,646 crore. The latest numbers available for GPay showed that the company reported a net revenue of Rs 14.8 crore in FY21.The company reported a net profit of Rs 1.4 crore during the same fiscal, jumping 210 percent from the previous financial year.
At the same time, banks have a limited share of UPI transactions, according to the report titled "India's Promise: The Rise of Digital Credit — the Most Profitable Part of the Financial Inclusion Journey".
The report further added that regulatory restrictions and the lack of a physical distribution network have limited the impact of this disruption on the bigger prize, deposits, which remain the stronghold of banks.
"UPI poses a growth risk for traditional forms of cashless payments such as cards. Debit card volumes have been declining steadily in the last five years, despite the low penetration vs other markets," said the report.
Jump in UPI numbers
The mobile payments juggernaut UPI crossed 10 billion transactions in a month for the first time on August 31. The volume stood at 10.58 billion by the end of the month, according to data from the National Payments Corporation of India (NPCI), which runs the real-time payments platform.
The value of transactions for August stood at Rs 15.76 lakh crore, surpassing the previous record set in July of Rs 15.34 lakh crore.
The transaction volume growth stood at 61 percent on a year-on-year basis in August, while transaction value grew 47 percent during the month
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