The digital payments industry, which is largely dominated by the unified payment interface (UPI), needs more investment from different players to tackle competitiveness, said a senior Reserve Bank of India (RBI) official.
“There is a need for investment and innovation to tackle the competitiveness in the digital payment industry,” said K Vijayakumar, General Manager, Department of Payment and Settlement Systems, RBI.
Speaking at the Global Fintech Festival in Mumbai on September 6, Vijayakumar said that investments can help make the payments industry competitive and help in the inclusiveness of other players.
Vijayakumar also highlighted that the regulator has been keeping a close eye on the developments in the UPI segment as it is among the fastest growing digital payment services.
National Payments Corporation of India (NPCI) MD and CEO Dilip Asbe, speaking at the Global Fintech Festival, said India might soon touch 100 billion UPI transactions a month now that it has already crossed 10 billion in August 2023.
“UPI123 Pay, an NPCI instant payment system for feature phones, will boost UPI's 100 billion monthly target,” said Vijayakumar.
Also read: Digital payment industry facing concentration risk, says PhonePe VP
Fintech industry
The total addressable market for fintech in India is expected to reach $2.1 Tn by 2030, with a compound annual growth rate (CAGR) of 18 percent from 2022, according to a report titled State of Indian Fintech.
RBI Governor Shaktikanta Das, in his address at the Global Fintech Festival, said that Indian fintech is expected to generate $200 billion in revenue by 2030.
"The sector is expected to contribute 13 percent to global fintech revenues," Das said.
UPI dominance
The UPI segment in India has three major players: Paytm, PhonePe and Google Pay. These three together, have captured 95 percent of UPI transactions, said a report published on September 5 by Bernstein, a global wealth management firm.
Here, banks have had a lacklustre approach and further regulatory restrictions and lack of a physical distribution network have limited the impact of this disruption on the bigger prize deposits which remain the stronghold of the banks, the Bernstein report said.
"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.
“UPI is expected to account for 90 percent share of the total retail digital transactions volume in the next five years, growing from 75.6 percent in the fiscal year (FY) 2022-2023,” the RBI’s June 2023 bulletin said.
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