Sachin Bansal's Navi starts offering cashbacks for UPI payments as it looks to expand financial services

Sachin Bansal's fintech app Navi has started offering cashbacks for UPI transactions as it expand its financial services play

Sachin Bansal’s fintech app Navi has started offering rewards and cashbacks for unified payments interface (UPI) users on its platform.

For every UPI transaction, customers will get coins, where 10 coins equal one rupee, in a fixed rewards system similar to credit cards. The number of coins customers get is based on luck and varies for transactions. There are also rewards for referral if the referred person downloads and uses Navi to buy digital gold or start a mutual fund account.

The Flipkart cofounder recently told Moneycontrol in an exclusive interaction that Navi is about to start marketing for UPI and will approach the market with a new angle to take on the existing players.

“We believe there's new stuff to be done over there. We will announce it when it comes. We believe we can bring a new angle to UPI, which we will try. Give us a few months, we have some things we are doing and we are hoping it will work,” Bansal said.

According to a couple of banking sources, Navi has earmarked Rs 200 crore as its budget for UPI-related promotions this year.

“What they have allocated for UPI is a good budget. But we are talking about one billion transactions in a month to even reach 6-7 percent market share. It is a long journey and takes more than cashbacks to win,” said a senior banker, who looks at digital payments.

In March, Navi did three million transactions worth Rs 94 crore on the UPI platform, according to data from the National Payments Corporation of India (NPCI) website. NPCI runs UPI. To put the numbers in context, the fourth-placed Cred did 132 million transactions worth Rs 45,000 crore during the month. Market leader PhonePe did 6.5 billion transactions worth more than Rs 10 lakh crore.

Breaking the duopoly

Navi’s aggression and intent come at a time when there are concerns that UPI is an entrenched duopoly with Walmart-owned PhonePe and Google Pay cornering more than 85% of the market. Meanwhile, another large player, Paytm, has seen its market share drop from around 13 percent last year to around 9 percent in March because of regulatory action against its associate company, Paytm Payments Bank.

Recently, Navi rebranded its app on the Google Playstore as Navi: UPI, Investments and Loans, indicating the importance it attaches to the payments platform.

NPCI is hopeful that other players will take market share from the top two players to avoid concentration risk or a duopoly. However, newer players such as Cred, Amazon Pay, Slice and WhatsApp Pay have failed to make serious inroads in the market despite aggressive marketing and cashbacks.

In fact, Bansal also acknowledges this: “Yes, the competition is very large. Of course, market share-wise, it looks like a duopoly kind of thing.”

The Flipkart connection

Incidentally, Flipkart, which Bansal left in 2018, also ventured into UPI a month ago. PhonePe, which is the market leader in UPI with around 50 percent market share, was incubated in Flipkart and hived off in 2020. Flipkart always wanted a payment platform of its own but did not launch any separate product because of PhonePe. But with the latter being hived off, it has reentered the space.

UPI is the most popular digital payments system in the country, with around 75 percent of all online transactions executed through the platform. It makes sense for an ecommerce company with billions in sales every year to have its own UPI platform. For instance, Amazon Pay UPI is used for around 50 percent of all transactions made on the ecommerce platform.

Similarly for Navi, using its own UPI product for making loan repayments, mutual fund investments and insurance premium payments makes more sense. The average transaction value for these payments tends to be high and this helps Navi reduce any payment processing commission loss to third-party apps.

Reverse engineering

Not everyone is convinced that Navi will succeed. A senior executive with one of Navi’s financial partners said that it will be tough to break the duopoly, adding, “It will be a cashback war and is good for customers.”

While a lot of payment apps try to sell investment and lending to monetise their large customer base, Navi is trying to go the other way.

Bansal’s fintech’s primary business is digital lending, followed by investments in insurance, digital gold and mutual funds. It is trying to enter payments to get more customer engagement and get users hooked on the app at a much higher frequency rather than only for making loan payments or monthly premium payments or systematic investment plan (SIP) payments. The higher the frequency, the likelihood of the customers buying Navi's core financial services products becomes better.

“Yes, that is one of the thought processes as well. I think payments itself may not be as profitable, but it actually can be a very nice vehicle for user engagement and acquisition and then cross-sell. Yeah, but in itself also it can be profitable,” Bansal said in the recent interview with us.