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The country’s Unified Payments Interface (UPI), which enables mobile bank-to-bank transactions, posted 822 million transactions in July — up 249% annually — per sources that spoke to the Economic Times.
But the system’s competitive dynamic is changing: Long-time market leader Paytm posted 133 million transactions in July, giving it a 16% share, while Google Pay and PhonePe posted around 300 million (36% share) each. For context, in May, Paytm posted 200 million transactions, indicating that customers could be using the app for UPI payments less often.
Here’s what it means: The features and access offered by Google Pay and PhonePe could be giving them an advantage when it comes to attracting transactions users.
- Paytm’s robust feature set keeps it atop the space even as it cedes UPI market share. Paytm, which counts 350 million active users, also offers wallet integrations, bank accounts, and cards, meaning it doesn’t live and die by UPI. The firm’s 140 million UPI transactions represent just 23% of its total volume in the month, per the Economic Times. As it doubles down on consumer offerings, through a new credit card and lending functions, and merchant partnerships, such as wider QR code acceptance, it should continue to extend its lead.
- But Google Pay’s and PhonePe’s respective pushes to build out their offerings seem to be working. Google Pay, which is the most-downloaded fintech app in India and counts 25 million monthly users, has been bolstering its security and is rumored to be developing a new merchant-facing rewards offering. And PhonePe, owned by retail giant Flipkart, is currently seeking out $1 billion in funding as its owner looks to spin it out. If the firms can continue their trajectory, and further new features and partnerships, we expect them to become more formidable competitors to Paytm.
The bigger picture: Digital payments have surged in India since its 2016 demonetization, and July’s UPI data indicates that the market is still wide open for the taking.
In India, cash still comprises the lion’s share of transactions — which means that habits have yet to be formed. Seventy percent of transactions are made using physical currency, and just 14% of Indian consumers make mobile payments on a weekly basis, indicating the market is far from saturation. However, digital payments are surging, with the market projected to be worth $1 trillion by 2023, which is bringing new players into the market.
July’s UPI numbers, and the potential shift in competitive dynamics that they foreshadow, indicates that there’s still considerable room for a true market leader to emerge in the next few years, particularly as new policies mitigating fees could steer merchants away from cards.
And as WhatsApp prepares to enter the market with a bang — the app counts up to 400 million users and its payments offering counted 1 million customers in a limited pilot — we could see further changes in the year ahead, making unique features and robust customer acquisition efforts more important than ever.
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