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UPI – The new Financial Breakthrough

Indian economy is undergoing yet another transition wherein UPI (Unified Payments Interface) is soon going to become the most preferred online mode for making payments.

UPI has gained significance and killed the e-wallet system, changed the banking ecosystem & is transforming the mind set of Indians on technological advancement. The breakthrough was primarily achieved during the Demonetization, which made ‘Paytm’ its biggest beneficiary & brought the mode of payment on forefront.

NPCI (National Payments Corporation of India), reported 2146 million transactions in India worth Rs 3.51 trillion in the quarter ending 31st March, 2019. Detail of the players, transactions volume as well as transactions value is given below:

Latest report on UPI transactions - number of players on UPI till Quarter ending March 2019

UPI’s pilot launch was made on 11th April, 2016 with 21 banks by the then RBI governor, Dr Raghuram Rajan. Today UPI has become the safest mode of online payments as well as transfers & has 142 players currently. The interface uses 2 Factor Authentication i.e. MPIN which is quite similar to OTP but better than OTP.

Latest data on UPI - Volume of transactions in million for the quarters Dec 2016 to March 2019

UPI transactions volume March 2019

From its introduction in the year 2016, UPI’s transactions volume increased many folds from 2.4 million in the quarter ending Dec 16 to 2146  million transactions in the quarter ending March 19. {Note: The above figures have been rounded off}

UPI value of transactions March 2019

With the improvement in the volume of transactions, there has also been an improvement in the value of the transactions made using UPI. The Value of transactions has increased from Rs 8.55 Billion to Rs 3.50 trillion. Thus, depicting the confidence of the user’s in UPI & the ease in making payments through UPI. {Note: The above figures have been rounded off}

Key Features of UPI

  1. UPI service can be used 24 hours as well as on all Public holidays.
  2. It allows single mobile application for accessing various bank accounts.
  3. It allows the user to make all types of payments – merchant payments, utility bill payment, in-app payments, OTC payments & barcode based payments, through one single mode.
  4. Further, SEBI recently announced that UPI to soon be available for making IPO payments for the retail investor, in order to boost the participation of the investors in the capital market.
  5. RBI has announced to allow the transfer of funds from one UPI to another. Eg A user will now be able to transfer money from their PayTM account to their Google Pay account.
  6. The apps have a very user friendly interface & allow ease of access as well as use.
  7. UPI is available for & on all the platforms: Windows, IOS & Android.

Players

In India currently there are 142 players that include both Private and Public Banks active on UPI as on 31st March, 2019. Among the players in the UPI segment, the private players are leading the market while the Indian Government promoted BHIM (Bharat Interface for Money) is facing a slump with a fall in the level of volume & value of transactions.

On the other hand Paytm leads the market and is closely followed by Google Pay & PhonePe.  In the month of January, Paytm reported total transactions volume of 221 million while PhonePe & Google Pay both reported a volume of 220 million each. Further, 13 million transactions were made using BHIM, implying that the other players have failed to make any transactions. Following is the Pie chart illustrating the market share of various platforms as per the number of transactions made in the month of January 2019.

Market share of Paytm, Google pay, Phone Pe, BHIM and Other players as on January 2019

Road Ahead

The above pie chart depicts that there are only 3 main contenders in the UPI segment accounting for the major market share, while the total number of active players stands around 142.

This means that the sector shall undergo consolidation such that only the biggest players will survive & continue to grow.

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Disclaimer: The report only represents personal opinions and views of the author. No part of the report should be considered as recommendation for buying/selling any stock. The report & references mentioned are only for information of the readers about the industry stated.

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