The UPI Juggernaut Continues to Grow

In a development substantiating its position as India’s flag bearer of FinTech innovation, Unified Payment Interface (UPI) crossed the 400 million mark in September. Ever since its launch, UPI has been leading the waves of disruption in the Indian payment landscape and looks to be doing really well in the most crucial and difficult phase for any new solution/business — consumer adoption — as suggested by its transaction statistics.

The transaction values, as well as the number of transactions per month, have been growing with a steady compounded quarter-on-quarter (QoQ) growth rate of 73.1% and 100.7% respectively. In terms of MoM growth, the transaction value has been growing at a CMGR of 34.33% since November 2016, whereas the CMGR for the number of transactions in the same period is 38.78%.

To put the growth numbers into perspective, the total UPI transaction value in Q3 2018 was almost 11.7 times the value in Q3 2017.

In a previous article, I had written about how Indian mobile payments are evolving from PPIs to UPI. The continuing trend is substantiated by the fact that India’s largest mobile wallet provider, Paytm, has not only incorporated UPI services in its offering but has also now topped the UPI charts with a 33% share of UPI transactions in September. Other major players in the UPI space are third-party, non-traditional providers such as Google’s Pay and Flipkart’s PhonePe. The government’s in-house UPI app BHIM’s market share continues to remain overshadowed by these tech giants. However, the government has now mandated all partner banks to rebrand their UPI offerings by prefixing ‘BHIM’ in the name (e.g. BHIM Axis Pay).

Coming back to the statistics and trends, while the transactions have been growing at an unprecedented rate over the past two years, UPI saw a first major fall since its launch in the month of July when the number of transactions decreased by 4.3% since June — primarily due to NPCI’s initiative of curbing the round-tripping in single account transactions, as well as due to government’s withdrawal of incentives for UPI transactions in the month of July.

The success of UPI has substantiated the impact of bank-led consortium in the ongoing fight for the share of wallet between banks and third-party FinTech/TechFin disruptors. With 122 partner banks — out of which 39 banks have incorporated UPI in their mobile banking app — UPI is now associated with a large chunk of the Indian banking community. Now with UPI 2.0 — launched in August — having some interesting features such as pre-authorization of transactions, invoices in the inbox, linking of overdraft, etc., the UPI transactions are expected to keep growing further, thus raising the bar for Indian mobile payments.