As online payments are gaining the utmost market in digital payments today, UPI has been the biggest player for India to contribute for its growth. UPI abbreviating Unified Payments Interface has undoubtedly been the biggest fintech revolution India has ever witnessed. UPI has developed an easy to use real-time payment system which is created by our own National Payments Corporation of India (NPCI). NPCI is regulated by the Reserve Bank of India and works intensively to facilitate instant bank to bank transactions through mobile platforms. UPI was invented right after the move of Modi Government’s Demonetization, where the clear intention and motive of the financial division was to promote digital payments in India as much as possible. Since then UPI has been seeing endless growth with numbers of transactions doubling and tripling every year. Until August 2019, there were around 1029.44 crore UPI Transactions completed.
Before UPI, the online digital payments market was majorly influenced by US majors Mastercard and Visa, who were exploiting a huge share and were earning from every single transaction done through their cards and other payment platforms. MasterCard and Visa had the practice of deducting a very small percentage as their service fee from every transaction. By this they were earning a whopping 40,000 crore everyday just through their digital payments platforms.
Our Government sought this to be a problem and led their own UPI application to promote completely free instant bank to bank transfer and at the same time let the Indian merchants earn what was going to the American giants. UPI has not only changed how
we made our payments but also made it more easy, convenient, portable and feasible.
With UPI tripling its number of transactions every year, Google Pay and PhonePe have been the main drivers of this surge. Google Pay and PhonePe have acquired the highest of UPI Transactions share and have been adding its users rapidly. The non-wallet payment market is dominated by these two and seems to have a pretty hot battle for who acquires the most of India’s market share. This market was also dominated by Indian brand Paytm but seems to lack in pace lately. Being the reason why PhonePe has been surging to new levels and are trying to level up with the already established Google Pay.
When UPI started picking its feet, Google Pay was its highest yielding share with reach covering over 60% of the whole market share. Google Pay actually came very aggressively offering cashbacks and other offers on payment through its UPI app. These cashbacks really drove the whole consumer interests and the transactions surged rapidly. Soon, other market players like Paytm, PhonePe, Jiopay and other UPI platforms came to scrape the high-end opportunities.
Still it is seen that among all, PhonePe has really achieved an unbelievable growth in its user base and transactions which makes it to be a huge competition for Google Pay today. PhonePe is making the best use of increasing its merchant base every year. They reached close to 11 million merchants before the covid situation and now they are measuring it close to 15-16 million merchants. They are aiming to reach the 20 million mark by 2020 year end. PhonePe was doing good and this covid situation came as a cherry on top for them as the transactions hiked rapidly due to higher promotion of digital payments and contact less payments.
Sameer Nigam (Founder and CEO of PhonePe) quotes that they have extended their reach to over 500,000 cities now. PhonePe also started with the same strategy of offering small cashbacks on each transaction but from last few months they have moved on to a different yet effective strategy. They have focused on performing better in transaction security and success rate which has been a huge problem with GooglePay these days. PhonePe have assessed that people value transaction security and success rate more than those penny cashbacks. Even their repeat rate increases with faster and better transactions.
PhonePe have currently established a user base of 23 crore and above and the monthly active users stand anywhere at 9 crore per month. PhonePe has also partnered with various Governmental agencies and telecom operators to achieve their motive of fast and secure transactions. The Company has also diverted its interest in creating various investment portfolios launching six insurance and mutual fund products in just the span of 4 months. For which they have achieved a good response with fund investments coming over from 15000 PIN codes covering almost all the levels of cities and towns.
With their extending reach and leaps, PhonePe has given the juice to their objective of achieving huge user base in just a short period time. It has peddled and attracted people with its high success rates and secure transactions. PhonePe is backed by Walmart and aims to acquire the highest of share in the Indian UPI market and they possibly seem to be a huge competitor for Google Pay.
Though Google Pay is still the king of India’s UPI market and is also trying to extend its user base. Google Pay also seems to be optimizing its glitches and preparing a better solution to improve its success rate.
Both the UPI Platforms Google Pay and PhonePe are bringing in a very tough competition among them of who would acquires the larger user base. Even the other platforms are trying to follow their footsteps. Let’s see if it could turn out to be a real heat of a battle!
Though there are certain problems coming their way as the NPCI is looking for opportunities to put a cap on all the UPI transactions with the intentions of de-risking the payments market from being dominated and skewed from two or three large market players. Let’s see how will that play out for these giants but for now it certainly seems that Google Pay and PhonePe are enjoying a good duopoly market competing intensively against each other for higher market share.