Paytm is betting big on UPI and though it’s still a distant third, analysts believe it could have an edge over PhonePe and Google Pay
- Apart from a slight dip as the nationwide lockdown started, UPI’s numbers had been growing constantly until January 2021.
- While there’s no beating
PhonePe’s phenomenal growth in the space, what’s noticeable is Paytm’s rise in the segment.
- Paytm’s growth in UPI comes as the payments method sees widespread adoption from merchants.
AdvertisementWith the COVID-19 pandemic, the move to digital has become even more important and with that, the growth of India’s financial technology players.
Over the past one year, UPI or United Payments Interface, India’s burgeoning digital payments bet, has seen exponential growth and taking home the biggest shares in the market are players like PhonePe, Paytm and
Apart from a slight dip as the nationwide lockdown started, UPI’s numbers had been growing constantly until January 2021.
But what’s interesting is how the top three players are vying for a bigger share of the market.
While there’s no beating PhonePe’s phenomenal growth in the space, what’s noticeable is Paytm’s rise in the segment, even while Google Pay, which was once the leader in UPI has been seeing its numbers decreasing for the past four months.
Merchants – the next big driver
Paytm’s growth in UPI comes as the payments method sees widespread adoption from merchants. And that’s also where the current market leader PhonePe has been winning the game.
“Paytm has traditionally been much stronger in the P2M (peer to merchants) segment than the P2P (peer to peer) segment, as the usage of UPI starts to become more and more for commerce, that is where Paytm has gained. Google Pay has been a more consumer app, while PhonePe has been both. Ultimately, how much P2P payment will happen, what drives payments is commerce,” Shishir Mankad, head of financial services, Praxis Global Alliance told Business Insider.
Narendra Yadav, Vice President, Paytm told Business Insider that P2M transactions are 70% of Paytm’s overall transactions, whereas for UPI overall that share is around 40%. But Yadav also said that the company’s dominance in merchants is not yet completely visible in UPI. “Our focus has been on merchants – online or offline. Whenever merchant transactions are increasing, Paytm will benefit. And after COVID-19, merchants have been moving to digital transactions where Paytm is also seeing huge growth,” he said.
AdvertisementBusiness Insider has sent queries to Google Pay and PhonePe. We will update the copy if and when there is a response.
Success rate of UPI transactions
Paytm said that as per a NPCI report it registers the lowest technical decline rate of 0.01% as compared to all UPI remitter banks and 0.04% as compared to all UPI beneficiary banks. “Paytm’s success rate in UPI is much better, and there’s no one who comes closer to that,” said Yadav.
However, Gupta believes that when compared to the likes of Google Pay the reasons are beyond the company. “The reason lies with banks and not Google Pay. Paytm has an advantage because it's a payments bank, so it controls the entire stack which basically means a lower failure rate. Having said that Google Pay works with three or four major banks and failure rates aren’t just dependent on banks but also NPCI’s UPI stack,” Arnav Gupta, analyst at Forrester told Business Insider.
Adopting new users in UPI
AdvertisementThe acceleration in UPI also means new users and new payers being added to the ecosystem. And players have also been spending on marketing to get these users. Both Paytm and PhonePe have gone on to sponsor Indian Premier League, the glam cricketing tournament.
“These numbers are dependent on the kind of marketing and ad spending these companies keep doing. Transactional volumes are always increasing, and with that the average transaction ticket size is also increasing. Digital adoption by the consumers is on the higher side especially due to the COVID-19 pandemic, a lot of new users and new payers were added to the ecosystem,” said Gupta.
The Vijay Shekhar Sharma-led company had recently said that it processes 1.2 billion transactions in a month.
In January 2021, Walmart-owned PhonePe had said it processes over a billion monthly transactions. “PhonePe now has more than 275 million lifetime registered users, which essentially means that one in every five Indians now has PhonePe. Our monthly transaction count is up nearly 100% year-over-year. Our monthly active users (MAU) has crossed 110 million monthly users with a very healthy 97% monthly customer repeat rate. Even in terms of monetary value, our annualised total payment volume (TPV) run rate has crossed the $300 billion mark,” PhonePe’s chief executive Sameer Nigam had said during Walmart’s fourth quarter earnings.
Meanwhile, Paytm knows it has a long way to go in the UPI ecosystem. The $16 billion startup has also announced, on Monday, that its UPI handles have been approved by India stock regulator Securities and Exchange Board of India for users to pay for IPOs. And this is just one of the tricks that Paytm is using to leverage its other businesses.
Advertisement“Paytm has many businesses, and if they put their might behind this it will surely yield results. While in UPI, Paytm is a distant third, if you look at Paytm wallet to wallet transactions that’s very large but doesn’t get recorded as it doesn’t enter any settlement,” said Mankad.
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