SUMMARY
Despite banks being facilitators, they failed to capture the UPI market as agreeably as fintech apps, T Rabi Sankar said
Between January and November 2022, UPI apps have facilitated transactions worth INR 113.13 Lakh Cr ($1.4 Tn), with banks’ contribution being less than 2%
The comment comes shortly after NPCI and RBI’s discussion over UPI’s market cap deadline failed to regulate the duopoly within the UPI ecosystem
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The deputy governor of the Reserve Bank of India (RBI), T Rabi Sankar, reprimanded banks during the 18th Banking Technology Conference over their low market share in UPI.
“How is it that a system of transactions between two bank accounts has evolved in a way, where most of the business is owned by non-banks? Clearly, banks have missed a step here,” he said, addressing the event organised by the Indian Banks’ Association.
He added that banks already have the customers’ account and phone numbers, and yet they failed to capture the UPI market as agreeably as fintech apps. Sankar further said that while fintech companies are not a replacement for traditional banks, the banking industry failed to exploit the technology revolution within the fintech ecosystem.
The comment comes shortly after NPCI and RBI’s discussion over UPI’s market cap deadline failed to regulate the duopoly within the UPI ecosystem. The UPI governing body – the National Payments Council of India (NPCI) – had to thrice push the deadline that capped individual apps’ UPI volumes to 30%. The new deadline to comply with the market cap guidelines is December 31, 2024.
Notably, UPI has grown to become the preferred digital payment channel over the years, with apps such as PhonePe, Google Pay and Paytm becoming household names. The trio have a share of over 95% of the UPI market and banks do not even make it to the top 10 preferred UPI apps.
For reference, between January and November 2022, UPI apps have facilitated transactions worth INR 113.13 Lakh Cr ($1.4 Tn).
Sankar noted that the banking industry was mutating fast and banks have already missed the bus on several major technological changes and need to adapt fast. He further emphasised that banks should now adopt CBDCs (central bank digital currencies) that offer multiple benefits such as increased privacy and smoother international payments and settlements.
Currently, eight banks – SBI, ICICI, Yes Bank, IDFC First, Bank of Baroda, Union Bank of India, HDFC and Kotak Mahindra – have been identified for a phase-wise CBDC pilot.
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