Leading UPI Apps Grew Slower In August Compared To Massive June-July Spike

Walmart’s PhonePe has reported 46.7% share of customer transaction volumes on the unified payment interface (UPI), according to data shared by the National Payments Corporation of India (NPCI) in August. PhonePe volumes are marginally lower than reported in July which was 47% customer transaction volume. 

PhonePe processed 1.62 Bn UPI transactions worth INR 3.01 Lakh Cr in August, compared to 1.5 Bn transactions worth INR 2.88 Lakh Cr in July.

Google Pay reported 35.9% share of customer UPI transaction volumes while IPO-bound Paytm Payments Bank reported 12.2% share, both remaining flat in comparison to July numbers. 

Google Pay processed 1.2 Bn transactions worth INR 2.4 Lakh Cr in August, higher than 1.1 Bn transactions worth INR 2.3 Lakh Cr in July. Paytm Payments Bank reported 0.42 Bn transactions worth INR 0.5 Lakh Cr in August, compared to 0.38 Bn transactions worth INR 0.46 Lakh Cr in July. 

Is UPI Adoption Slowing Down With The Economy Opening Up?

After two months of aggressive growth, the UPI transaction growth slowed down marginally in August. It reported 3.5 Bn transactions worth INR 6.39 Lakh Cr in August 2021, growing 9.5% by volume and 5.4% by value over the previous month. 

Though a spike has been reported, in comparison to the transaction value growth seen in the last two months, growth in adoption of UPI appears to have taken a dip. This could be attributed to parts of the cash-based economy returning to business. 

In June and July, transaction volume grew by 10% and 15%, respectively, on a month-on-month basis while transaction value grew by 11% and 10%, respectively. The country’s gradual recovery from Covid-19 second wave in June had a positive impact on the UPI ecosystem which reported a month on month 10% spike in transaction volumes and 11.5% spike in value of transactions. 

Started in 2016, UPI has had a tumultuous acceptance in the Indian market. It witnessed its biggest dip in April last year, wherein transaction volume dipped to 990 Mn and transaction value dropped to INR 1.51 L Cr. This drop was due to covid lockdowns and restriction on travel, dining out, ecommerce and offline transactions. 

After ease of restrictions, UPI transactions surpassed the 2 Bn mark and went on the path of recovery in October 2020 — quite similar to the trend in June and July this year.

Slowdown Maybe Good For Google Pay And PhonePe

In August, among the top performing six UPI apps, customer transaction value grew marginally at an average of 0.2% higher than July numbers indicating a higher level of adoption across the larger ecosystem which drove adoption. Apart from Paytm, PhonePe and Google Pay, Amazon Pay reported 1.75%, BHIM reported 0.76% and Yes Bank reported 0.7% of customer transaction volume share, respectively. However, it would be beneficial for PhonePe and Google Pay to lose some of the customer dependence given the transaction caps implemented by the NPCI.

In November last year, NPCI had mandated that starting January 2021, each of the third-party application providers (TPAPs) such as Google Pay, PhonePe and Paytm, would not be allowed to process more than 30% of the total volume of transactions on the UPI network. NPCI had said that the market share cap would ensure that India’s digital payments landscape does not become an oligopoly, while also preventing risks of overload of the UPI infrastructure. 

In its guidelines, NPCI stated that the total volume of UPI transactions, of which no more than 30% can be processed by a single app, will be calculated on a rolling three-month basis. Existing TPAPs that exceeded the 30% cap as of December 31, 2020 have been given a period of two years (December 2023)to comply with the new rules in a phased manner.