The latest data from National Payments Corporation Of India (NPCI) for the month of April, shows that Walmart-backed PhonePe increased its share of customer transactions (by value) by over 2% month on month. The UPI app now controls 47.43% of market share in the country. PhonePe processed customer transactions worth INR 2.34 Lakh Cr during the month.
In the same period both Google Pay and Paytm lost 1% each to report 38.53% and 7.47% market share. Google Pay processed customer transactions worth INR 1.90 Lakh Cr while Paytm processed transactions worth INR 0.3 Lakh Cr.
The remaining platforms to report the highest transaction volumes compared to the rest of the ecosystem include BHIM (1.40%), CRED (1.1%), Yes Bank (1.00%) and Amazon Pay (0.87%).
In terms of transaction volumes also PhonePe led the charge with 46.4% of the reported 2.5 Bn customer transactions in April i.e over 1.1 Bn transactions.
Although UPI transactions recorded a jump in March, the staggered lockdowns introduced across states starting 14th April impacted consumer behaviour in the subsequent months.
Launched in 2016, UPI transactions volume saw the first massive dip in April 2020, after falling below the 1 Bn mark to 990 Mn, while the value of transactions dropped to INR 1.51 Lakh Cr. This fall was in the wake of the Covid-induced lockdown and restrictions that shut down all major services including traveling, dining out, ecommerce and offline transactions.
Interestingly, Kunal Shah led CRED, which reported only 0.4% market share in April 2020, has grown to report 1.10 % market share 12 months down the line. On the other hand, Google Pay, Paytm and BHIM have only lost market share during these 12 months.
In November last year, NPCI had mandated that starting January 2021, each of the 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 Unified Payments Interface or 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. By transaction volume, Google Pay and Phone together comprise 82% of the market share at present down from 85% in November 2020.
In its standard operating procedure (SOP), NPCI has 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 to comply with the new rules in a phased manner.
Changes In UPI Transaction Behaviour
While appwise numbers have been released only till the month of April, overall UPI numbers for May have been released. During May, NPCI reported 2.53 Bn UPI transactions, down 4% month on month compared to 2.64 Bn transactions in April. Value of transactions also registered a marginal decline to INR 4.90 Lakh Cr (down 0.6% month on month) compared to INR 4.93 Lakh Cr in April. In March 2021, UPI had reported its best ever figures with 2.73 Bn transactions amounting to INR 5.04 Lakh Cr.
However, the slowdown this time has been more gradual compared to the 20% dip in transactions reported in April 2020. This has been largely due to the staggered nature of lockdowns across the country this time.
According to fintech analysts, the impact across kirana and small essential local retailers is likely to be lesser during the second wave simply because their movement has not been impacted this time if they can manage deliveries. With digital transactions gaining steam over the past year, essential product and service retailers are on a safer footing this time. This segment is also a larger beneficiary of UPI compared to SMEs.