Driven by the launch of a dedicated app and adoption by some of the largest e-commerce players in the country, usage of the Unified Payments Interface (UPI) has jumped 178 times in volume terms in its first year since launch, according to data released by National Payments Corporation of India (NPCI), which operates the channel. The volume of transactions rose to 16.61 million in August 2017 from 92,856 in August 2016 and their value surged to Rs 4,127 crore from Rs 3 crore during the same period.
Much of this growth was fuelled by demonetisation and the launch of the Bharat Interface for Money (BHIM) app in the last two months of 2016. The volume of UPI transactions zoomed seven fold to 1.97 million between November and December and again two fold between December and January to 4.15 million. BHIM now accounts for about half of all UPI transactions by volumes.
The increase in usage was aided by the two largest banks in the country —State Bank of India (SBI) and HDFC Bank — joining the UPI platform around the same time. The two banks were late to join as they initially had misgivings about the absence of a dispute resolution framework for UPI transactions and came on board only when their concerns were taken care of.
Another significant push came as e-commerce major Flipkart enabled UPI on its payments app PhonePe. As of today, the app accounts for 45% of all UPI transactions. Sameer Nigam, chief executive officer at PhonePe, says this is because of the first-mover advantage the wallet had. “Our monthly transactions have grown 800% since December last year,” he said.
In later months, players such as the Indian Railway Catering and Tourism Corporation (IRCTC), Redbus and Paytm adopted UPI. In May, the NPCI had said it was working to bring on board top 300 merchants.
Bankers agree that the entry of e-commerce players into the UPI ecosystem has helped boost usage. Manju Agarwal, deputy managing director for corporate strategy and new business at SBI, said much of the growth in the UPI is coming from e-commerce. “The maximum number of UPI transactions are happening through the e-commerce platforms only. Almost 54% of the traffic is through those platforms,” she said.
About 1.3 crore SBI accounts have been linked to the UPI so far, she observed, of which 1.12 crore came through BHIM, 11.72 lakh through the Unstructured Supplementary Service Data (USSD) channel for feature phones and 6.68 lakh through the bank’s own app, SBI Pay. Since the beginning of FY18, the bank has clocked 18 million UPI transactions worth Rs 5,087 crore on SBI Pay and 17.4 million transactions worth Rs 5,445 crore on BHIM.
Experts believe that the way to push UPI adoption further is to take it to small merchants. However, a better mode of digital acceptance by small merchants may be BharatQR. Vivek Belgavi, partner and fintech leader at PwC India, said it is a more economical prospect for merchants. “Low-cost acceptance, using QR code, would be the key,” he said. “I would put my money behind BharatQR.”