UPI gives tough competition to mobile wallets; trusted more for high value transactions

September 3, 2019 17:22 IST

NEFT, NEFT 24x7, National Electronic Fund Transfer, RBI, monetary policy, Real Time Gross Settlement, RTGS, digital payments

In consonance with its Payment Settlement Vision 2019 to 2021, the central bank decided on Wednesday to make National Electronic Fund Transfer (NEFT) available 24x7 from December.

Unified Payments Interface (UPI) as a mode of mobile payments is giving tough competition to mobile wallets in merchant transactions and recharges, while also dominating higher valued person-to-person transactions averaging $32. “UPI has a strong market share in higher value use cases,” according to business consulting firm RedSeer. On the other hand, even though wallets continue to have a higher share in the recharge and SME merchants category, UPI payment system is giving it neck to neck competition there as well. For bill payments and cashback too, UPI is the preferred transaction medium, according to the report by RedSeer.

While demonetisation gave a nudge for converting India to a cashless economy, the same also resulted in the inception of the mobile payment systems like UPI and wallets. The 2016-launched UPI has been getting more users on board for some time now and has found wider adoption in merchants as well, a segment which was initially dominated by wallets.

Two months after UPI was launched, the ratio of wallet-to-UPI transactions was at a staggering 96:4. The scales started tipping massively in 2017, and now, UPI has above 80% share for categories including person-2-person payments, bill payments and cash backs and has about 50% share in merchants (offline) and recharge categories. Only in merchants (online) category, wallets users are considerably higher than UPI users. From over Rs 69 billion in FY17, UPI payments have jumped massively to Rs 1,524 in May 2019, according to NPCI statistics.

Meanwhile, BharatPe, UPI payments and digital lending platform, last week raised $50 million (about Rs 350 crore) as a part of its latest round of funding. The same was led by Ribbit Capital and London-based hedge fund Steadview Capital. Sequoia Capital, Beenext Capital, and Insight Partners, which are already investors in the platform, also participated in the funding round. The funding from this round is expected to be deployed in expanding current merchant base of 1.45 million to over five million within the next year.