Leading banks, such as State Bank of India and Axis Bank are looking to increase their Unified Payment Interface (UPI) market share by making innovations in their mobile application that can be used by both customers and non-customers. Armed with a third-party application provider licence, they are seeking to get aggressively into the space currently dominated by PhonePe, Google Pay and Paytm.
“We want our app to serve as an alternative to the existing UPI apps. Since we want to serve new customers of the bank or non-customers, they should be able to do things that they do on third party applications,” says Nitin Chugh, Deputy Managing Director and Head (Digital Banking and Transformation), State Bank of India (SBI).
SBI is set to launch a revamped YONO 2.0 platform, which will be accessible to both customers and non-customers. The application will serve as a market place wherein, users will be able avail banking services and purchase products. Currently, banks need a third-party application provider (TPAP) licence to service non-customers.
“Even if you do not have an account with SBI, you can come on the application, register yourself and start making UPI payments, much like what you would do on PhonePe or Google Pay,” says Chugh.
This eagerness among banks to make inroads into the unified payments interface(UPI) payments segment stems from the fact that UPI transactions have been rising steadily in recent years. UPI transaction volumes surpassed 12 billion, and transaction value crossed Rs 18 trillion mark in December, data from the National Payments Corporation of India(NPCI) showed.
Apart from SBI, YES Bank, Axis Bank, and ICICI Bank are also targeting non-customers with their mobile applications. For instance, ICICI Bank’s InstaBIZ application intends to provide mobile banking services to customers of all banks. Here, banks are harnessing the account aggregator network to offer tailor-made products and services to a wide range of users.
“We have launched a brand new Yes Pay Next application recently. Users can make any sort of payment using the app. It is very user-friendly and convenient. This app can be connected with any bank account, not just Yes Bank,” says YES Bank Managing Director Prashant Kumar.
In its latest report on trend and progress of banking in India, the Reserve Bank of India(RBI) highlighted that digital modes of payments are increasingly replacing conventional paper-based instruments like cheques and demand drafts. Amongst the various options available, UPI has the majority share in volume of transactions. Real-time gross settlement, which facilitates high-value transactions on real time basis, accounted for the largest share in terms of value.
Currently, PhonePe is the largest player in the UPI transaction segment, with a 47% volume market share. Together, PhonePe, Google Pay and Paytm held an around 95% volume market share in February.
But, the Paytm app has seen a steady fall in its volume market share in the last nine months, which has presented an opportunity for other companies. Further, NPCI has mandated payment apps to hold no more than 30% market share in terms of payment volumes, which requires a more even distribution of market share.
“It is now becoming clear that if you can be the payment application for a customer, it can be used to cross-sell other products like loans, and insurance,” Ranadurjay Talukdar, Partner and Payments Sector Leader, EY India said.
“The value of UPI data is the primary driver behind this trend of banks also trying to create a very intuitive app experience that can potentially take on TPAPs in the market.” he added.
Can a bank break into the top three?
In recent times, many entities like CRED, Amazon Pay, and Mobikwik have attempted to break into the top three spots as far as UPI transactions are concerned. But they have so far, not been successful. Among banks, the ICICI Bank application ranks the highest, and it currently occupies the fifth spot. Nevertheless, the prolonged dominance of the top three mobile applications indicates that there is a lot of “customer stickiness” in the UPI payment space, say experts.
“There is no reason as to why suddenly if a bank is making an app, there should be traction. Banks will have to invest heavily in marketing like the way PhonePe, Google Pay, and Paytm did in the early days,” says Talukdar.
Nevertheless, banks can offer their own products and services on their payment applications, which can work in their favour. On the other hand, third party apps like PhonePe, Google Pay, and Paytm can only distribute financial products of a partner bank or financial services company.
In recent years, several banks have spent heavily on technology infrastructure in a bid to manage transaction volumes. Simultaneously, these entities are also utiliisng the digital route to garner low-cost current-account savings account(CASA) deposits. Regardless of size, banks that have a clear technology roadmap will hold the edge, say experts.
“If we offer distinctive experiences to customers, they will use our app. If we offer sub-standard experiences, they will stop. This is very clear,” says Sameer Shetty, President and Head – Digital Business and Transformation. Axis Bank.
“Nobody has a birthright over customers. We have to be on the job and we have to deliver. If we deliver, there is no reason for us to not have the outcomes that we desire,” he added.