When the National Payments Corporation of India (NPCI) launched the unified payment interface (UPI) earlier this month, there were apprehensions that it would kill the business of mobile wallet companies such as Paytm, Oxigen, Mobikwik and others. However, industry experts claim otherwise.
Wallet companies are likely to be beneficiaries of UPI, considering the use cases they have, friendly user interface (UI), user experience (UX) designs, and also because of lower transaction costs once UPI is adopted in large scale.
Dilip Asbe, chief operating officer, National Payments Corporation of India, told FE, “Mobile wallet have many use cases and that’s why they went on to become popular even when we had internet banking and card payments. Just because UPI is in, doesn’t mean wallets would die. The wallets are active because of discounting, convenience, valued-added services and other factors that they offer. The cannibalisation impact (of UPI) may come only after five years.”
As a first step, UPI has been enabled only for banks. But the architecture of the UPI allows even non-banking entities to get involved as and when permitted. Asbe said depending on the adoption rate, NPCI would make a recommendation to the RBI to include wallet companies as payment service providers (under UPI), which are now restricted only to banks. This may further strengthen the competition and help wallet companies.
Digital wallet companies say UPI will make it easier and cost effective for consumers to load cash onto the wallet, and that in turn would benefit the wallet payment ecosystem.
Paytm, with a 120 million wallet user base, claims to have about 90 million monthly transactions worth Rs 700-750 crore. In 2015, the company had spent Rs 588 crore as cash back.
Oxigen with 20 million users claims to clocks transactions worth Rs 450 crore every month. Mobikwik with 30 million wallet users claims to have around 5 lakh transactions worth between Rs 50-60 crore per month.
Bipin Preet Singh, founder and CEO of Mobikwik wallet, said, “UPI is just an infrastructure and not an end-user app.
Today, the success of any financial system depends on both, the front-end and back-end system. Banks have to build best of apps, or upgrade to use it effectively. Whether that will happen or not sure. Because many of their users today are not using their wallet, but using other independent wallets. Therefore, the key is the consumer adoption and also the merchant adoption.”
With UPI infrastructure, wallets companies like Paytm and Oxigen expect cash loading cost to reduce by 60-70% , as it reduces dependence on the payment gateway platform.
“Apart from reduction in cash loading cost, higher UPI adoption would also bring down our customer acquisition cost substantially, as banks would now be driving more people to get online and transact using smartphones,” Nitin Misra, vice-president for products, said.
After the launch of UPI, payment gateways like Citrus and PayU are looking at alternative revenue options and to partner with banks in making more merchants and consumers adopt UPI.
Sandeep Moonka, head of banking at PayU, said, “Our direct business is marginally impacted. But going forward, we would look at ways to engage with banks in expanding the adoption of UPI. We would play the role of a middlemen between banks and merchants, directly or indirectly and add more merchants on to the platform.”
Shiv Kumar Bhasin, chief technology officer at State Bank of India, echoed similar views and said banks will use services of third-party players to add more merchants to accept the UPI as a payment platform.