Original UPI app lagged rivals, is now playing catch-up
In January this year, barely 29 months after its launch, at Rs 109,932 crore for the month, UPI transactions beat both debit and credit card transactions at merchant outlets (`105,520 crore); the same success, however, eluded the public sector NPCI’s BHIM, the original UPI app. While BHIM accounted for 45.7% of all UPI transactions by value in August 2017, this fell to a mere 4% in August 2019. Perhaps it didn’t matter as much then since, with the prime minister having just announced demonetisation, NPCI’s main aim was to quickly showcase what was possible via BHIM and then to let others build upon it. And build upon it, they did—PayTM was the first off the block, and users could pay all manner of utility bills, for instance; indeed, most petrol pumps were quick to use PayTM and got to BHIM-UPI only recently, and even Mother Dairy outlets allowed PayTM before moving to BHIM-compatible QR codes.
Generous cashbacks and merchant discounts helped make other payment apps more popular—BHIM, which recorded 10 million downloads in the first 10 days, gave just Rs 105 crore of cashbacks till September 2018—since, at the end of the day, if the merchant accepts certain payments, customers automatically download that app.
Payment apps like Google Pay also allowed linking of more than one bank account, PhonePe allowed you to settle credit card bills, you could buy gold on PayTM, and, now, can even make payments to the National Pension Scheme. Indeed, when other UPI apps were offering a daily transaction limit of Rs 1 lakh, BHIM’s limit was just Rs 40,000.
To counter this, NPCI has just launched BHIM 2.0 that has a lot more features than its predecessor; to be fair, BHIM did get more features over time, but version 2.0 takes them to a different level. Like Google Pay, you can link more than one bank account to the app, you can buy IPOs, there are a lot more merchant discount offers which are better displayed, you can issue standing instructions for bills or for rental payments and EMIs, merchant invoices can be seen in detail before making payments, your overdraft account can be linked to the app, etc.
Whether BHIM will be able to wrest back market share is unclear, a lot will depend on if it can keep up the innovation cycle NPCI is known for. Indeed, while it is true private sector firms like PayTM and Google have a lot more financial reasons for having dedicated teams for, say, creating merchant relationships—and offering them generous cashbacks—than a NPCI BHIM does, this never stopped NPCI from developing both UPI, and then the BHIM app. Since there is nothing to stop NPCI from listing in the way IRCTC just did, logically speaking, it too should be beefing up its BHIM teams and budgets. More important, it needs to unleash the next round of innovations, including NFC and tap-and-pay; adding a wallet to BHIM is not an innovation, but in even a secure payment application, this allows users to limit their exposure to hacking risk, since the bank account will never be exposed.