UPI's acceptance to give a boost to account-based payments in India
The UPI has also made it easier for foreign companies to enter the Indian market.
Chennai: The UPI could be a game changer for the digital payment space in India and may lead to a drastic shift away traditional cards and wallets to account-based payments, finds Global Payments 2018 report by the Boston Consulting Group.
On the infrastructure side, the UPI that the National Payments Corporation of India (NPCI) launched in 2016 could be a game changer for the digital payments space in India and may lead to a drastic shift away from traditional cards and wallets to account-based payments. The UPI has also made it easier for foreign companies to enter the Indian market.
In the two years since UPI launched, UPI volumes have grown to 9 per cent of total retail payments; and they are set to increase further as the UPI was extended in 2018 with new features such as linking overdraft accounts, sending invoices directly to a customer’s inbox, and scheduling payments. In addition, the UPI’s open architecture has encouraged tech giants such as Google and Facebook as well as local ecommerce players like Flipkart to build intuitive payment apps, which could boost adoption of noncash payments for P2P as well as merchant transactions.
BCG found that the electronic payment industry in India itself has been growing exponentially in the past two years. Payment volumes rise significantly in the two years since demonetization. In 2017, total payments revenue equaled $20 billion, compared with $17 billion in 2016. We expect that payments revenue will increase at an 11 per cent CAGR over the next ten years, said BCG.
One factor behind this growth has been the availability of innovative payment methods such as Paytm and Google Pay, which have expanded payments access. Another factor has been the Indian government’s push to advance noncash payments, an effort that included promoting payments infrastructure modernization and waiving the merchant service charges (MSCs) for debit transactions below $30 through a subsidization programmme.
Winners from demonetization include the local card scheme RuPay, whose volumes are up almost 2,000 per cent over the past two years, driven by increased activation and use of debit cards, and the digital wallet Paytm, whose volumes grew by 900 per cent over the same time period. Both succeeded in attracting under-banked customer segments.
Similar to Tencent and Ant Financial in China, Paytm has been focusing on small merchants that frequently go underserved by traditional banks. Paytm’s innovations, including user-friendly QR codes that make it easy for shop owners to enable acceptance, along with Paytm’s huge on-the-ground sales teams have won the company a wide following, BCG said.