Unified Payments Interface (UPI) that allows for instant bank-to-bank fund transfers is gradually taking the lead over the vibrant mobile wallet market in India.
A large chunk of P2P remittance payments that were happening through digital wallets have moved to UPI, according to Naveen Surya, chairman emeritus of industry body Payments Council of India.
He attributes this to the Reserve Bank of India’s mandatory KYC rules for digital wallet companies and the goods and services tax imposed on business correspondents’ transactions.
“There are retail agents (of digital payments platforms such as EbixCash and Oxygen) who do almost Rs 5 crore of monthly remittance, and many of them have moved on to UPI, where the transactions happen from their own user handles to the beneficiaries’ accounts,” explains Surya, a former managing director of ItzCash.
UPI transactions surged to about 405 million in September, up nearly 70% from about 235.65 million in July and 165% from about 151 million at the beginning of this year, show data shared by the RBI and the National Payments Corporation of India, which runs UPI.
Digital wallet transactions dropped to 320 million in July — the latest month for which data is available — from about 326 million in January. Nearly 90% of the transactions on UPI and digital wallets are small-value P2P fund transfers, according to industry estimates.
Debit card payments through POS terminals, or card reading machines — a good indicator of the adoption of digital payments for merchant transactions — increased to 366 million in July from 301 million in January, RBI data show.
The growth in debit card payments through POS terminals is an interesting trend, showing that people have started using their cards more for direct purchases than only for withdrawing cash from ATMs, says Vivek Belgavi, FinTech leader at PwC India.
“There has also been an improvement in the way online payment gateways are now designed, which could have made it more attractive for customers to pay for products online rather than opt for cash-on-delivery, thereby causing debit card usage to go up,” said Belgavi.
Also, several standalone wallet companies have either deleveraged to broader financial services models or gone back to their remittance business as banks’ agents, say industry experts.
Last month, Paytm said it registered 137 million UPI transactions in September, which was 20% of its overall transaction volume.