Google Pay’s loss is Paytm and PhonePe’s gain on UPI
Digital payments firms PhonePe and Paytm Payments Bank have increased their share of transactions on Unified Payments Interface (UPI) between November and January, while tech majors Google Pay and WhatsApp Pay lost share due to the technical glitches faced by their banking partners and the government-mandated cap on UPI transactions.
While PhonePe and Paytm saw 100 million and 72 million additional transactions, respectively, during the period, the number of transactions for Google Pay fell by over 100 million from 960 million in November to 855 million at the end of January.
According to industry experts and banking executives, the rise in number of UPI transactions for PhonePe and Paytm was at the expense of Google Pay, as customers moved away from the platform. Google Pay’s banking partners include State Bank of India, HDFC Bank Ltd, Axis Bank Ltd and ICICI Bank Ltd.
In November-December, HDFC Bank and SBI saw repeated outages on their tech stack, data centres and digital payment offerings. In December, SBI had one of the highest transaction decline rates of 8.96% on UPI, National Payment Corp. of India (NPCI) data showed.
“We have the highest end-to-end success rates in UPI payments, according to NPCI data, and believe that overtime products always win. We are starting to see early signals of user preference,” said PhonePe co-founder Sameer Nigam.
Three banking and payments executives, requesting anonymity, said that earlier Google Pay used to add the number of cashback transactions to its total reported number, but since it stopped doing so, the number of transactions have fallen. Mint, however, could not ascertain whether this exercise was undertaken only by Google Pay or all payments apps on UPI. “At times, there are problems in terms of where the money has to be credited to or from the bank where the funds will get debited. That could be any lender and not necessarily the four banks backing Google Pay,” said a senior executive in charge of digital payments at a private bank.
Google Pay and NPCI did not respond to queries. PPB declined to comment on the story.
“The technology infrastructure from the architecture and capacity standpoint is not able to cope with the flood of transactions. When volumes go above planned threshold, architectural changes are needed and capacity upgrades take time. Empirical data shows that due to exponential rise in transaction volumes, banks may have some challenges and would undertake fixes,” said Kunal Pande, partner, KPMG.
“The spillage is happening and it is natural as UPI users leverage at least two payment apps. Google Pay will not be able to correct the infrastructure challenges with banking partners easily in the next few weeks or months, since payment infrastructure needs sustained attention,” said a payment executive also requesting anonymity.
Merchant transactions on UPI have surged UPI’s growth which provides a further edge to PhonePe and Paytm, which have been investing on their offline merchant base in a bid to distribute credit and financial services to their partners.
“P2P (peer-to-peer) transactions will see some stagnation. It is P2M (peer-to-merchant) transactions where there is headroom to grow, and PhonePe and Paytm are adding more use-cases, growing the overall UPI ecosystem. Another challenge is the ‘do-it-yourself’ model, which Big tech like Google might be adopting, whereas Paytm and PhonePe are handholding the merchants, since this base counts for monetisation streams,” said Deepak Abbot, a former Paytm executive, and the co-founder of Indiagold, a startup which works in the gold monetisation space.
Shayan Ghosh contributed to this story.
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