UPI still way behind other digital payments despite growing tie-ups with mobile apps

Key highlights:

• Google's Tez app and Airtel's Payment Bank add to the list of the use of UPI
• UPI channel grew the fastest in the month of August as it posted a 45% growth
• Prepaid Payment Instruments (PPI) or mobile wallets still had a higher volume of transactions

The popularity of Unified Payment Interface or UPI has been adopted by several mobile payments apps. The latest on be added on the list is Google's Tez app and Airtel's Payment Bank launching UPI-enabled digital payments recently.

UPI is an payments architecture platform to enable mobile payments created by the National Payments Corporation of India (NPCI) and was launched in April 2016. While a mobile wallets such as Paytm, MobiKwik, Freecharge, PayU, among others had existed then, it was not until recently that many among these mobile apps also integrated UPI into their payment app.

Even NPCI itself launched its own payment app Bharat Interface for Money, more commonly known as BHIM, launched by Prime Minister Narendra Modi in December 2016 which used the UPI platform.

The list of mobile payment apps integrated with UPI now include most of the bank wallets and apps such as SBI Pay, HDFC Mobile Banking app, ICICI Bank's Pockets app, Axis Pay, Bank of Baroda's Mpay, Allahabad Bank UPI, Yes Bank's YesPay, among others. Besides this, Paytm Payment Bank, Chillr, FTCash, MobiKwik, Flipkart's PhonePe, Trupay, Uber, Vodafone's M-Pesa, have already integrated with UPI and even more such as WhatsApp expected to join in.

UPI channel grew the fastest in the month of August as it posted a 45% growth month on month in terms of aggregate volume of transactions. It also saw a 22% growth in terms of value in August from July, according to data released by RBI.

Despite many mobile payment apps integrating with UPI and its growth, Prepaid Payment Instruments (PPI) or mobile wallets still had a higher volume of transactions. PPIs issued by eight non-banks had transaction volumes over 5 times more than UPI.

PPI has 89.7 million transactions in August, which was up 1.1% from the previous month, in comparison to 16.6 million transactions in the same month despite the 45% growth.

Even the average ticket size of UPI transaction was lower in August at Rs 2,486, than July where the average ticket size of transactions was Rs 2,966.

However, in terms of value UPI was higher than PPI transactions. UPI transaction in terms of value had grown to Rs 4,127 crore in August from July were its stood at Rs 3,381 crore, a 22% growth.

PPI or mobile wallet transaction however was much lower at Rs 2,722 crore in August from Rs 2,511 crore, an 8.41% growth.

While the number of new players using UPI payments has increased the usage of the app, it still has a long way to go.

The reason why UPI transactions are higher than mobile wallet transactions is that UPI has so far been made for peer-to-peer payments which are much higher transactions, while wallets are commonly used to make small-value payments to merchants.

Besides comparison with mobile wallets, UPI transactions are much lower than other forms of digital payments such as Mobile banking, Debit and Credit Card payments at POS machines, IMPS and NEFT in terms of value and volume.

Mobile banking in terms of value was the highest in terms of value of transaction at Rs 1.03 lakh crore and a volume of 70.8 million in August. A small growth from July as the value of transactions during the month stood at Rs 1.01 lakh crore and had a volume of 69.5 million.

Cards at PoS saw a 4.04% growth in terms of value of transaction as it grew to Rs 45,708 crore in August from Rs 43,933 crore in July. In terms of volume, it posted a 2.24% growth as transaction volumes grew to 243 million in August from 238 million in July.

IMPS saw larger growth in volume and value during August. In terms of value of transactions it grew by 7.73% to Rs 65,149 crore in August from Rs 60,476 crore in July. In terms of volume, it grew by 9.54% to 75.66 million in August from 69.07 million July.

NEFT transactions in terms of value stood at Rs 12.5 lakh crore and in terms of volume of transactions stood at 151.6 million in August this year.

NPCI refused to comment saying that they were currently in a silent period.

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