After A Quiet Start, UPI Transactions Surge To Above Rs 1,100 Crore
The Unified Payments Interface (UPI) had a slow start but its fortunes appear to have turned.
Barely a month after the launch of the government's own Bharat Interface for Money (BHIM) app, which is based on the interface, UPI transactions have jumped sharply, according to provisional data released by the Reserve Bank of India (RBI).
The data shows that the value of transactions done through UPI have gone from Rs 90 crore in November to Rs 700 crore in December. Till January 23, transactions have already exceeded Rs 1,100 crore, according to the representative data released by the regulator on a daily basis.
In contrast, the pre-paid instruments category, which includes mobile wallets, has seen transactions worth Rs 1,490 crore so far in January. This category had seen a jump in transactions from Rs 1,320 crore in November to Rs 2,130 crore in December.
The government’s decision to withdraw Rs 500 and Rs 1,000 notes from circulation starting November 8 had led to a shortage of currency and pushed consumers towards digital means of payments. However, the plethora of payment options available have meant intense competition for those operating in the segment.
Those in the industry acknowledge that UPI is turning out to be a worthy competitor to options like mobile wallets.
"UPI is a force to reckon with. It's going to enable a lot of people moving to digital payments. The transaction volumes are becoming more impressive," Yadvendra Tyagi, Head of Business Development at PayU told a gathering at a digital payments conference in Bengaluru on Tuesday.
This was echoed by Rahul Chari, founder of PhonePe, a mobile payments company.
"UPI has brought a lot of new concepts to the FinTech space which can be a game changer for the landscape, irrespective of whether UPI works or fails," Chari said at the same conference. "The idea is to cut as many intermediaries as possible and UPI does that effectively. Banks are the perfect keepers of funds and UPI is ensuring just that."
On April 11, National Payments Corporation of India (NPCI) launched the UPI in pilot mode. Built on the existing Immediate Payment Service (IMPS) infrastructure, UPI allows people to settle transactions directly between their bank accounts in real time through a virtual address. The platform is one-of-a-kind since it bypasses the need to have a card, wallet or any other kind of instrument to make payments or receive them.
After a test run, UPI was formally launched in August. While the initial response to UPI was tepid, the platform has picked up in the last two months,
Some executives are skeptical about the numbers.
A senior executive with a prominent wallet player said, on condition of anonymity, that it took their company multiple years to cross the Rs 1,000 crore transaction mark which makes the UPI numbers a little tough to believe. The executive added that there may be large value transactions happening through the platform, enabling it to report a surge in the total amount transacted.
The RBI data, however, shows that both volume and value of transactions have risen. The volume of transactions has gone from 3 lakh in November to 20 lakh in December and 31 lakh in January so far.
A representative from a major payment gateway company present at the conference, speaking on the condition of anonymity, said that there's a possibility that there is some overlap between IMPS transactions and UPI transactions. This is because the UPI platform is built on the existing IMPS infrastructure.
AP Hota, chief executive officer of NPCI, did not respond to a phone call from BloombergQuint.