GPay Trails Behind PhonePe In The UPI Race, But Should It Really Be Worried?

Currently, PhonePe, GPay and Paytm together account for around 90 per cent of the overall UPI market

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By Shipra Singh


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Google Pay (GPay) is fast losing its hold over the Unified Payment Interface (UPI) market in India. As per data from National Payments Council of India (NPCI), the payment app's UPI market share in terms of transaction volume has fallen by 800 basis points, or bps, (1 bps is 1/100th of 1 percentage point) in the last eight months.

In March this year, GPay's overall market share was 35 per cent, down from 43 per cent in August 2020. Fall in market share in terms of transaction value is even wider at 10 basis points during the same period. It recorded 35 per cent share in March 2021, down from 45 per cent in August 2020.

The digital payment app developed by the tech giant Google was the second UPI-based platform to have been launched in India. It was rolled out in 2017 as Tez. This was the time when digital payments were gaining ground in the country in the aftermath of demonetisation and the recently developed UPI was attracting attention for its fast, safe and efficient payment settlement mechanism. GPay was an instant hit owing to the plethora of cashback rewards and heavy discounts it offered on transactions.

Despite facing stiff competition from payment majors Paytm and PhonePe, GPay steadily remained the market leader over the next three years. But, in the past six months, GPay's arch-rival PhonePe has swiftly eaten into its market share.

From 36 per cent of the total market share in August last year, the Flipkart-owned payments company has captured nearly 43 per cent of the share in terms of transaction volume as of March, shows data from NPCI. Its market share in terms of transaction value stands at 45 per cent.

The company attributes this growth to massive adoption from users in tier IV, V and VI towns and talukas.

"We are delighted to emerge as leaders in the UPI merchant transactions. Our continuous focus on reliability and ensuring highest transaction success rates is creating a great amount of trust on the PhonePe platform. That coupled with a superior product experience is leading to customers increasingly preferring PhonePe over other payment apps. Our leadership in the P2M space is due to an expansion of the market with more merchants using our platform in smaller towns," said Vivek Lohcheb, VP - offline business development, PhonePe, in a company statement.

Notably, GPay's falling market share may not be a cause of concern for the company after all as NPCI has recently put a cap of 30 per cent on the total transaction volume via UPI that a third-party app provider can process. As per a circular released by the retail payments body in November, the limit will be calculated on the basis of total transaction volume processed in UPI during the preceding three months and if an app exceeds the limit, it will get two years from January 2021 to comply with the cap in a phased manner.

In this regard, the falling transaction volume of Gpay is in line with NPCI's mandate, whereas PhonePe seems to be moving in the opposite direction.

Where is Whatsapp Pay

Whatsapp Pay has gained only a miniscule share in the intensifying UPI race in India since its launch in December 2020. In March, Whatsapp Pay processed only 0.58 million UPI transactions of the total 2.7 billion. In fact, in January, the second month of Whatsapp's payment service, its transaction volume fell to 0.56 million from its opening month that recorded 0.81 million transactions. Number of transactions has remained stagnant since.

Its slow growth can be attributed to NPCI's order that allowed only 20 million of the messaging app's total user base of 450 million to avail the payment service and that too for only peer-to-peer transactions at a time when peer-to-merchant transactions have grown manifold as people have switched to digital modes of payments amidst COVID-19.

However, despite a slow start, experts believe that once Whatsapp Pay gets a regulatory nod to go full out, it'll surpass Walmart's PhonePe and GPay in a flash to capture maximum share in the market.

Currently, PhonePe, GPay and Paytm together account for around 90 per cent of the overall UPI market.

Shipra Singh

Entrepreneur Staff

Freelance Journalist

Now a freelance journalist, ealier steered the Wealth section on the Entrepreneur website, covering everything finance. Previously a personal finance reporter at The Economic Times and Outlook Money.

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