UPI dominance heats up payments race for cards

BENGALURU: Dominance of the Unified Payments Interface (UPI) continues to rise in India as it came close to the volumes of debit and credit card transactions in the financial year ending March 2019, shows latest regulatory data. 

Incidentally, as per data available with the Reserve Bank of India (RBI) and National Payments Corporation of India (NPCI) for the first three quarters of current fiscal, UPI payments by value have overtaken card-based payments. UPI is still largely used for peer-topeer (P2P) transactions while credit or debit cards are used to make merchant payments.

UPI has clocked transactions worth Rs 4.4 lakh crore in April-June period of 2019 while for debit and credit cards, the figure stands at Rs 3.4 lakh crore. The combined merchant payments are still just about 15-20% of the overall UPI transactions and often incentivised by large players like Google Pay, PhonePe and Paytm. UPI’s use case of P2P transactions was also being fueled by heavy incentives from payments player to corner market share. During the same period, cards saw over 172 crore transactions in volume while the same for UPI was over 226 crore.

The rise of UPI as an instrument among popular mode of payments like debit cards is of importance, industry executives said.

This comes at a time when NPCI, which manages the UPI network, has capped the merchant discount rate (MDR) at Rs 100 for every transaction. For transactions less than Rs 100 via QR scan and pay, there will be no MDR from next month. At present, this is capped at 0.25% for transactions up to Rs. 2,000 and at 0.65% for transactions above Rs 2,000. The move is expected to boost UPI’s adoption among all types of merchants.

“The cost of business will come down which will see wider merchant acceptance. P2P transactions have limited use case so eventually there will be more merchant transactions. We have grown at a rate faster than UPI and that’s a testament to the merchant payments growth story,” said Ashneer Grover, co-founder and CEO, BharatPe, which allows merchants to accept payments via any UPI app.

Consumer payments platform PhonePe said it is essentially a payments container that enables all payments options for its users, including its own wallet. “UPI has seen a huge growth on our platform, but we also have millions of cards which customers have saved and use on our platform daily,” said a PhonePe spokesperson.