Google Pays loss is Paytm and PhonePes gain on UPI – Mint

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 major Google Pay lost share due to the technical glitches faced by its banking partners.

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, National Payments Corporation of India (NPCI) data shows.

According to experts and bank executives, the rise in number of UPI transactions for PhonePe and Paytm was at the expense of Google Pay, as customers moved away due to decline rates on its platform, caused by infrastructure issues with banking partners. Google Pays 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 outages on their tech stack, data centres and digital payment offerings. In December, SBI had one of the highest transaction failure rates of 8.96% on UPI, 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 banks used to add the number of cashback transactions on Google Pay to its total number, but since they stopped doing so, the number of transactions might have fallen. Mint, however, could not ascertain whether this exercise was undertaken only for 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.

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 payments company executive, requesting anonymity.

Merchant transactions on UPI have boosted UPIs 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 merchants, since this base counts for monetization streams," said Deepak Abbot, a former Paytm executive, and the co-founder of Indiagold, a startup which works in the gold monetization space.

Shayan Ghosh contributed to this story.

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Google Pays loss is Paytm and PhonePes gain on UPI - Mint