Banks are increasingly vying for a share of the Unified Payments Interface (UPI) segment, with State Bank of India (SBI), YES Bank, Axis Bank, and ICICI Bank among those targeting non-customers with their mobile applications.
Currently, PhonePe holds the largest market share in the UPI transaction segment, followed closely by Google Pay and Paytm, collectively commanding around 95% of the market share in terms of transaction volume.
The surge in banks’ interest in UPI payments is driven by the steady rise in transaction volumes in recent years. UPI transaction volumes surpassed 12 billion, with transaction value exceeding the Rs 18 trillion mark in December.
Recognising the potential of the UPI segment, banks are leveraging account aggregator networks to offer mobile banking services to customers of all banks. For instance, ICICI Bank’s InstaBIZ application aims to cater to a wide range of users, irrespective of their bank affiliation.
Similarly, YES Bank has recently launched the Yes Pay Next application, allowing users to make various payments conveniently. The application is compatible with any bank account, not limited to YES Bank.
| UPI dominates the volume of transactions, with real-time gross settlement accounting for the largest share in terms of value. |
The competition
While many entities have attempted to break into the top three spots in UPI transactions, banks are yet to secure a significant foothold. The dominance of the top three mobile applications underscores the challenge of “customer stickiness” in the UPI payment space.
Despite the uphill battle, banks have the advantage of offering their own products and services on their payment applications, unlike third-party apps that can only distribute financial products of partner banks or financial services companies.
Banks have been heavily investing in technology infrastructure to manage transaction volumes and attract low-cost current-account savings account (CASA) deposits through digital channels. Those with a clear technology roadmap are likely to maintain a competitive edge in the evolving landscape of digital payments.
| Banks have the advantage of offering their own products and services on their payment applications, unlike third-party apps that can only distribute financial products of partner banks or financial services companies. |
