📊 Why has the 30% market share cap on UPI volumes been extended; and is there a glass ceiling as a new UPI App? 📊
💳 💡 NPCI, to break the UPI market concentration within the top 3-4 apps, had originally capped a single app's market share at 30%, with December 2020 as a deadline. This deadline was then extended to 2022, and now they’ve extended that deadline to the end of 2024
💳 💡 But this deadline will probably have to be extended again. The Top 10 apps control 98% UPI transaction volume. And this is heavily skewed towards the Top 3, which control 92% as of April ‘24. (PhonePe 51%, Gpay 35%, Paytm 6%).
❓ But why are there so many UPI Apps operating, if the top 3 collectively have > 90% market share? In April ‘24 there were 70 UPI Apps. Ex: Whatsapp (#13 in volumes processed, 2815 Cr / month) Jupiter (#21, 710 Cr) Slice (#24, 608 Cr), Fampay (#25, 588 Cr), Navi (#32, 317 Cr), Flipkart UPI (#36, 174 Cr), Niyo, (#60, 16.7 Cr), MMT (#60, 19.3 Cr)
💳 💡 Consumer facing companies could be getting into UPI to acquire customers for their core business. Amazon Pay in April ‘24 processed ~6784 Cr & 64M txns. Groww did ~5452 Cr and 8M txns. This was 0.35% and 0.28% of the market respectively. So even a fraction of the market can mean significant volumes. Of course, in the case of UPI, with pricing limitations, sustainability is a question, but this isn’t a problem for apps with established products & business models who would see this purely as an acquisition channel
💳 💡 But there may not be enough incentives to scale up UPI volumes after a certain point. For customer acquisition, and ability to cross sell, yes. But beyond that to be able to break the Top 4 UPI App monopoly would require campaigns in the hundreds of Crs. Look at CRED. In FY22 it spent INR 976 Cr on marketing. In FY23 it spent 713 Cr. In April ‘23 its UPI share was 1.45%, which in April '24 is at 2.20%. (INR 43k Cr)
So how could this play out?
✅ NPCI will continue to shift deadlines unless the volumes even out which could take a while. PhonePe & Gpay are quite ahead in the market, but Paytm is yet to recover after the Paytm Bank went down (mkt share dropped from 11% in April ‘23 to 6% in April ‘24). And CRED caters to a very specific audience: only those who have credit cards, so it may be unlikely that they will scale to > 5% of UPI volumes. So there could be an opportunity for 1-2 fintechs to step up as a challenger for UPI volumes, but willingness to spend is still a very big question
✅ Customers use UPI because it is convenient. To make UPI payments even easier there will have to be innovations to 1) reduce the need for mobile devices, Ex biometric solution for ID verification and payment and 2) end to end in-app payment experience to drive convenience. And the fintechs who are able to solve this will have the right to win
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#fintech #UPI #NPCI
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