Digital transactions got a leg up post demonetization in November 2016 and so did the Unified Payments Interface (UPI), which was launched a few months before the note ban. A little later, the National Payments Corp. of India (NPCI) launched its own UPI app called BHIM, which took off in a big way. But the good run doesn’t seem to have lasted too long. With other companies, including Google Pay, PhonePe, Paytm and Mobikwik, also launching their UPI apps, BHIM’s market share has dipped in the past few years. UPI, on the other hand, has continued to grow at a rapid pace, surpassing even mobile wallets, which were more popular than UPI earlier, in terms of transaction volume and transaction value (see graphic).

So what has led to the fall in the share of BHIM even as the underlying UPI platform is still growing strong?

Growth in UPI

Hemant Gala, head, payments, banking and financial services, PhonePe, a UPI payments app, links the growth of UPI to growing adoption of mobile phones and internet. “Mobile and internet adoption has gone through the roof and UPI is a system that has been built as a mobile-first system to send and receive money in real time," he said.

The other factor that boosted UPI was interoperability, said Mandar Agashe, founder and vice-chairman, Sarvatra Technologies, a banking technology solution company. Interoperability means you are not dependent on a particular platform to make a transaction with a user on another platform.

Moreover, in order to use other modes of fund transfer, like the IMPS (Immediate Payment Service), you are required to use the mobile app provided by your bank. “That may not be the best platform and you will be stuck with what your bank provides. Many smaller banks may not even have their own apps. Also, UPI is directly connected to your bank account, unlike an e-wallet where you have to first load your wallet and then carry out a transaction," he said.

The BHIM story

Despite all the advantages that UPI brought for users, the BHIM app continues to lose its share over the past two years.

In response to queries from Mint, NPCI said that the intent of creating the BHIM app was to enable programme partners to use this as a starter app to become UPI compatible and allow their customers the convenience of using the UPI platform. “When it was created for the UPI platform two years ago, there were around 15 apps for UPI available. Today, we have more than 100 apps that have an interface with UPI. It was to create a BHIM-UPI app ecosystem where hundreds of apps were made available to the consumer," NPCI said.

NPCI added that all UPI apps are uniquely placed to serve the digital payment needs of consumers. “Each one benefits from the efforts of the other, PSPs (payment service providers) get to acquire consumers and banks get to activate the consumer on the digital channel," it said.

Attracting users

UPI made person-to-person money transfers easy. However, when using an app or a platform, consumers also look for other offerings such as cashbacks, the number of use cases, and its user-friendliness.

People who are new to the UPI payment system continue to be attracted by cashbacks and other offers. Agashe said the main reason for users shifting from BHIM to other apps is promotional offers. “Because there is a limitation to what NPCI can offer compared to others. Large companies can probably provide much more in terms of offers and cashbacks and sustain more losses than a BHIM app," he said.

Another consideration is the ways in which you can use an app. Most UPI apps, including BHIM, help you pay regular bills like power, broadband internet and phone. However, some apps have introduced other features too. For instance, PhonePe now enables payment of credit card bills or buying of gold through UPI, Gala said.

Typically, there are two stages in a customer life-cycle—there is adoption, and then comes engagement. While incentives will continue to come for new users on UPI apps, they can’t drive engagement forever. “Hence our focus has been to give multiple use cases to a consumer. For someone who is completely new to the UPI mode could need some incentivisation. Someone who has already adopted it needs engagement. The same customer coming again and again to a platform to do an incentivised transaction might not be in the best interest of the platform. The better metric to look at is how many use cases have you developed and how often the consumer returns to the platform for engagement," he said.

Watch this space to know how the UPI landscape develops in future.

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