Paytm and UPI: A Look at Why Paytm Could Emerge as A Leader in The UPI Segment in The Near Future
- By Mukesh Kumar
- Apr 20, 2021
- 1302 views
The COVID-19 pandemic completely transformed our lives in 2020. From wearing masks to using sanitizers, everything became a part of the new normal. In the age of social distancing, one of the most significant changes in India was the usage of digital payment platforms instead of cash.
Over the past year, many Indians have given preference to online transactions through Unified Payment Interface or UPI. And the biggest shares of this UPI boom are taken by three key players – PhonePe, Paytm, and Google Pay.
Apart from a slight dip, UPI’s numbers have been growing constantly since the start of the COVID-19 pandemic. But what’s interesting to see is how the three major financial technology players in India are competing for a bigger share of the market.
While there’s no denying that PhonePe has seen exponential growth in the UPI segment, what’s noticeable is Paytm’s rise in the space. And this comes when Google Pay, which was once a leader in the UPI segment, has experienced a dip in its numbers in the past few months.
That being said, here’s a look at the things that are driving Paytm’s growth in the UPI segment.
Paytm and P2M
A major driver behind Paytm’s growth in UPI is the widespread adoption of the payment service by merchants. And that’s also where the market leader PhonePe is experiencing growth.
“Paytm has traditionally been much stronger in the P2M (peer to merchants) segment than the P2P (peer to peer) segment, as the usage of UPI starts to become more and more for commerce, that is where Paytm has gained. Google Pay has been a more consumer app, while PhonePe has been both. Ultimately, how much P2P payment will happen, what drives payments is commerce,” Praxis Global Alliance’s head of financial services Shishir Mankad was quoted as saying by Business Insider.
Paytm’s vice president Narendra Yadav told Business Insider that P2M makes up for 70% of Paytm’s overall transactions, whereas the overall share for UPI is around 40%. But Yadav emphasized that Paytm’s dominance in the P2M sector is not yet completely visible in UPI. “As of now, our major is on merchants – online or offline. Whenever merchant transactions are increasing, Paytm will benefit. And after COVID-19, merchants have been moving to digital transactions where Paytm is also seeing huge growth,” he said.
Paytm and its high success rate of UPI transactions
According to an NPCI report, Paytm has experienced the lowest technical decline rate of 0.01% as compared to all UPI remitter banks. Also, the decline rate has been 0.04% as compared to all UPI beneficiary banks. Paytm’s vice president believes that the success rate of Paytm in UPI is much better, and there’s currently no one in the market who can come close to it.
But analysts think that when compared to other players like Google Pay the reasons are beyond the company. “The reason lies with the banks and not Google Pay. As Paytm is a payment bank, it can control the entire stack. This, in turn, means a lower failure rate. Given the fact that Google Pay works with only a handful of major banks in India, its failure rate isn’t just dependent on banks but also on NPCI’s UPI stack,” an analyst at Forrester told Business Insider.
Adding new users
With the increasing number of Indians going online, Paytm is spending huge amounts on marketing and adopting several strategies to attract them to its platform.
In an attempt to expand its reach, Paytm has gone on to sponsor the Indian Premier League, which is the most successful T20 tournament in the world. Also, the payment platform has recently announced that its UPI handles have been approved by India stock regulator Securities and Exchange Board of India and users can now pay for IPOs using Paytm. These are just some of the many things Paytm is using to leverage its business in the country.
The segment where Paytm will likely add many new users in the near future is online casino gaming. Most Indian states restrict offering casino gaming services within their territories, which has resulted in Indian players flocking to international sites where Indian gambling laws don’t apply. While it’s currently possible for Indian players to play some online casino games, especially Teen Patti cash game using Paytm, there are only a handful of foreign casino sites accepting Paytm as a payment method. As more and more online casinos start accepting Paytm deposits, we can expect to see a major chunk of Paytm payments happening in the online casino segment.
Nevertheless, these numbers are dependent on the kind of marketing and ad spending these technology firms are doing. “Paytm has many businesses, and if they put their might behind this it will surely yield results. While in UPI, Paytm is a distant third, if you look at Paytm wallet to wallet transactions that are very large but don’t get recorded as it doesn’t enter any settlement,” says Mankad.
Source : NewsOnFloor