Valuations of fintech firms driving UPI volumes soar

MUMBAI: Transactions using India’s own domestic payments platform—Unified Payments Interface ( UPI )—hit a landmark of one billion in October, three years after its launch.The UPI also recently crossed 100 million users, making it the fastest adoption of any payments system anywhere in the world.Having achieved this double milestone, the National Payments Corporation of India (NPCI), which operates the UPI platform, aims to take the network global by enabling acceptance of UPI in Singapore and the UAE.The UPI platform, which was launched before demonetisation in 2016, enables users to send money from their account to any account without entering bank details by using an email-like handle or scanning a QR code . The NPCI, which launched the Ru-Pay network, had launched this to promote digital payments by harnessing the ubiquitousness of smartphones.“The UPI has had the fastest acceptance not just in payments but among other platforms as well. I have not compared the numbers but given the time taken to reach 100 million users by social media and other platforms. I am sure we should be among the top,” said Dilip Asbe, chief executive officer, NPCI. To put things in perspective, in August the total volume of all card transactions (debit and credit) put together was 142 crore (1.42 billion).While all major banks are part of the UPI network and many have proprietary apps, the open architecture of UPI enables any bank account to be accessed from any UPI app.This has enabled three players—GooglePay, Paytm and PhonePe—to dominate the market as customers of different banks use largely these three apps and the NPCI’s BHIM app to transact. These three have been the most aggressive in enrolling small merchants, including hawkers, to accept payments through the UPI. What has also helped is that UPI waived merchant fees for payments up to Rs 100.The foreign-investor backed fintechs that have been driving UPI volumes have gained in terms of valuations, given the market potential. Walmart-owned PhonePe, according to a Morgan Stanley report, is now worth $7 billion. Paytm has also seen its valuation soar in line with an increase in users.“The four apps are 90% of total volume on the app side. But on the merchant-acquiring side, it is a diverse set of banks and fintechs that are deploying QR codes,” said Asbe. “The objective for the next three years is to expand this 100-million base to 500 million. We believe in the next two years the merchant ecosystem will get digitised with the number of QR codes going to 30 million from 10 million now,” said Asbe. The acceptance development fund proposed by the Reserve Bank of India is expected to promote the deployment of QR codes.On going global, Asbe said it is in the planning stage and various permissions will be required. He expects that the collaboration between fintechs and banks, which drove acceptance in India, will do the same abroad. Technically, a QR code scan done anywhere in the world can debit an Indian bank account instantly, but the transfer to the merchant’s account can happen after some time.A model for that is already in place—China’s Alipay and WeChat are accepted in 30 countries. The difference is that these are closed-loop payments, while the UPI can work with any bank account.While the usage of UPI has skyrocketed, so has the attention of fraudsters. Confidence tricksters, who used to fool people into sharing card details, are now scamming people into sharing their OTP or QR codes, or getting them to install remote-access apps on their phones. “There are two types of fraud— one where people fall for lottery scams and share their details to receive the money, and the second is where fraudsters put up fake helplines online. In the first one the customer is partly to blame, while in the second the customer calls up because he has a problem. We are working with online providers to block fake accounts, but the ultimate solution is education and we are spending more on this,” said Asbe. The NPCI is pooling with banks to set up a fund to increase awareness on UPI.