Home KNOWLEDGE SOURCE UPI challenges mobile wallets’ emergence

UPI challenges mobile wallets’ emergence

UPI challenges mobile wallets’ emergence
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The upcoming opportunity in digital payments space is huge. The digital payments market in India is expected to grow to $ 1 trillion by 2023 led by growth in mobile payments, according to NITI Aayog. The market is such that various instruments could exist and grow without cannibalizing each other’s share.

However, consumers have a choice to use their preferred app to fulfill their payment needs. First time users may start their digital payments journey by using simpler instruments like mobile wallets before making the transition to UPI apps.

While there was a 43.2% increase in the number of transactions done on mobile wallets in March 2019 over the previous year, the increase in the number of transactions done on UPI over the previous year was a massive 349%. In absolute terms as well, transactions done using mobile wallets in March 2019 (INR 160 billion) are only 15% of the size of the total transaction value on the UPI platform (down from 42% in the previous year). It is clear that the growth in UPI is coming at the expense of wallet transactions.

“We are successfully moving towards an exciting and fast changing payment space that makes the digital payments experience ubiquitous, secure and frictionless for consumers and merchants despite the fact that cash is still king. The Reserve Bank of India in its latest vision document noted the decline in paper-based clearing instruments and observed a significant growth in acceptance infrastructure facilitating digital payments during 2015-2018. In the years to come, we are confident that India will witness over a 50 percent rise in mobile-based payment transactions as projected in the document,” Deepak Chandnani, Managing Director, Worldline South Asia & Middle East.

GIVE THEM POS

Worldline has over 1 million merchant touchpoints PAN-India accounting (30% of the merchant acquiring touchpoints). It analyzed transactions that it processed in Q1 2019 (Jan-Feb-Mar) and derived some unique insights.

In FY 2018-19, there was a concentrated effort by the government and banks to increase the deployment of point of sale (POS) terminals; the target was 2 million terminals but the achievement was half of that. The number of POS terminals increased to 3.72 million in March 2019, an increase of 18.6%, from 3.14 million in March 2018.

A point to note is that while 29% of transactions on POS terminals were done using credit cards, they translated to 52% of the total amount spent on POS terminals. One reason is the conservative nature of Indian consumers who mostly use debit cards for their daily purchases and credit cards for purchasing high value items. In Q1 2019, the average ticket size on POS terminals for debit card transactions was INR 1,323 and INR 3,477 for credit card transactions.

While the transactions at POS terminals increased from 1.3 billion transactions in Q1 2018 to 1.6 billion transactions in Q1 2019 (up by 24.8%), the share of card transactions at POS terminals to total card transactions went up from 36% to 38% only. Similarly, while the value of transactions at POS terminals have increased from INR 2.4 trillion in Q1 2018 to INR 3.1 trillion in Q1 2019 (up by 27.4%), the share of value of money spent through cards at POS terminals to total money spent through cards at POS terminals and ATMs went up from 24% to 27.6% only.

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