Roadmap for Bank-based Apps to Gain UPI Market Share A missed opportunity!

As UPI dominates, will banks step up to reclaim their market? UPI continues its meteoric rise, handling 69.6% of India's digital transactions and reaching ₹20.6 lakh crore across 14.8 billion transactions in August 2024 alone.

- Dharmender Jhamb Pragya Madan

Yet, banks contribute a mere 2.1% to this ecosystem, largely dominated by third-party apps. With upcoming caps on these apps' market share, banks have a key opening to leverage their infrastructure, trust, and customer relationships to capture a bigger slice of India's digital payments market.

The Unified Payments Interface (UPI) has significantly transformed how Indians transact, paving the way for a cashless economy. According to the DigiDhan Dashboard, UPI accounted for 69.6% of all digital payment transactions by volume in India during FY 2023-24. It has become the most preferred mode of payments, processing 20.6 lakh crore across 14,863 crore transactions in August 2024 alone. This marks a nearly 31% increase in the value of transactions and a 40% increase in transaction volume compared to the previous year. UPI continues to make digital payments faster and more accessible, driving financial inclusion across both urban and rural regions.

In August 2024, this growth is driven by a leading few players contributing to more than 90% in terms of volume of transactions has raised concerns regarding market and Technology concentration. It is because UPI enables free instant payments, discouraging other players from promoting it aggressively due to a lack of revenue generation.

To address this issue, the National Payments Corporation of India (NPCI) proposed a 30% volume cap on Third-Party App Providers (TPAPs) in November 2020. UPI players were initially given two years to limit their market share to 30%. Although the original deadline was set for December 2022, it has since been extended for another two years to the end of 2024. Despite this extension, there has been limited progress toward implementing the cap so far.