SBI’s UPI market share falls to zero

The State Bank of India SBI, the country's largest bank, has a market share of 0.18 per cent in UPI unified payment interface transactions, which is fast catching up as the medium of payment in person-to-person P 2 P and person-to- merchant P 2 M. The largest private sector bank, HDFC Bank, has a share of a paltry 0.21 per cent in UPI transactions in value for July 2022. The biggest long-standing banks are a pale shadow of the third-party apps like PhonePe and Google Pay, which have a market share of 48.91 per cent and 34.17 per cent.

Is it caused by design or the outcome of cut-throat competition?

The banks are a bit reluctant to create a dedicated UPI app. Mihir Gandhi, Payments Transformation Leader, PwC India, says they have mobile banking apps, which offer a wide range of banking services, including payments.

Yes Bank and ICICI Bank are the two big banks that have crossed the 1.0 per cent market share mark.

Another market watcher says that banking apps are too cluttered. Traditional banks are focusing on a holistic app rather than just UPI. SBI's Yono, which is a digital banking app, is attracting a lot of volumes. The largest bank has added more than 60 lakh clients for savings accounts, granted loans totalling Rs 20,000 crore, and received subscriptions for mutual funds totalling Rs 10,000 crore in 2021 -- 22.

These numbers speak volumes of what a traditional bank like SBI has achieved in the digital banking space. The SBI's UPI market share of less than a percentage shows a disconnect with the adoption of Yono by digital-savvy customers. Gandhi of PWC says there is no incentive for MDR or cost recovery.

Big banks' deployment of UPI is hindered by the fact that P 2 P and P 2 M transactions have zero MDR. All transactions done by PhonePe and GooglePay, which are non-banks, eventually land on the banking infrastructure for settlement. Banks end up spending more on interchange fees, SMS costs, refunds, and other technology set-up costs. The banks' IT infrastructure gets flooded with high low-value transaction volumes.

Banks are not fully reimbursed for UPI transactions carried out through third-party apps. There is a subsidy component, but it is insufficient.

They are familiar with GooglePay and PhonePe. A fintech player says that they have also offered cashbacks and other incentives to onboard a huge number of customers.

The National Payments Corporation of India NPCI, which runs UPI, stated that UPI's market share for third-party apps such as Google Pay would be limited to 30 per cent of total volumes by January 2023, but there is a possibility that there will be an extension of this deadline. Banks are not complaining.

In April, NPCI allowed WhatsApp to add 60 million users to UPI, taking the total count to 100 million users. The entry of WhatsApp will increase the competition for banks and cost in the near future.

In July alone, UPI handled a record six billion-plus transactions, the most since its launch in 2016. In July, the NPCI said that in terms of value, the UPI reached Rs 10.62 lakh crore. The next goal is to increase the UPI's 220 million per day, with a 4 X increase. Credit card-UPI linkages, international remittances, and penetration into smaller geographies are poised to drive the next wave of exponential growth.