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UPI vs IMPS: Who pipped whom and how in terms of transaction numbers

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From a tepid start in August 2016, the Unified Payments Interface (UPI) has raced on through 2017 to cross the 100-million transactions mark in November, overtaking Immediate Payment Service (IMPS), till recently the preferred mode of peer-to-peer (P2P) transactions

From a tepid start in August 2016, the Unified Payments Interface (UPI) has raced on through 2017 to cross the 100-million transactions mark in November, overtaking Immediate Payment Service (IMPS), till recently the preferred mode of peer-to-peer (P2P) transactions. While UPI ended November with 105 million transactions, it was under 90 million for IMPS. In November 2016, transaction volumes for UPI and IMPS stood at 0.28 million and 40 million, respectively, indicating a significant change in the transactions sweepstakes. But in value terms, IMPS still rules with transactions worth Rs 78,258 crore in November this year against Rs 9,679 crore worth of transactions on UPI. Besides the lower ticket size of transactions using UPI, another reason for the surge in transaction numbers can be that while UPI is a free service, consumers have to pay a charge to use IMPS, a service launched in 2010.

What has also helped swell the UPI numbers has been the entry of Google India’s Tez app. The UPI app has managed to generated 140 million transactions since its launch in September thanks to a string of cash-backs and other rewards for users.

However, it was the National Payments Corporation of India (NPCI)-promoted Bharat Interface for Money (BHIM) app that gave the initial push to UPI. BHIM used to account for 45% of all UPI transactions by volume till Tez edged it out of its pole position; it now has an 8% volume share in the UPI system. Flipkart-owned PhonePe, the other key UPI app, contributes 30% of the transaction numbers.

Hemant Gala, head of bank relations and strategic partnerships at PhonePe, said UPI will soon evolve into the dominant choice for P2P transactions. “Simple on-boarding experience along with ease of being able to send and receive money instantly on UPI has redefined the way P2P works,” he said. “P2P, however, has to mature as a use case, from customers trying or experimenting with it to using it for serious transactions.”

All the same, it is still early to say that UPI has replaced IMPS as the chief channel for P2P payments. Sangram Singh, head, cards & payments at Axis Bank, pointed out that the two modes are not strictly comparable because of the wide difference in ticket sizes. While the average UPI transaction involves a transfer of a little over Rs 900, the average IMPS transaction involves an amount nearly 10 times as large. “It’s not as if IMPS has significantly dropped in transactions, which is what a replacement (of one by the other) would have meant,” Singh said, adding, “We have not yet reached a stage where one payment method might be replacing the other. Right now, everything is replacing only cash.”

The next leg of growth for UPI will come from higher adoption of the channel by merchants, especially in the offline space. At present, about a quarter of UPI transactions are merchant transactions, all of which happen through e-commerce platforms. Some companies, such as Trupay and Benow, have begun the process of on-boarding small merchants for UPI payments. Vivek Belgavi, partner and fintech leader at PwC India, said the process will gather pace in 2018. “As we see the QR code story growing, and in another six to eight months a lot of these payment banks start rolling out their operations, we should see a lot more offline merchants joining the system,” he said. He added, though, that for merchants, UPI will continue to be a push product for some time.

 


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