The top four UPI (Unified Payments Interface) players which include three fintech payment apps Paytm, PhonePe, Google Pay have captured 95 percent of UPI transactions, according to a report published on September 5 by Bernstein a global wealth management firm.
At the same time, banks have a limited share of transactions in UPI transactions, according to the report titled “India’s Promise: The Rise of Digital Credit — the Most Profitable Part of the Financial Inclusion Journey.”
The report further added that regulatory restrictions and lack of physical distribution network have limited the impact of this disruption on the bigger prize deposits which remain the stronghold of the banks.
“UPI poses a growth risk for traditional forms of cashless payments such as cards, debit card volumes have been declining steadily in the last 5 years, despite the low penetration vs other markets,” said the report.
The report also lauds India’s financial inclusion initiatives. “The key ‘measurable’ aspects on the country’s financial inclusion status include (1) access to bank accounts and (2) growth in the number of savings deposit accounts; and few countries match India on the progress it has made on Financial Inclusion, especially on the deposits and payments front,” said Bernstein report.
The report also said that PMJDY (Pradhan Mantri Jan-Dhan Yojana ) has acted as a catalyst for the sharp increase in savings deposit account penetration on providing universal access to basic transaction banking facilities.
“While the Jan Dhan programme was available through all the banks, it was the Public Sector Banks (PSBs) and the Regional Rural Banks (that are typically sponsored by a Public Sector bank) that accounted for over 95 percent of the opened accounts,” said the report.
Interestingly, the large distribution network of the Public sector banks and Regional Rural banks had a role to play in their outsized contribution.
” PSBs & RRBs banks also accounted for the bulk of the additions even in Urban areas where the private sector banks are not too far behind on distribution,” said the report.