Google Pay stares at stagnant growth on UPI

Bengaluru: Transactions for Google Pay have started to stagnate on the Unified Payments Interface (UPI) network, as it failed to show any growth in the past three months, data from National Payments Corporation of India (NPCI) showed.

From the peak of 960 million transactions in November 2020, commanding close to 43% market share in UPI payments, Google Pay platform has seen a continuous drop in transactions. It recorded 827.86 million transactions in February, 853.5 million in January and 854.4 million transactions December.

Google Pay had registered 857.8 million transactions in October.

Google Pay’s peak in November could be attributed to the ‘Go India’ game that it ran on its platform, which included earning points after making UPI payments, said three people familiar with the matter.

In February, Google’s market share too has dropped to 36% from 43%.

Banking outages by top banks, as well as Google’s lack of focus on merchant payments is causing the slide, which is giving market leader PhonePe and Paytm a competitive edge, said the people mentioned above.

NPCI data also shows that between October and February, which marked Google Pay’s decline on UPI, also saw peer-to-peer or P2P transactions grow only by 4.5%. Peer-to-merchant or P2M transactions however saw 20% growth in the same time period.

“There would be almost a 80%-90% overlap of customers between the top 3 UPI players including Google Pay, PhonePe and Paytm, which essentially means that the big three are contesting for the same customers, reducing room to grow on peer-to-peer (P2P) payments. Hence, the next phase of UPI growth will come from adding more merchant use-cases and acceptance” said the first person, asking not to be named.

P2P transactions are between users, while P2M transactions are when a user makes a payment to a registered merchant on UPI.

“Google Pay faced decline due to banking outages in December and January, and that depreciated the user trust on the platform, as transactions started getting stuck. But now it is clear that Google Pay also faces a growth issue in terms of merchants and users,” said a second person.

Google Pay didn’t respond to queries.

Rivals PhonePe and Paytm in recent months have been heavily investing in growing their merchant base to expand the net of UPI acceptance.

“Google Pay’s focus and popularity is mostly urban metro users, where UPI payments can soon become a saturated market for growth,” said a third person.

NPCI CEO Dilip Asbe at an event last week agreed that transaction declines were on the rise on UPI network between October and December due to tech integrations by several banks causing outage. Asbe added the issue has been resolved ever since and the industry can expect better approval rates on UPI.

PhonePe processed close to 975.5 million transactions in February 2021, and widened the gap with competitor Google Pay by 147.6 million transactions.

PhonePe which took over the market leadership from Google Pay on UPI last December, added closer to 7 million merchants in the last 8 months. It also said that over 54% of transactions on their network in February were from merchants payments.

“We are also seeing massive adoption in Tier 4,5,6 towns and talukas along with a huge jump in our P2M transactions. Of our total UPI transactions, over 54% were P2M,” said Hemant Gala, vice president, payments and financial services, PhonePe.

Paytm, which increased its transactions from 244.94 million in October to 340 million in February, credited its technology infrastructure for its growth.

“Our tech team, which comprises the best minds in the business, works round the clock to provide a seamless and efficient experience to our users and merchant partners. We have witnessed rapid adoption of our UPI payments service across the country,” said Satish Gupta, chief executive of Paytm Payments Bank Ltd.

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