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Just 5 banks claim 80% of UPI’s big billion October fest

State Bank of India, HDFC Bank, Axis Bank and ICICI Bank together account for more than 45% of the total transactions reported on UPI last month, according to numbers sourced by ET from bankers in the know of the matter.

, ET Bureau|
Nov 12, 2019, 07.42 AM IST
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Yes Bank logs 400m, Paytm Bank 200m while SBI, HDFC Bank, Axis and ICICI account for 500m
BENGALURU: Four large banks — State Bank of India, HDFC Bank, Axis Bank and ICICI Bank — are dominating the retail digital payments business, riding on the Unified Payments Interface (UPI) wave, which crossed a billion transactions in a month in October.

These banks together account for more than 45% of the total transactions reported on UPI last month, according to numbers sourced by ET from bankers in the know of the matter. An ET analysis of the trends over the past four months showed that the four large banks consistently reported close to 40% share of overall UPI payments.

“Wallets are still growing, but issues around full KYC have caused wallet mainstays like the domestic money transfer business to move back into the banking channels; while new avenues of business have been elusive, their existing lines of business have declined as well,” said one of the bankers.

While the trend of banks dominating payments is not new, the fact that four to five major banks are getting majority share of UPI transactions was a worrying trend, say industry experts.

Although the four banks have together recorded more than 500 million transactions on the UPI railroad, according to the numbers, another private sector lender, Yes Bank, leads with more than 400 million transactions, followed by Paytm Payments Bank which recorded slightly less than 200 million transactions.

“Large banks have been dominant in card payments as well; in the case of UPI also the trend continues. Only during the initial years of wallets (did) a significant chunk of retail digital payments move outside the banks’ ecosystem, (but) UPI has managed to bring them back into the game,” said a senior banker with a private sector bank on condition of anonymity. Yes Bank confirmed that it had reported 415 million transactions through its UPI handles. State Bank of India, Paytm Payments Bank, HDFC Bank, Axis Bank and ICICI Bank did not respond to separate email queries.

While the four banks allow UPI payments to originate from their own mobile applications, a large part of the transactions are driven by third-party applications they partner with, such as PhonePe and Google Pay. Both Google and WhatsApp, which is testing its payments product, work with these four banks for UPI payments. If Yes Bank’s transactions are added for October, then the share of the five commercial banks put together becomes more than 80%.

“Yes Bank has managed to ride the UPI wave with PhonePe, which offers the Yes Bank handle for transactions, they have also struck partnership with many third-party apps like Swiggy, MakeMyTrip, Cleartrip, Redbus and others,” said another banker in the know of the matter. Yes Bank has more than 20 partnerships with third-party applications, according to data shared by the National Payments Corporation of India.

While wallets had challenged banks briefly in the payments space, issues around full KYC — which was made mandatory — and initial restrictions on inter-operability have caused them to lose market share.

“With the volume of UPI transactions growing so fast, there will be stress on the systems of these banks which can cause technical declines to shoot up. The need is to get more banks to partner with major third party apps to reduce risks,” said a top executive of a fintech company.

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