So, India’s UPI market seems to continue to get bigger and brighter. Foreign countries seem to be marvelling at what UPI can do and India’s partnered with a couple of these countries to attempt to foster UPI interoperability, among other developments. In October 2024, there were said to be roughly 16.5 billion UPI transactions. Not too shabby.
But, could it be possible that right now, there may be too many UPI players in India? That’s what it seems like, especially when the development came out in December 2024 that Bajaj Finance is scaling back its ambitions in the payments space, including UPI.
In Q32024, PhonePe was said to hold close to a 50% share in UPI usage in India, followed by Google Pay at close to 40%. A bit of a distant third, Paytm is said to have close to a 10% market share. It’s said that Bajaj Finance ranked 24th in the UPI payment business.
Interestingly, it’s said that there might have been a decline in UPI transactions in November 2024. For that month, PhonePe had about 7.4 billion transactions, Google Pay had about 5.7 billion, Paytm had about a billion and trailing, kind of, behind was Bajaj Finserv at roughly 8.4 million transactions, according to NPCI data.
And it’s not like Bajaj Finance wasn’t working hard to be a big deal in India’s payment and credit card markets. According to a LiveMint report, Bajaj Finance was, previously, aggressively expanding offerings, like UPI, prepaid wallets, bill payments, merchant QR codes and more, while, also, strengthening co-branded credit partnerships with financial institutions, like RBL and DBS India. It’s said that about $100 million was invested in building Bajaj Pay. Imagine spending that much money and, unfortunately, not being able to make a dent.
As Rajeev Jain, MD – Bajaj Finance, told LiveMint, the functionalities of Bajaj Pay were virtually similar to Google Pay and PhonePe, due to huge inertia, leading to a struggle with profitability in the payments business. And now, it’s pivoting to make sure its payment business becomes viable using AI, instead of opting for a high-cost and low-margin strategy. An earlier goal of capturing 3% of UPI GMV by FY2029 has been said to be revised downward to 1%. Furthermore, it’s said that co-branded credit credit partnerships are no longer happening, with regulatory restrictions seemingly limiting the role of co-brand partners being cited.
This kind of reflects the post-funding-winter trend: less aggressive expansion, more sustainable profitability. It might make sense, considering how the growth of a lot of UPI brands might have been built on slim margins or maybe, even, no margins at all. Especially, since UPI is, more or less, free and there’s said to be zero-MDR. So, PSPs may have been scrambling to figure out how to accumulate some cheddar for themselves, though, there might be some ancillary services at play.
Plus, a September 2024 survey by Localcircles outlined that around 75% of UPI users would stop using it if there were any transaction charges levied. Looks like consumers have been getting a bit spoiled with the expectation of the best services for little to no charges.
So, the UPI market seems to be a bit of an oligopoly at the moment with around 90% of the market share dominated by 3 players. Even the Big 3 might be burning some cash with their referral bonuses or cashback offers or, somewhat, obsolete and irrelevant rewards.
Even WhatsApp, which has such a huge chunk of users in India, might be struggling to compete with the 3 Goliaths, though it has done, kind of, well with about 51 million transactions in November 2024. So, has user loyalty already hardened around the incumbents? Or is there anything new or innovative for the other PSPs to do to get bigger? To some extent, maybe, there could be some interest piqued if a PSP could get personalized pictures made into individual QR codes. There was some interest in that technology on social media in 2022 or 2023, maybe, that could create some personalization and user stickiness, but that remains to be seen.
In 2025, which PSP will you be paying attention to?
