In the ever-evolving landscape of digital transactions in India, a recent report by Bernstein, a global wealth management firm, has shed light on the exceptional dominance of the top four Unified Payments Interface (UPI) players. These four formidable entities, including three fintech giants – Paytm, PhonePe, and Google Pay – have collectively seized a staggering 95 percent share of UPI transactions.
This revelation underscores a remarkable shift in the dynamics of digital payments, where traditional banks find themselves with a limited stake in the UPI realm. Regulatory constraints and the absence of a substantial physical distribution network have curtailed banks’ influence on UPI transactions.
The report titled “India’s Promise: The Rise of Digital Credit — the Most Profitable Part of the Financial Inclusion Journey” underscores the impact of UPI on traditional cashless payment methods, particularly debit card usage, which has been on a steady decline over the past five years. This decline is noteworthy, given the relatively low debit card penetration compared to other global markets.
While UPI’s ascendancy challenges conventional payment norms, the report commends India’s strides in financial inclusion. India’s financial inclusion initiatives, with a focus on expanding access to bank accounts and increasing the number of savings deposit accounts, have garnered international acclaim. Few nations rival India’s progress in financial inclusion, particularly concerning deposits and payments.
The Pradhan Mantri Jan-Dhan Yojana (PMJDY) has emerged as a pivotal force behind the substantial growth in savings deposit accounts, ensuring universal access to essential transaction banking services. This program, available through all banks, saw Public Sector Banks (PSBs) and Regional Rural Banks (RRBs) accounting for over 95 percent of the accounts opened. The extensive distribution networks of these PSBs and RRBs played a pivotal role in this achievement.
Remarkably, even in urban areas, where private sector banks are present, PSBs and RRBs have maintained a prominent position in driving financial inclusion, a testament to their wide-reaching influence.
In essence, India’s financial landscape is witnessing a transformative shift, with digital payment leaders redefining the way transactions are conducted, while traditional banks adapt to this paradigm shift.
