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How Payment Apps Became The Next Big Thing In India?

Maybe it was Google Pay’s scratch cards or PhonePe’s cashback but our country is completely hooked to payment apps now.

Digital Payments — The Beginning

Since the introduction of smartphones, we, Indians, have been finding new ways to get everything done through our phones. But it took digital payments a while to become a huge thing in India while the lack of trust over sending money online was one big reason. Many people in India had various questions — If the cash doesn’t reach the person, whom should I contact? — the bank or the app or the internet service provider.

But all of this changed, when demonetisation happened on the eve of 8th November 2016. Post demonetisation, Rupay card transactions have witnessed a magnificent surge from 6.2 million to 18.16 million in volume and this didn’t stop when things returned to normal. Digital payments continued to surge by many folds and the curve is still going up.

The Growth Of Digital Payments

  • As per the “India Mobile Payments Market Report” by S&P Global Market Intelligence, mobile payments initiated by apps, consisting of account-to-account transfers and payments made from stored-value accounts, surged 163% to $287 billion in 2019.
  • The report said the cashless payments increased in 2019, as card and mobile payments as a percentage of gross domestic product (GDP) surged to 20% in the quarter ended December 31, 2019, from 13% in the same quarter of 2018.
  • The report also said that UPI processed almost 11 billion transactions in 2019. Based on a monthly rate of $31 billion in February, UPI payments are already recording over $373 billion in annualised payment value in 2020.
  • Google Pay and Phone-led UPI payment apps handed more than 7 billion transactions in total, representing over two-thirds of UPI transactions in 2019.

The Reason Behind The Massive Growth

Firstly, during demonetisation, most of the population was kinda pushed towards payment apps. But now, during the pandemic, people and a lot of companies are encouraging people to do cashless transactions to control the spread of viruses and germs which may be present on currency notes.

The Ultimate Strategy

The solution found by payment apps to make people get hooked on them is by rewarding them. Google Pay did this on a massive scale. It paid people money when they were doing transactions through the app and this was a huge hit.

As per an Entrackr report in 2019, which cited regulatory documents, Google India Digital Services spent around ₹1,369 crore in cashback rewards over the past two financial years. Another article said that India’s top payment apps spent nearly $1 billion to attract customers in FY19.

And this turned out to be a killer strategy because it’s working tremendously. According to the figures from Statista, GPay constituted a share of 54% of all UPI usage in India during FY19 and it has amassed more than 67 million monthly active users. GPay was followed by PhonePe and Paytm on the list.

As per a Credit Suisse estimate, India’s mobile payments market could touch $1 trillion by 2023. But experts believe that the entry of WhatsApp Pay could change the entire game. Since WhatsApp already has over 400 million users, it wouldn’t take the company much time to convert them into active users of WhatsApp Pay. WhatsApp Pay might become like a monopoly in this space but it might take a while for that to happen.

However, there is a high chance that the current payment apps will continue to fight for the market share because this is a gold mine for those who have already set out their sails!

Head to moneyguru’s Insight section to stay updated on all major financial news updates of the day!

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