Which FinTechs are the Major Drivers of UPI Adoption in India?

The past few years have witnessed rapid merchant onboarding to digital payments driven by ease of use and low setup, maintenance costs of QR codes. Fintech players have played a crucial role in driving the off-take of QR code placement at merchant Point Of Sales (POS).

QR payments are accepted by more than 30M merchants, a 12x increase from just 2.5M merchants accepting QR payments 5 years ago. However, growth in total number of POS machines, approximately 6M in FY22 has remained stagnant in comparison.

QR code acceptance has also penetrated amongst 75% business to consumer (B2C) merchants. This has driven merchant payments, increasing from about 12% share in UPI volumes in 2018 to more than 45% in 2021, based on PhonePe Pulse transaction trends data.

Tech disruptions and enablement by big tech and fintech: India saw substantial startup funding with customer payments players witnessing investment flows to the tune of US$1.4B in 2021.

The digital payments ecosystem has been disrupted by the entry of many new players with diverse offerings such as TPAPs driving payments at scale, niche players offering value added services through Buy Now Pay Later (BNPL) options and new gen credit scoring with payments data.

Tech giants and leading Indian fintech players have thus been key drivers of UPI adoption in India among end users and merchants with user-friendly transaction interfaces and innovative offerings; furthermore supported by an op en API ecosystem.

This is how the share of UPI transactions in India looks like amongst players, in FY22:

1/ PhonePe: 46%

2/ Google Pay: 34%

3/ Paytm: 14%

4/ All banks and other TPAPs: 6%

With PhonePe leading the pack, what do you think PhonePe is doing right with its penetration in India? Interestingly enough PhonePe was actually acquired for just $10M-$20M by Flipkart back in 2016, and now it's the leading FinTech in India with the highest % of UPI transactions.

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