Google Pay Makes A Quiet Move Up To Lead UPI Charts

Google Pay continues to record the highest amount of transactions on the UPI platform.

Google Pay. (Source: BloombergQuint)
Google Pay. (Source: BloombergQuint)

Google Pay recorded the highest value of transactions among Unified Payments Interface or UPI-based platforms in April 2019, with competitors PhonePe and Paytm hard on their heels, shows transaction data accessed by BloombergQuint.

The payments platform of Google LLC reported approximately Rs 49,700 crore in transactions in April. PhonePe reported nearly Rs 42,610 crore worth of transactions and Paytm reported volumes of Rs 35,500 crore during the same period. The three companies put together accounted for nearly 90 percent of the Rs 1.42 lakh crore worth transactions reported on the UPI platform last month.

The data compiled by National Payments Corporation of India isn't released publicly but is available to the industry.

In terms of volume of transactions, PhonePe was in the lead, with Paytm and Google Pay in close competition. PhonePe reported 25.8 crore transactions, while Google Pay and Paytm reported between 23-24 crore transactions each. In term of volumes, these three companies contributed to nearly 93 percent of the 78.2 crore UPI transactions in April.

BHIM, the UPI application created by National Payments Corporation of India, and the other applications available in the market accounted for the remaining volume and value of transactions. BHIM reported only 1.5 crore transactions worth Rs 6,600 crore during the month of April.

Google Pay declined to participate in the story.

Google Makes Quiet Gains

In an already crowded market for payment system, Google Pay has made quiet inroads since its launch in September 2017. The platform was first introduced under the brand name of Google Tez but later rechristened as Google Pay in August 2018.

While globally Google’s payment services have prioritised the near-field communication technologies, in India the technology giant decided to focus on UPI because of the limited penetration of the NFC technology. This technology allows customers to use their mobile devices to conduct digital transactions when they are close to a payment terminal.

According to a payment systems specialist who spoke to BloombergQuint on condition of anonymity, Google was clear on what it wanted to achieve in the Indian market. Over time, it hopes to become a no-frills attached default for payments.

At present, the Google Pay application allows only two basic payments functions. One is to send money and the other to receive it. It also allows the sender and receiver to chat on its application. This makes the service an easy-to-use, low-clutter option.

However, just like its peers, Google Pay, too, has relied on cashbacks to improve customer engagement. These cashbacks are designed such that higher engagement leads to higher rewards, said the payments specialist cited earlier.

“We believe Tez's (Google Pay) growth has, in part, been driven by heavy promotional spend and very high penetration (>80 percent share of smartphones) of Android phones in India,” said Bernstein Analysts Harshita Rawat and Gautam Chhugani in a May 15 report which looked at emerging competition for incumbent payment firms like Visa and Mastercard.

Google Pay has also recently expanded to online and bill payments (a must have to drive stickiness), entered into a potentially pivotal partnership with Uber, and has also partnered with some leading in-store POS (point-of-sale) companies to drive offline penetration.
Bernstein Report

Their goal, Rawat and Chhugani wrote, is to acquire the mass-market, newly online Indian consumer.

Data Localisation Challenge

Like many other multi-national firms providing payment services in India, Google Pay is also yet to become compliant with the new data localisation norms announced by the Reserve Bank of India last year.

In April 2018, the banking regulator had said that all payments systems operators must ensure that data regarding transactions conducted on their platforms in India must be stored locally and any data that exists on international servers must be deleted. The RBI had set the Oct. 15, 2018 as the deadline for this.

Many international payments companies such as Mastercard, Visa, American Express, as well as Google Pay had objected to the guidelines. However, the RBI refused to ease the rules.

Both Mastercard and Visa have sought time till September 2019 to be fully compliant with the norms, BloombergQuint had reported earlier. In October 2018, Google Pay had requested the central bank to allow it to be fully compliant with these norms by December. Google Pay has now requested time till September to be fully compliant, an NPCI official said on the condition of anonymity.

Since the RBI hasn't placed any restrictions on existing payment services by these firms, Google Pay has continued to grow despite being non-compliant. In contrast, WhatsApp’s payment services remain restricted as it was still in pilot-phase when the data localisation guidelines were released.

The Next Leg Of Growth

While firms like Google Pay, Paytm and PhonePe have expanded quickly in the payment space, making money from these services remains notoriously tough.

UPI services are mostly still free. While banks are now considering charging for such payments, the earnings purely from payment transactions will be limited.

According to Naveen Surya, a digital payments specialist based in India, the next bet will be to figure out how payment firms can use all the data available to them to cross-sell more products.

“There's a famous saying that if you're using something for free, you are the product,” Surya said. “Companies obviously want to use the customer data they are collecting to cross-sell other financial products in India.”

According to a fintech consultant, who declined to comment on record due to company policies, Google’s plan for growing in the financial services space could follow a three-step model. Since Google is essentially a social enterprise, the first step would be to use the UPI platform to improve customer engagement. This could help Google get newer users, which aligns with the next billion users idea, he said.

The next step would involve offering a wider suite of financial services products. Finally, Google has been toying with the idea of launching some form of commerce as part of its services. Should that happen, Google Pay will offer a captive payment option, the consultant said.

Competition will impact Google Pay’s future plans. So far, Google Pay has been facing competition from local players only. As well-capitalised global competitors like WhatsApp enter the market, the dynamics could change.

Recently, Amazon Pay became fully compliant with the data localisation norms and is rolling out full fledged UPI-based payments services, according to a report by Worldline in March. Similarly, WhatsApp Pay will be ready to launch full services by July, the Facebook Inc. owned company told the Supreme Court earlier this month.

As such, a verdict on who will emerge as the eventual leader in the Indian payments space remains up in the air.

With the plethora of payment options available, India “is rapidly becoming a test case for how the battle between global networks, domestic schemes (which often enjoy government backing), global internet giants, and Chinese players shakes out in other emerging markets,” said the Bernstein report cited earlier.