India's top payments companies managed to grow their user base and fashion a rebound in digital transactions in May using a mix of cashbacks, advertising campaigns and quick solutions built for merchants. This, despite the fact that much of the country remained under lockdown in May and consumers spent cautiously.
The value of transactions on the Unified Payments Interface fell by 27% in April due to restrictions imposed across the country in the wake of the Covid-19 pandemic. But UPI transactions shot back up in May, rising 45% month-on-month to Rs 2.18 lakh crore, according to data from the National Payments Corporation of India.
Industry participants explain that a few factors drove the rebound.
The first was a surge in new or first-time users on the platform, the second was an increase in cashbacks, discounts or rewards by some players and the third is through quick-fix solutions aimed at solving logistics issues faced by offline merchants. A large volume of contributions through these platforms towards the PM Cares relief fund also helped.
These factors, together with aggressive social media campaigns including National Payment Corporation of India's ‘UPI chalega' promotions, helped ensure a quick rebound for UPI transactions.
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June 3, 2020Rise In New UPI And Wallet Users
According to the industry participants that BloombergQuint spoke with, the top four payments apps—Paytm, PhonePe, Google Pay and Amazon Pay—witnessed 20-30% growth in consumer base over the past few months.
PhonePe's consumer base has increased by 50% compared to the pre-pandemic level across older cohorts and people from lower income segments as well, said Karthik Raghupathy, vice president and head of strategy and business development at the Flipkart Group company.
“While the number of users has increased and the average value of transactions on our platform has increased as well, we are also seeing a shift in the transaction mix from offline merchant payments account for the majority of transactions pre-Covid period to a spike in payments for essential goods like bill payments, medicines and groceries,” he said.
Google Pay and Amazon Pay declined to share precise data for increase in users. Paytm didn't respond to an email from BloombergQuint.
E-wallet transactions also surged.
During the first 30-days of the lockdown, Amazon Pay, Jio Money and Paytm saw a surge in e-wallet transactions mainly due to contributions to the PM CARES Fund and cashback offers, according a report by Razorpay.
“Mobile wallets exhibited impressive growth in the lockdown period, with Jio Money growing by 66%, Amazon Pay by 63%, and Paytm by 43%. In Tier-2 and Tier-3 cities, the mobile wallet wave swept over as they continued to witness a massive surge in wallet transactions for bill payments,” it said.
Cashbacks Act As An Added Incentive
During the initial boom period of digital payments apps, all payment service providers used cashbacks as a consumer acquisition strategy. Over time, these were scaled back.
However, cashbacks made a stronger comeback during the lockdown period.
Recent social media posts by Google Pay, Amazon Pay and Paytm shows that they have been using cashbacks and discounts to boost transactions in the past two months.
While Google Pay is providing cashbacks to push users to pay bills, Paytm is offering cashbacks and merchant-based discounts or vouchers for education services, flight bookings and pharmacies.
Similarly, Amazon Pay is providing cashbacks on electronics, mobile phone purchases, food delivery, entertainment and various bill payment services.
PhonePe has shifted away from cashbacks to partner-based discounts and offers, said Raghupathy. “This allows us to monetise the platform better compared to cashbacks as they are not sustainable and do not lead to customer stickiness.”
A senior payments industry adviser, who spoke to BloombergQuint on the condition of anonymity, said that Amazon Pay has been gaining market share in UPI and e-wallet transactions through an aggressive cashbacks and discounts strategy over the last one year. They initially used cashbacks to gain a foothold in the bills payments space, but in the last few months they have been using cashbacks and discounts for first-time users and existing customers, this person said.
Since Amazons' e-commerce platform was operational during the lockdown, mainly for essential goods, it had an advantage and used this cashback or discount strategy to increase its share of e-wallets and UPI transactions, this person said. Amazon Pay had a 30% share among e-wallets in terms of transactions on Razorpay's platform prior to the lockdown, which increased to 55% between March 24 and April 23, according to Razorpay's report.
“Cashbacks have continued to prevail but not at the peak levels seen four years ago. Usually, it is used by a new player when they enter the market or when existing firms want to attract customers to use a new service,” said Naveen Surya, chairman, fintech convergence council and chairman emeritus, Payments Council of India.
The companies could be using cashbacks to push customers to use UPI for paying their bills for example, but in times like these the demand for digital payments is already high so it may be useful mostly as a promotion tool, he said.
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May 29, 2020Quick-Fix Solutions For Merchants
To be sure, promotions and discounts weren't the only factors that helped UPI volumes rebound. Payment services providers were quick on their feet to provide solutions needed by merchants amid the nationwide lockdown.
Both Google Pay and PhonePe launched a mapping function in their mobile application which allowed customers to find and contact nearby stores that were providing basic essential goods, medicines, and groceries.
Sajith Sivanandan, business head at Google Pay, said in an emailed response that the company has expended the ‘Nearby Stores Spot' feature to 35 cities from 4 major cities in April. He added that HP Gas, Bharat Petroleum and Indane were also added to the application to allow all its users to pay bills.
Paytm, in a recent statement, said that its Business Khata or e-ledger service for merchants, witnessed a four-fold growth in merchant payments during the two-month lockdown until May 15, compared to the preceding two months.
“Over the last few months, Amazon Pay has been working to serve micro, small medium enterprises across the country visiting door-to-door and enabling safe, contact-free digital payments to help local shops offer contract less payments,” an Amazon Pay spokesperson said in an emailed response.
Currently, we have over millions of merchants and continue to see a 10% increase in merchant signups on a month-on-month basis, this person said.
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