In today's fast-paced world, where a stable income is crucial, the game-changing power of UPI apps has transformed how we move money. But have you ever pondered the secret behind these digital payment apps? So, let’s plunge into the enigmatic process of turning transactions into revenue by these UPI apps.
According to a report, India has become the global leader in real time transactions with 41 million transactions per day! Nowadays, making payments on the go has become easier than ever with the introduction of UPI (Unified Payment Interface) as it plays a significant role in streamlining fund exchanges. UPI payments were introduced by the National Payment Corporation of India ( NPCI) to make the process of online transactions run smoothly.
Now, let's talk about how big the UPI industry is. At the end of the calendar year 2022, the total transaction value done through UPI was 125.95 lakh crores (1.75x YoY). As per the NPCI, the total UPI transaction value accounted for nearly 86% of India’s GDP in Financial Year 2022. Three years after its launch, UPI has not only accrued 100 million+ users but has also recorded more than 1.25 billion transactions since then.
With 67 million active users on Google Pay (Gpay) and more than 150 million people using Paytm to process their daily transactions, the competition in the UPI industry is growing rapidly. According to the company, there are 55 million bank accounts and 300 million mobile wallet accounts overall on the network. Apps like PhonePe, BHIM, MobiKwik, and SBI Pay have also had a big impact on facilitating UPI transactions.
There is no doubt that UPI apps have revolutionised the way people in India make digital payments. Not only do they facilitate inter-bank, peer to peer, and merchant transfers, but also help in promoting a cashless economy by providing security to their users and allowing them to make transactions through multiple bank accounts.
But the real question that arises is that are these UPI apps making any money? If yes, then how?
How they run and how they generate their revenue is something that we’re all curious to know.
Basically, they function as broking apps, working between the user and another third party application. They generate revenue over some time through leveraging consumers and vendors by the monopoly. UPI apps also make money through commissions as all these businesses have agreements with brands for a brand placement fee by providing everyday facilities like (recharge, bill payment,DTH activation). For example, you might have seen a scratch card with offers that provide a discount of ₹100 on placing an order with any XYZ company.
These apps also charge a subscription fee (a small transaction fee) for each of the POS devices that are installed at kirana stores or shopping marts that allow customers to scan and make payments. These businesses also end up taking money from customers on behalf of their lenders, earning them 0.5% to 1.5% of the total amount of the current disbursement.
Data collecting for marketing services is another good source of income for these UPI apps as they have a huge user base and can sell the data to earn profits. This data provides valuable insights on consumer behaviour, which further help in the analysis of their preferences.
“The current pandemic has highlighted the critical importance of instantly getting funds whether for individuals or for businesses”, said Raja Gopalkrishna, the head of global real time payments at FIS. India’s growth is 213% up by handling these daily transactions. In future, the UPI apps will create a greater impact on our economy and for the customers while taking a cut out for themselves. The results also show a high level of consumer confidence and readiness in accepting and making digital payments.