NPCI does not have money; mobile wallets like Paytm have an edge over UPI: Hota

DNA spoke to A P Hota, MD and CEO of National Payments Corporation of India to understand the reason behind UPI’s low market penetration, its competitors and challenges.

Demonetization has caused a radical change and made digital payments the new modus operandi of exchanging money. Post Prime Minister Narendra Modi’s announcement on November 8, mobile wallets jumped at the opportunity to advertise aggressively and saw a multifold increase in its user base while United Payments Interface (UPI), a single platform providing multiple banking services, faltered to rise to the occasion.

Former governor Raghuram Rajan’s brainchild- UPI was launched by the National Payments Corporation of India (NPCI), an organisation backed by the Reserve Bank of India (RBI). Formally launched in August, this interface system allows people to conduct real time transactions directly between their bank accounts through a virtual permanent address. It does away with the tedious process of requiring to enter details such as the account number, card number, IFSC code, etc and is touted to be as simple as sending an SMS.

DNA spoke to A P Hota, MD and CEO of NPCI to understand the reason behind the system’s low market penetration, its competitors and challenges.

Impact of the Demonetization drive

“UPI has got a fillip in the number of participants and usage. We used to have around 10,000 transactions a day but after demonetization, we are running at an average of about 35,000 and as of December 5, the confirmed user registration was at 2.6 million” said Hota. He further added that before demonetization, NPCI’s UPI had a daily registration number of 25,000-30,000. Post the Prime Minister’s announcement and his recent Mann ki Baat show, where he hugely promoted UPI, registrations have jumped to 1.5 lakh per day.

“Demonetization has helped make SBI and HDFC Bank participate in UPI” he added. While a total of 31 banks have gone live with the interface system, four Public Sector Banks (PSBs) namely- Indian Overseas Bank, Syndicate Bank, Corporation Bank and Punjab and Sind Bank have still not become participants.

Market penetration

Despite the aforementioned increase in registration number, UPI has still had a middling growth. While Hota stated that it has 2.6 million users, mobile wallets like Paytm and MobiKwik are much higher in popularity with 165 million and 40 million users respectively. When asked on why UPI wasn’t performing as well as mobile wallets, Hota said that the Achilles’ heel is the lack of money.

A P Hota MD, CEO of NPCI
Paytm’s advertisements are phenomenal in TV and newspapers. It is in a position to spend a lot of money and reach out, but we operate on a meagre budget. The Prime Minister has been speaking about UPI, but the money has to come in from somewhere and we do not have any.

He admitted that Paytm has an edge over UPI as far as user friendliness and convenience is concerned.

Hota stated that in order to increase the market outreach, there is a requirement for more banks to come on board. “It is a long procedure for banks to get the certification for UPI. Mobile wallets have a centralised solution with a single server while bank applications require heavy customization and integration, so it takes time for them to scale out.” Hota said that NPCI has set its target to get 50 banks and 25 million customers by March 31 and conduct 1 million transactions a day.


According to Hota, there are three major challenges currently impeding UPI’s growth, with the first being its awareness. He acknowledged that NPCI has been low on advertising and stated that,

A P Hota MD, CEO of NPCI
We are not going out in a big way through advertisements. We are reaching out through newspaper articles.

Even though UPI has 31 banks with a customer base of 300-350 million, the smartphone user base amongst this is 100 million out of which only 2.6 million are currently using UPI.

The second hurdle is that there is a limited number – 31 banks that have undertaken UPI. Cooperative banks have played an integral role to financially include the poor in the banking system. However currently, only one cooperative bank has gone live with UPI. Hota described that the long certification procedure to rope in cooperative banks is a stumbling block for the organisation and hence their focus is on PSBs. “PSBs have a large customer base so we would like to include them under UPI as quickly as possible.”

Another challenge is that UPI is primarily focused on smart phone services. When asked about how NPCI will tackle the issue of lack of the Internet connectivity especially in rural areas, Hota said, “There are parallel efforts by the government like broadband initiatives, making Mumbai 100% wifi enabled which will come in effect by the year end.” NPCI’s Unstructured Supplementary Service Data (USSD), can be the solution for feature phone users who are automatically restricted from UPI. This is because even though USSD has been capped at Rs 5000, it transfer funds sans Internet connection with a simple phone dial at *99#.

Competition and the way ahead

The organisation has planned to release a few ads soon along with radio jingles till December 15, said Hota. Commenting on its competitors, the CEO said that mobile wallets and UPI are complementary to each other.

A P Hota MD, CEO of NPCI
We are not looking at a competitive strategy. As the requirement of the market is so big, we need all kinds of solutions so that there is a wide choice for customers.

He further added that NPCI is working on making the interface system more user friendly which is expected to reflect in the launch of its second version, UPI 2.0 in March 2017. He touted that the enhanced version will have more specialised facilities like bill payments, insurance premiums etc. When asked whether he was apprehensive about the prevalence of cyber crime, especially after the recent ATM security breach, Hota assured that it was not a concern as UPI was extremely secure.

Even though UPI has crawled its way to find space in people’s smart phones, the government’s recent support should provide a shot in the arm to its growth. In its quest to turn the economy cashless, the Centre has formed a 13-member committee to map the way for the country’s digital payment system and get more merchants to accept UPI. Spearheaded by Andhra Chief Minister Chandrababu Naidu, the committee which includes various chief ministers, experts and NITI Aayog members, recently met bankers and RBI brass to develop a multipronged approach for the way forward.