Axis Bank is making significant strides in the Unified Payments Interface (UPI) ecosystem and might soon surpass Yes Bank as the leading payment service provider (PSP) by the end of September 2024. According to data from the National Payments Corporation of India (NPCI), Axis Bank is on a rapid ascent towards the top spot.
What is UPI?
UPI, managed by NPCI, is India’s most popular real-time payment system. It enables users to make instant transactions through various third-party UPI apps, known as TRAPs. These apps need to partner with banks, which act as PSPs, to connect with NPCI’s server and process transactions.
Current Standings
In August 2024, Yes Bank processed about 5.14 billion UPI transactions, while Axis Bank handled 5.13 billion. The difference between the two banks has dramatically decreased from over 1.5 billion transactions last year to just 13 million transactions now.
Yes Bank has a strong partnership with PhonePe, one of the leading UPI apps, which has helped it maintain its position at the top. On the other hand, Axis Bank collaborates with several UPI apps, including Google Pay, Amazon Pay, Flipkart UPI, Navi, and Cred.
Factors Contributing to Axis Bank’s Growth
- Stronger Relationship with PhonePe: Axis Bank has developed a closer relationship with PhonePe, especially after Yes Bank faced a crisis that led PhonePe to temporarily halt UPI transactions. This disruption prompted NPCI to recommend reducing reliance on a single bank and using multiple virtual payment addresses (VPAs). As a result, PhonePe shifted many accounts to Axis Bank as a precautionary measure. According to a senior fintech executive, Axis Bank’s transaction failure rates are similar to Yes Bank’s, making it a reliable alternative for PhonePe.
- Changes in UPI Market Dynamics: Google Pay, the second-largest UPI app, saw its market share drop from 44% to around 32-34% during this period. Axis Bank’s partnership with Google Pay helped it bridge the gap with Yes Bank. Although Google Pay’s market share has recovered to 37%, Axis remains a significant PSP partner. Historically, State Bank of India was the primary PSP for Google Pay, but Axis has taken over many of these accounts. Additionally, regulatory changes forced Paytm to shift its PSP banking services from Paytm Payments Bank to Yes Bank, Axis Bank, HDFC Bank, and SBI.
- Incentives and Fee Structures: Axis Bank’s success is also linked to its competitive fee-sharing arrangements with UPI apps. By offering a higher proportion of the PSP fee to apps like PhonePe, Axis Bank has incentivized these apps to direct more transactions to it. Although Axis Bank denies that fee structures are a primary factor, they are still a crucial part of their strategy to attract and retain UPI transactions.
UPI Remitter Members: UPI Top 10 Members (August 2024)
| Bank | Total Volume (In Mn) |
|---|---|
| State Bank Of India | 4,052.31 |
| HDFC Bank Ltd. | 1,270.59 |
| Bank of Baroda | 985.86 |
| Union Bank Of India | 941.93 |
| Punjab national Bank | 835.00 |
| Kotak Mahindra Bank | 772.93 |
| Axis bank Ltd. | 730.47 |
| Canara Bank | 722.42 |
| ICICI Bank Ltd. | 648.75 |
| Bank Of India | 478.26 |
UPI Beneficiary Members: UPI Top 10 Members (August 2024)
| Bank | Total Volume (In Mn) |
|---|---|
| Yes Bank Ltd. | 6,021.00 |
| State Bank Of India | 1,562.83 |
| Axis bank Ltd. | 1,437.88 |
| HDFC Bank Ltd. | 729.74 |
| ICICI Bank Ltd. | 605.83 |
| Bank of Baroda | 430.60 |
| Federal Bank Ltd. | 411.62 |
| Union Bank Of India | 379.29 |
| Canara Bank | 364.14 |
| Punjab national Bank | 336.13 |
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