YES Bank’s bet on UPI platform helps it make space in digital payments ecosystem

MUMBAI | BENGALURU: YES Bank’s bet on the Unified Payments Interface (UPI) platform, launched in August last year, has helped it steadily make a significant space for itself in the digital payments ecosystem. The bank is now on the cusp of breaking even on investments made for its UPI operations. YES Bank is also confident its UPI transactions will surpass those of the government-backed BHIM app by June.
“There are large investments that have gone into building YES Bank’s set-up. In the next four to five months, the bank will break even on all investments on an operational level on the UPI front, including infrastructure cost and customer acquisitions,” Ritesh Pai, chief digital officer of the bank, told ET.

While the bank declined to comment on investment financials made for the platform, two people aware of the bank’s spends on UPI told ET that the Rana Kapoor-led bank has spent about Rs 1.5 crore on the technology and infrastructure setup for the platform.

YES Bank is also on course to topple BHIM and become the market leader soon. “We expect to cross BHIM’s market share of 40% on UPI by June,” said Pai.

To lead the race, the bank is aggressively looking to increase its merchant-network base. “To cross BHIM’s market share, we will have to widen the base to include more players. We believe that the P2M (peer-to-merchants) payments arm needs focus to ensure that the ecosystem benefits,” he said.

Currently, the BHIM app holds the largest market share on UPI contributing to over 40% of all transactions, according to data by the National Payments Corporation of India (NCPI), which runs the UPI platform. YES Bank claims to come a close second with a 32% share that is garnered from its network of over 60 merchant partners. The bank said it did an average of 1.2 lakh UPI transactions on a daily basis in May, while NPCI data shows the average daily UPI transactions were about 3 lakh in May.

According to NPCI chief operating officer Dilip Asbe, the dynamics in the UPI ecosystem is set to change in the next few months, as banks are competing to tie-up with the largest partners and merchants.

Banks like Axis Bank and ICICI Bank recently tied up with players like Samsung and Truecaller respectively. There are currently 50 banks on the UPI platform.

“The play will depend on merchant acquisition, and whoever can expand their merchant will lead in UPI transactions by creating the supply side,” Asbe said.

YES Bank has been driving a large part of its UPI volumes through its partnership with Flipkart-owned PhonePe, which accounts for about 75% of UPI transactions for the bank. PhonePe has enabled the bank to host transactions made from the dominant players in the ecommerce space including Flipkart, Myntra and Jabong, among others. During Flipkart’s recent five-day sale, PhonePe registered one million UPI transactions.

Apart from PhonePe, YES Bank also works with online and offline merchants such as Meru Cabs, Motilal Oswal, Reliance Securities, Capital Float and Trupay.