Zomato launches its own UPI service, and Flipkart will soon follow.
Online food and grocery delivery platform Zomato has gone live as a third-party payments application provider for the Unified Payments Interface (UPI) for some of its users. The Gurgaon-based company has partnered with ICICI Bank for the service, and will allow users to make merchant payments as well as peer-to-peer payments.
Ecommerce major Flipkart has also started working on its own UPI offering according to people aware of the matter. Flipkart’s entry into UPI comes months after its separation from PhonePe, which now operates as a separate entity and is owned by Walmart.
“Flipkart has been working on the UPI offering and is part of the new bunch of companies like Zomato and others who would offer their own third-party payments service,” a person aware of the matter said.
For both Zomato and Flipkart, the move is aimed at servicing consumers better through their own UPI offerings, sources added.
ReTale had first reported in September last year that both Zomato and Swiggy were planning to join the UPI bandwagon with their own offerings for digital payments on the network.
Further, this is also a part of the broader attempt by the National Payments Corporation of India (NPCI), which manages the UPI network, to bring large consumer internet companies to the network to reduce dependency on Walmart-owned PhonePe and Google’s Gpay, which are currently the leaders in terms of UPI transaction market share.
NPCI had also proposed a cap on the market share of payment volumes for third-party apps with an aim to break the hegemony of PhonePe and GPay, which together hold over 80% market share. It had proposed a 30% cap on market share, planned to be implemented from December 31, 2022. However, this was deferred by two years.
“Zomato has a large set of customers that frequently use UPI to make payments for their food orders. We are providing a facility (as a technology partner to ICICI) for customers to create a UPI ID on the Zomato app so that they can make payments seamlessly (without the need to switch apps). There are no plans to tie up with more banks in the near future,” a spokesperson for Zomato said.
For both Flipkart and Zomato, the move to offer their own UPI service stems from the large user base that these companies serve. Sector experts pointed out that entering the UPI space would give platforms access to consumer data for one of the most popular payment options.
“Payments is an area that generates large amounts of data that tells how the consumer spends, at what frequency, under what conditions. With UPI, and its increasing use-cases, it makes more and more sense for companies with a large user base to not depend on other gateways. Once UPI for credit cards truly takes off, it could prove more useful with data of customers with generally higher ticket sizes becoming available,” a fintech sector analyst.
The analyst pointed out the older examples of consumer internet companies inorganically getting into payments with Flipkart’s acquisition of PhonePe, Ola’s buyout of ZipCash, Snapdeal buying FreeCharge (and having sold it to Axis Bank later), and ecommerce platform Infibeam acquiring payment gateway company CCAvenue.
“There is a longer-term incentive for consumer internet companies to have their own UPI offering instead of depending on other payment aggregators. For companies that see millions of transactions every year, having your own payment product is a way of hedging against any potential merchant commissions that may be imposed in the future,” a person aware of the developments said. This will also help with payment downtime during rush hour on food delivery platforms—especially in the evening.
In August 2021, Zomato had set up a subsidiary, Zomato Payments Pvt Ltd, to operate and offer digital payment services such as e-wallets, payment gateway services, and others. In 2020, Swiggy also launched its own digital wallet, Swiggy Money, in partnership with ICICI Bank. During calendar year 2022, Zomato had 58 million annual transacting customers, up from 49.5 million in 2021.
Also read | Paytm CEO Vijay Shekhar Sharma expects more revenues from expanding UPI use cases
Zomato also offers customers the option of making payments through its app at some restaurants listed on its platform, through a product called Zomato Pay, using various options such as cards, net banking, UPI, etc.
Earlier this month, Noida-based fintech company Paytm, which is third in the UPI pecking order after PhonePe and GPay, indicated that expanding the use cases of UPI to instruments beyond bank accounts could lead to revenue generation for companies offering these services.
ReTale had reported that one of the reasons NPCI chose to extend the market share cap deadline was because it believed other players have not been able to scale up operations.
Meta-owned WhatsApp Pay was being seen as a major challenger to incumbents Google Pay and PhonePe. However, it has not been able to build a meaningful share in UPI payments despite being allowed to take its payments services to 100 million users.
As part of the same broad approach, NPCI was attempting to bring on board consumer internet platforms with large user bases as third-party application providers. The Tata group’s superapp Tata Neu joined UPI last year. Other non-core fintech companies to offer UPI as third-party operators include Amazon, Makemytrip and WhatsApp.
According to the latest data from NPCI for the month of April, while PhonePe clocked 4.21 billion UPI transactions in August with a 46.8% market share, Google Pay turned in 3.11 billion transactions on the payments highway with a 34.5% share.
Third placed Paytm Payments Bank clocked 1.29 billion transactions with 14.4% market share, while players like Amazon Pay recorded only 53.44 million UPI transactions during April, with a market share of less than 1%.
In total, the UPI ecosystem recorded over 9 billion transactions in April, with a value of Rs 14.26 lakh crore.