Digital payments like Google Pay and Paytm are available at every other local shop these days. It is easy and quick, and hence people have widely accepted it. The numbers also suggest the same. In May 2023, UPI transactions marked a record high value of Rs 14.3 trillion and a volume of 9.41 billion, according to Economic Times.
Now after looking at the success of digital payment apps, banks also wish to jump on the bandwagon. And why not? After all, UPI has seen remarkable growth in the past few years.
But why do banks suddenly want to enter the digital payment space, and will they be able to establish their dominance?
Let’s find out.
What’s Happening?
Banks, once the undisputed leaders, have now taken a back seat while fintech giants like Paytm and PhonePe have become merchant’s favourites with their QR code magic. But now, the tables are turning, as banks have counterattacked them to reclaim their share of the lucrative merchant payments pie by deploying their own QR code stickers at merchant outlets.
Banking giants like ICICI Bank, Axis Bank, and HDFC Bank are already out on their mission of aggressively wooing merchants.
According to Economic Times, with 1.5 million active businesses using its merchant payments platform called InstaBiz, ICICI Bank is already leading the game. HDFC Bank also has over a million downloads for its merchant-facing platform, SmartHub Vyapar.
Meanwhile, Axis Bank is brewing a merchant-centric mobile app, complete with its sound box, just like Paytm and PhonePe.
Banks are leaving no stone unturned in their quest to win back the hearts of merchants.
Why Weren’t Banks Doing Anything Until Now?
To understand this, you need to understand how fintech companies function. The fintech companies have a brand, a QR code and a user-friendly process. When a user completes a transaction, the banks are the one who settles it. Moreover, merchants have their current accounts with banks. So, fintechs were just intermediaries, whereas banks were the main lead.
At first, everything seemed fine. Banks had the advantage as they had current accounts of merchants, and fintech companies were happy being the intermediaries.
But then, something unexpected happened – the fintech spotted an opportunity.
Realising the potential, fintech giants began offering credit facilities to these merchants. Because of this, banks suddenly saw their current account customers slipping away into the hands of fintech competitors. And that’s when banks decided to create their own merchant payment platform and a QR code.
However, the big question remains: can banks truly attract the merchant base of established payment apps like Paytm and PhonePe? And will merchants, who have grown accustomed to the convenience and familiarity of these fintech platforms, readily switch to their bank’s QR code?
Will Banks Be Able to Claim Their Lost Territory?
The journey will be difficult because customers and merchants are used to the user interface of fintech companies. So, banks will have to focus on user-friendly interfaces and simplify the lives of businesses.
Moreover, a bank is seen as a trustworthy source, and these days, when frauds happen everywhere every other day, customers may see a bank’s QR code as a safe option. This may be why banks stand a chance to win this battle for QR code supremacy.
That’s it for today. We hope you’ve found this article informative. Remember to spread the word among your friends. Until we meet again, stay curious!
*The companies mentioned are for information purposes only. This is not an investment advice.
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