Digital payments zoom past FY19 target driven by private lenders

BENGALURU: The government said digital transactions rose to 31.34 billion in the last financial year, exceeding the target by 4% and signalling a boost for the payment channel in the country. The Ministry of Electronics and Information Technology (MeitY) told bank bosses that digital transactions rose 51% from FY18 in a June 12 letter that was reviewed by ET.

The ministry ranked Yes Bank, IndusInd, ICICI Bank, Paytm Payments Bank and Axis Bank as the top five, in that order, based on various criteria. These include volume of transactions, number of terminals for Aadhaar based merchant payments deployed by them and the average success rate of transactions. The government has set a target of 40 billion digital payments for the current financial year. Digital payments in FY18 amounted to 20.75 billion and the FY19 target was 30.13 billion transactions. MeitY is the nodal ministry driving digital payments.

“Yes Bank has facilitated 432 million digital transactions during FY19, which is around 80% growth from what we have facilitated last year,” said Ritesh Pai, chief digital officer at Yes Bank. “We aim to grow at about 45-50% over next year, primarily through focus on instruments such as cards, Immediate Payments Service and Unified Payment Interface (UPI).” The bank is also understood to be one of the largest players in the merchant payments space on the UPI platform, where it works in partnership with Flipkart-owned digital payments platform PhonePe.


Public sector lenders were lower down in the rankings. State Bank of India, the country’s biggest lender, was at 27, below Bank of Baroda (BoB), also state-owned, at 22. The targets are assigned based on the size and reach of banks, so some large banks could have scored high on transaction numbers without making the top of the list as other MeitY criteria influence the rankings. The report only refers to volumes and not the amounts that are being moved through the channel.

Paytm Payments Bank, owned by Vijay Shekhar Sharma, was the only one from that segment in the top five. Airtel Payments Bank and Fino Payments Bank exceeded targets more than twice over, according to ministry data.

‘PoS Deployments a Challenge’
But they have not played any part in BHIM (Bharat Interface for Money) Aadhaar PoS (point of sale) deployments.

“In FY19, Paytm Payments Bank processed 393 crore digital transactions, 111% of the MeitY target set for us. The target set for the current year is 501 crore digital transactions,” said a Paytm Payments Bank spokesperson. It says it has a merchant base of 12 million.

The ministry has set transaction targets for this year, as per documents ET has seen. SBI’s target is 7.68 billion transactions, while that of Paytm Payments Bank is 5 billion, ICICI Bank’s is 2.8 billion and HDFC Bank’s is 2.53 billion.

Even as the number of digital transactions rise, the bigger challenge is to expand payment acceptance points across retail merchant networks, experts said.

The cost of operating terminals, network constraints in small towns and low usage levels have hampered growth. ET reported on May 15 that banks had only achieved 44% of the total 2 million PoS deployment target set by the government for FY19. For the current year, the target stands at 8.5 million across rural areas and the Northeast. These terminals could straddle traditional PoS terminals, QR codes, wallets and UPI.