Google Pay handles over 80% of all mobile transactions made POS stalls in India, making it the dominant player. How did Google Pay become so popular?
India underwent a mobile payments revolution through its UPI program. A lively digital ecosystem has sprung with many start-ups and payment providers battling it to become the dominant player in this expanding market. One however stands out, Google, who with its Google Pay solution captured nearly the entire mobile payments market.
In the first half of 2019, Google Pay represented 66 percent of all payments conducted at Point of Sale stalls. A mere two years later, in the first quarter of 2021, its share had grown to 82 percent. While its share had declined to 80 percent in the third quarter of 2022, the payment service saw a speedy recovery to 82 percent by the end of 2023. How did Google manage to become the largest digital payment provider in India?
Strategic importance
In September 2016, CEO at Google, Sundar Pichai elaborated on the strategic importance of India for the company’s business. In an op-ed, cited by The Verge, Pichai pointed out that the rapid development of the internet across India would serve as a benchmark for upcoming trends across other regions. He had witnessed noticeable improvements for its product in India, with a specific focus on mobile, allowing for the company to get a glimpse into the internet of tomorrow.
Pichai noted that Indians still faced many connectivity and data challenges, which turned to be a blessing in disguise as Google created Google Maps for offline use, which saw success in countries across Europe and the United States. The Verge adds that smartphones are the primary gateway for Indian citizens to access the internet, with developed countries like the United States seeing a slower pickup of mobile traffic. Hence, Google believes by tapping into India’s unique market dynamics, it can create innovative products.
Google’s commitment to the Indian market was exemplified in the billions of dollars it was set to invest in the country. In July 2020, the company announced it would invest $10 billion to aid India’s upcoming digital economy. During the live event, Pichai detailed the funding would be distributed over a period of 5 to 7 years, where it would allocate its investments toward operational, infrastructure and ecosystem projects.
The first round of investments would go to enabling affordable access to information, irrespective of language, The Indian Express noted. During the second stage, Google would create tailored products and services for the Indian market, which aim to further accelerate the digital transformation. One such example is developing and integrating artificial intelligence across the health and education sector.
In January 2022, Google announced it would invest $1 billion in India’s telecom operator Bharti Airtel, with the funding coming from the earlier announced investment fund. The investment is intended to help Airtel develop its devices division, home broadband, data centers, cloud infrastructure and 5G network. Airtel is the second-largest carrier in the country, Reuters noted.
The operator, according to the news outlet, was entangled in a pricing war with its major competitor Jio, owned by India’s richest man Mukesh Ambani. Telecom analyst at Motilal Oswal Financial Services, Aliasgar Shakir, told Reuters, the investment by Google would allow Airtel to continue investing its delivering affordable smartphones, roll-out 5G and expand its cloud ecosystem to attract and support small to medium enterprises.
While Google hasn’t explicitly stated it wanted to accelerate its presence in the mobile payments market, ensuring that all pieces were in place, such as a strong mobile network and a high smartphone adoption, are crucial for its services to succeed. Knowing that it can still influence the course in which the Indian digital economy can grow, makes such large investments a worthwhile endeavor.
Google launches Tez
In September 2017, Google announced its mobile payments app for India, called Tez. The tech company noted that with over 300 million smartphone users and rapidly expanding internet coverage, the needs of consumers started to shift to digital services. From watching videos, playing games to messaging friends, the mobile ecosystem in India was starting to shape. However, a key piece of the puzzle was still underdeveloped, mobile payments. A need that Google wanted to tap into with Tez.
Google Tez would connect through the Unified Payments Interface (UPI) standard, the widely successful mobile payment interface, that leapfrogged India’s currency system into the digital. Tez would include Cash Mode, which allowed for easy money transfer without personal data attached. The bank account and phone number would remain private during the transaction. Payments can also be completed through QR-code scanning or NFC, with Tez being able to communicate between Android and iOs devices.
Offline and online businesses can automatically allocate Tez payments to their savings or individual current accounts. To further support businesses, Google added the Tez for Business program, which allowed business owners to safely process UPI Payments on their mobile websites. Through the dedicated Business Channel, merchants can inform users about discounts, product orders and reminders for recurring payments. Companies like Jet Airways and Domino’s have shown their support for the solution.
Tez launched with all 55 banks who provide UPI support, including top 4 banks, Axis Bank, HDFC Bank, ICICI Bank and the State Bank of India. Adding support for the four largest Indian banks enabled Google to immediately tap into a large audience. Furthermore, Tez comes free of charge, with money staying in the user’s bank account for interest purposes and no need to set up a dedicated top-up wallet.
Tez becomes Google Pay
In August 2018, Google revealed the next step for its mobile payments solution, Tez, the rebranding to Google Pay. In almost a year since its introduction, Tez attracted 22 million people and businesses, who use the solution every month, reaching over 300,000 communities across India. People used Tez to pay their electrician, book bus rides, or split bills with friends, Google highlighted. With over 750 million completed translation, worth over $30 billion, it was time for the next step for the fledgling payment service.
Launching Tez taught valuable lessons to the Google team, with governments taking note of the success of the solution, which could bring easy digital payments to countries around the world. In order to harmonize the success of Tez and strengthen Google Pay’s value proposition, the two brands would merge into Google Pay. The tech company adds that by integrating the service into Google Pay, it would allow for an easier expansion across other services and Google products.
Google had already been adding support for Google Pay at online providers such as Goibibo, FreshMenu, redBus, and two thousand other shops and mobile apps, the company highlighted, with more upcoming partnerships on the roadmap, such as BookMyShow, Big Bazaar e-Zone and FBB. These big name brands are part of a wider network of 1.2 million local businesses across India that Google wants to support with its payment solution.
By integrating these businesses with its other services, Search and Maps, Google improves discoverability and allows for easy communication between merchant and customer. The company said it was already testing the service expansion with selected merchants in Bangalore and Delhi. In following years, we would see Google adding new features to Google Pay in rapid succession and increase brand awareness with large advertising campaigns.
Pushing Google Pay
In August 2019, Google introduced its new Google Pay advertisement campaign, featuring Ramakant Achrekar, former coach of international cricketer Sachin Tendulkar and India’s youngest female Sarpanch, Chhavi Rajawat, among others, who overcame the odds to become iconic figures in the nation’s history books. The Agency Reporter noted the campaigns how ordinary people can make a big difference. Adding that Google wants to close the gap to primary competitor PayTim.
Director of Marketing, India and Southeast Asia, Google, Sapna Chadha, commented that since its 2017 launch, the company has seen wide adoption of its payment solution, with people using Google Pay to complete payments for a wide variety of occasions, from paying bills to shopping online. Google Pay made many daily interactions hassle-free and more efficient, Chadha added. These small interactions formed the basis for the new ad campaign.
The campaign was an extension to the September 2018 ‘La Familia’ ad campaign, featuring multiple advertisements, turning the spotlight on everyday events. The ‘La Familia’ ads were created in cooperation with the MullenLowe Group agency and emphasized the security benefits of using Google Pay. Through these campaigns, Google pushed the narrative of making everyday interactions safe and simple.
In November 2021, Google launched its #SaferwithGoogle campaign to inform users of Google Pay about scams during the festive period. The advertising campaign created in cooperation with agency Lowe Lintas, now shifting the focus to consumers instead of small to medium size businesses, showcases a feature that warns users about a possible malicious transaction. The ads are an extension to Google’s familiar team of safety and security.
Feature expansion
Google started to follow the key features for its Indian market expansion, including its Google Pay solution. In May 2021, Google partnered with Wise and Western Union to support international bank transfers, with U.S users now able to transfer money to recipients in India and Singapore. Google would calculate a modest fee for the service. CNBC notes that Google followed in the footsteps of Apple and Alibaba, with tech companies extending their reach into financial markets.
The fees captured on those transactions is oftentimes low, however when investing heavily into user acquisition during the ramp-up phase, hundreds of millions of recurring payments, make for a stable business model. In March 2023, Google announced its collaboration with Pine Labs to support UPI Tap to Pay support at merchant terminals. Google Pay could now easily verify payments from supported payment terminals with their UPI Pint. Business head for Google Pay and Next Billion User initiatives for Google APAC, Sajith Sivanandan, said the Tap to Pay for UPI would further solidify easy payments at POS and reduce hassle at high traffic outlets.
In May 2023, Google Pay launched UPI payment support for RuPay credit cards. Chief Relationship Management and Key Initiatives, Corporate Business from National Payments Corporation of India (NPCI), Nalin Bansal, commented that RuPay’s Credit Card in combination with UPI delivers a seamless payment experience and by offering access to a digital credit card, the payment method will be allowed to mature. By partnering with Google Pay, Bansal believed it was another push for credit democratization in India.
A month later, in June 2023, Google partnered with the NPCI to add Aadhaar-based authentication for UPI activation for easier onboarding on Google Pay. Aadhaar is a 12-digital random number issued by the Unique Identification Authority of India (UIDAI), which can be issued free-of-charge to any Indian resident irrespective of age and gender. Through this unique identifier, Indian citizens can apply for Government welfare schemes and programmes, aiming to improve financial inclusion.
Adding the Aadhaar system served as a crucial step to further nestle Google Pay within Indian society. In May 2023, a month before the announcement, the India Times reported that transactions authenticated through Aadhaar reached a saturation share of 94.8 percent among all age groups, with 1.96 billion completed transactions in April 2023 alone. A growth of 19.3 percent compared to the same period last year.
Shortly after the introduction of Aadhaar-based authentication, in July 2023, Google launched the UPI Lite Wallet to support wallets valued up to 2,000 Indian Rupee ($24.01). Adding UPI Lite enables users to complete small payments without using pin verification, allowing for fast payments during peak hours with lower failure rates, the Indian Express highlighted. At the time of Google Pay integration UPI Lite was supported by 15 major public sector and private banks, with PhonePe and BHIM, behind the first partners for the payment program.
PhonePe wars
The reasons for Google’s advertising campaign and aggressive feature expansion aren’t solely out of impatience to capture the Indian mobile payments market. Google Pay is involved in a fierce battle to obtain marketing dominance for digital payments. We’ve opened the article by stating that Google had nearly captured the entire POS-market, however, in terms of UPI transactions, Google Pay has trouble maintaining its position.
In December 2020, PhonePe overtook Google Pay in terms of the number of completed UPI transactions, according to data published by the NPCI, referenced by News18. In the month of December 2020, PhonePe handled 902.03 million user-initiated transactions compared to Google Pay’s 854.49 million transactions. This puts a dent into Google’s long streak of market dominance, with PhonePe gaining momentum, ultimately leading up to taking the top position.
The timing is crucial as NPCI maintains tight control over UPI payments completed by Third-Party App Providers (TPAPs). News18 pointed out that the NPCI has capped payments at 30 percent of the total UPI volume, which means parties like Google Pay, Paytm, Mobikwik and WhatsApp have only a finite market as the NPCI is assessing the risks of allowing third-parties into the space and the system itself, the news outlet adds.
Fast forward to June 2023, and PhonePe was holding its own in terms of UPI completed payments, according to Worldline’s India Digital Payments Report over the first half of 2023, cited by The New Indian Express. In the month of June, PhonePe maintained a market share of 49.8 percent, completing 3,266.8 million transactions, with Google Pay taking the second spot. PhonePe, together with Google Pay and Paytm accounted for 95.68 percent of all UPI payments over the month of June.
Android dominance
We’ll briefly circle back to Google Pay’s success. Google’s investments into the Indian market, helping carriers to cheaply deliver mobile data and smartphones,was a vital piece of the equation which ensured the company was able to build a near monopoly. In January 2014, Google’s Android operating system had a market share of 34.78 percent. Its market dominance started to grow rapidly as Nokia started to lose its footing in the market, seeing its SymbianOS vanish into thin air.
In January 2015, Android captured 55.26 percent of the market. The years after Google’s market capitalization started to expand rapidly. At the time of Pichai op-ed stating India’s strategic importance in September 2016, Android’s market share had grown to 70.67 percent. In July 2018, market share had grown to 90.85 percent. This enormous reach helps Google to rapidly roll-out new services and capture large audiences, making its products quickly profitable when executed properly.
Additionally, we have to acknowledge the ad hoc decision making surrounding restructuring the payment ecosystem by Indian policymakers, who brute-force digital payments onto its systems. This shock therapy led to chaos during roll-out, whilst simultaneously laying the foundations for a vibrant digital ecosystem that Google could tap into.
Growing pains
Google has been investing billions into India, accelerating its digitization to create the necessary conditions for its products to thrive. The far reach of its Android operating system also served as the perfect vehicle to put Google Pay at people’s fingertips. Nonetheless, its success isn’t without its limitations. Google has yet to make a profit on UPI payments, which are regulated by the NPCI, who banned payment service providers from introducing fees.
In May 2024, Reuters commented that only Google and PhonePe have been heavily pushing mobile payments through UPI, whilst WhatsApp and Amazon Pay aren’t promoting their solutions as heavily. This has created a duopoly of Google and PhonePe who now control the majority of UPI payments in India. Despite both being unable to charge for UPI transactions, they’ve used their massive reach to sell additional services such as loans and insurances. Policymakers meanwhile fear that the current market dynamic poses a concentration risk.
While both PhonePe and Google refused to comment on the market, back in December 2022, The Indian Express spoke with Director of Product management at Google Pay, Sharath Bulusu, about the imposed market cap restrictions set by the NPCI. Bulusu noted that the ecosystem was still in its developing stages and regulation should promote innovation, allowing for players to expand into the space. Regulation should be there to create a healthy ecosystem, he added.
Bulusu pointed out that the Indian payment market was highly competitive, with numerous players introducing UPI and payment solutions. Allowing UPI to keep growing would invite more players into the market, hence the NPCI shouldn’t impose restrictions such as market caps, which disincentivize them from entering the ecosystem. Google’s stance isn’t surprising, as caps on market capitalization prevent further aggressive expansion and prevent competitors from chipping away Google Pay’s market share.
Aggressive expansion
Google has been aggressively pushing its Google Pay solution in the Indian currency system under its expansion strategy. The tech-behemoth didn’t wait for policymakers to allow for revenue generation over the UPI scheme. Instead, it integrated crucial features to make sign-up as easy as possible for Indian smartphone users. It boosted the solution’s popularity through ad campaigns multiple years in a row. However, we must also acknowledge the head-start Google had through its Android operating system.
Apple is gaining some momentum in India, but it’s nowhere near enough to topple the dominance Google has in the region. Furthermore, as long as Apple will price itself out of the market, Android-powered devices will remain popular in the developing economy. The currency demonetization haphazardly introduced by policymakers in India has also greatly benefited digital payment providers, who could ride the wave of organic adoption in the years that followed. Lack of competition only strengthened the position of Google, with little signs on the horizon pointing toward a major market disruption.
The rapid rise of Google also shows us how the right market conditions, and the willingness to take a loss on the core product, can aid greatly in capturing large swaths of the market. While this can be seen as a strategy in of itself, smaller players will have trouble nudging themself into such market dynamics. Google is facing competition from PhonePe in regards to UPI Payments. The coming years and the possible steps by the NPCI to open the market, will reveal who will be able to maintain dominance.
