New online payment app threatens to dusrupt Phone Pay and Google Pay

The arrival of a new Unified Payments Interface (UPI) innovation called UPI Plugin or merchant SDK could pose a challenge for PhonePe and Google Pay. This product allows online merchants to collect payments through a virtual payment address within their own app, eliminating the need for customers to use a separate UPI app. Payment gateway and processing firms like Paytm, Razorpay, and Juspay have enabled their merchants with this option to improve success rates.However, PhonePe’s co-founder and CTO, Rahul Chari, expressed skepticism about the technical benefits of UPI Plugin.

For instance, if a Swiggy customer chooses UPI payment, a notification prompt directs them to a UPI app like Google Pay or PhonePe.After payment, it returns the customer to Swiggy, where the order is completed. The extra step often causes payment failures.With the UPI plugin enabled, the payment will happen directly within the Swiggy app itself, rather than via a separate UPI app.The UPI plugin aims to address this issue by enabling payments directly within the merchant's app, bypassing specific UPI apps. The UPI plugin could threaten PhonePe/Google Pay's dominant market shares of 47% and 33%, respectively. There's a high probability that many customers are not going to use these UPI apps to complete payments.