Top UPI Stocks & its Future in India

Thanks to UPI, India has become the global "Sharma ji ka beta".

When was the last time you went to your bank branch to withdraw money or used a check to pay someone? 

You can’t remember that, right? This is because we have significantly moved to the digital payment route using the Unified Payments Interface (UPI) apps. 

The wave of digitalisation has empowered our payments, thanks to the UPI mobile applications. Today, we just make and receive payments quite faster than before. We scan a QR and send money. We find a number from our contact list and send money. We pay for buying things online and offline, pay utility bills, book tickets etc., within just a few seconds with UPI. 

These companies reward us for paying digitally by offering attractive discount coupons and cashback. The need to add a person as a beneficiary or go to a bank branch to make a payment is reduced.

Thus, with the rise in UPI users and UPI payments, their reach has quadrupled over the past five to ten years. In this blog, we will discuss the progress made by UPI companies and the performance of their stocks. Let us start by learning what these stocks are. 

UPI Stocks in India

Stocks of companies providing UPI interface to the customers, such as Paytm, can be termed UPI stocks. The three popular players in the UPI and digital wallets domain are PhonePe, Paytm, BHIM and Mobikwik.

Out of these, Paytm launched its IPO in November 2021. Hence, it is the only player which is listed on the stock exchange, and investors can buy its shares with ease.

Out of the other players, Phone Pe and Mobikwik are prepping to come up with their IPO soon. The business model of these UPI companies is more or less the same. All these companies majorly focus on the digital payment universe. 

The Growth of the UPI Universe 

As per the 2023 data, PhonePe, Google Pay and Paytm are neck and neck concerning making UPI payments. Phone Pe, taking the significant chunk, serves the volume of 47%. Its competitor, Google Pay, has a UPI transaction volume of 35%. (The data is expected to fluctuate and never remain constant). As per the 2022 data, UPI transactions crossed the 100 billion in 2023 and are expected to grow at a CAGR of 122%.

The speed with which the UPI acceptance is growing shows India's movement towards becoming a cashless economy. Therefore, UPI benefits not just its users but also the economy as a whole. UPI is expected to become one of the most used digital payment mediums in India. It is gaining quite a lot of traction lately.

One main reason UPI payments gain traction is the quickness and ease of making digital payments. Additionally, the pandemic push for digital payments, attractive cashback and coupons have made UPI the champion of digital payments in India. These benefits of UPI have made it a preference for small vendors and businesses.

Especially when it comes to small businesses, UPI payments have made it easier to create seamless transactions and manage multiple accounts through a single mobile application. With UPI transactions being free, the transaction cost that occurs while paying through digital mediums like credit and debit cards can be avoided. Also, UPI payments can be tracked and accounted for at a single place through the transaction history of your UPI mobile application. 

This helps small businesses reduce costs, provide payment versatility, secure transactions and quicker settlements. To provide more efficient services to small businesses, the BHIM UPI app has recently launched a lite version called UPI lite. 

The Future of UPI Stocks

With a vast population, there is still a lot of scope for UPI adoption to grow in India. As more and more Indians get access to a smartphone and the internet, the number of UPI transactions is set to rise, making it a fast-growing market.

With the ease of use, quickness, zero transaction cost and security, UPI can outdo other payment mediums like credit cards and debit cards. These hassle-free payment features of UPI can help it be adopted globally. Yes, UPI is now started to be widely accepted not just in India but also internationally. 

Recently, Bhutan became the first country to adopt UPI in 2022. Now, several other nations accept UPI as is shown in the image below.

Upcoming UPI stocks to look for are PhonePe and MobiKwik, which might launch their IPO in 2022. This will help in analysing and comparing the performance of different UPI stocks in a better way. 

How is the Listed UPI Stock Performing? 

Currently, Paytm, an online payments app offering UPI services, among others, is listed on the stock exchange. While the UPI volume and reach seem thriving, the short-term returns on the Paytm stock were more or less lacklustre. However, even after being in a thriving UPI space, Paytm stocks couldn’t run up the mile in terms of their shareholder expectations. The boom in the acceptance and usage of UPI in India wasn’t reflected in the company's stock price. 

One97 Communications, Paytm's holding company, launched its shares in November 2021. Since the launch of Paytm shares, their prices have steeply declined and went to as low as 70 percent from their listing value in March 2022. As of February 2024, they are trailing somewhere around 400, with a heavy loss from 900 in 1 year, and the reason for this is the FEMA violations. 

Paytm is now mandated to handle its payment transactions via a third-party application provider, National Payments Corporation of India (NPCI). This incident has brought major damage to Paytm's reputation and has also affected people's trust in the platform.

The fall in the price of the Paytm stock was mainly due to the announcement by the Reserve Bank of India (RBI). Surprisingly, this isn't the first time Paytm has suffered similar allegations. In March 2022, the RBI had ordered Paytm to stop taking new customers in the Paytm Payments Banks for multiple supervisory concerns. 

This led to a negative sentiment among its investors. This, along with the contagion of the Ukraine-Russia war, led to its stock price falling drastically.

The Bottom Line

With the rising acceptance of UPI in India and the world, there is a long way to go for UPI companies in India. Even with the current UPI stock, Paytm, its stock prices have recently recovered by around two per cent in June 2022. 

With Phone Pe and Mobikwick bringing their IPOs this year, only time will tell which UPI stock wins the profits race. These stock listings will also help investors get a better insight into the performance of UPI stocks. This will also help investors find value in UPI stock investments in India.

*Disclaimer: The stocks and companies discussed above aren't a recommendation from Finology Insider and shall not be construed as a replacement for professional advice. Consult a professional or conduct the necessary research before making investment decisions.