BHIM looks to bulk up with ONDC to take on digital payment heavyweights (2024)

Payments app BHIM or Bharat Interface for Money will soon become available on the government-backed nonprofit Open Network for Digital Commerce (ONDC), with an aim to counter the dominance of Google Pay and Walmart-backed PhonePe in India’s digital payments sector, people aware told ET.

BHIM, developed by the apex group for digital payment systems in the country — National Payments Corporation of India (NPCI), will foray into the ecommerce arena on ONDC through a separate division, they added.

“The hope is that with BHIM’s users able to shop for food and beverages, groceries, fashion and apparel, on ONDC, the adoption of BHIM app will increase compared to its competitors GooglePay, and PhonePe,” said an official aware of the matter.

NPCI and ONDC did not respond to ET’s request for a comment.

BHIM built on NPCI’s digital payments railroad Unified Payments Interface (UPI) — was launched in 2016 but has seen much lower adoption compared to rivals such as Google Pay and PhonePe, which together command nearly 85% of India’s digital payment market.

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Both Google Pay and PhonePe are also built on the UPI platform and designed to facilitate e-payments directly through banks and encourage cashless transactions.

With BHIM due to debut on ONDC, its prospects are expected to improve.

More so, as there has been a sharp upsurge in downloads of BHIM since regulatory curbs on the third-largest player in the space, Paytm, came into effect in end of January.

Data from app intelligence firm Appfigures showed that BHIM app downloads saw a significant 21.5% week-on-week increase from 111,000 downloads on Play Store on January 27 to 135,000 downloads on February 3.

NPCI also appointed ONDC’s former executive vice president for strategic initiatives Rahul Handa as the chief business officer of BHIM in March.

Handa was at ONDC for over two years from February 2022 to March 2024.

Lack of marketing budgets
Experts are of the view that despite its launch in 2016 with much fanfare, BHIM has languished due to lack of sufficient marketing budgets.

“It (BHIM) lost out to Google Pay, PhonePe, and Paytm as (the) three combined now have a 98% market share and BHIM has a negligible market share,” said Ranadurjay Talukdar, partner and payments sector leader, Ernst & Young India.

“It (BHIM) didn’t have a separate marketing budget to woo consumers with cashbacks. On the merchant side enablement, there was no separate BHIM initiative while Paytm, PhonePe and Google Pay invested significant marketing dollars in acquiring merchants,” he said.

From a consumer’s point of view, the thinking was that they must download the same payment app whose QR code they saw at the storefront. “This lack of understanding of interoperability from the consumers also led to more market share for the three apps — GooglePay, PhonePe, and Paytm,” Talukdar said.

Now, NPCI is embarking on a BHIM 2.0 project to reimagine, and rethink the user journey on the app. With new partnerships, like with ONDC, BHIM’s usage is expected to go up, according to industry experts.

During the four-day period from January 31-February 3, the BHIM app witnessed a 50% increase in downloads from 397,000 for the corresponding period in the previous week to 593,000, according to Appfigures.

However, banking heavily on ONDC alone to drive growth will not help BHIM.

“Changing consumer behaviour, the trust that customers repose in a payments app is not very easy to build,” said EY’s Talukdar.

High concentration risk
On April 17, ET had reported that several new third-party payments apps on UPI are being nudged by the NPCI to invest and incentivise consumers.

This is primarily aimed at getting users to transact through these new platforms, to reduce the risk from high concentration of transactions on PhonePe and GooglePay, three companies had told ET.

Since its formal launch in January last year, ONDC has facilitated more than 49.79 million transactions. Mobility led by ride-hailing apps such as Namma Yatri continues to dominate with more than 50% of total monthly orders. From February last year to March this year, mobility accounted for more than 32.2 million orders while non-mobility accounted for more than 17.5 million orders.

Companies and platforms that have been onboarded include Wow Momo, McDonald’s and Domino's Pizza in food and beverage; Marico, P&G and Hindustan Unilever in FMCG; and Namma Yatri, Kochi Open Mobility Network and Ola in mobility.

ONDC had its alpha rollout in April 2022 in five cities to evaluate live transactions with a closed group of sellers and buyers.

“Payment networks rarely have a B2C product, they are predominantly B2B players. They work with banks to provide products to their consumers. In that sense NPCI is unique. Running a successful B2C business is not going to be easy for NPCI,” Talukdar said.