The chief of a country's largest bank doesn't usually confess of a missed business opportunity where it has ceded space to biggies from the external arena. But State Bank of India chairman CS Setty was open about “missing the bus” on digital payments and admitting that it is too late for the state-owned lender to catch up with the firmly entrenched players.

Though SBI has the YONO Pay app, the digital payments business has duopoly players, Walmart-backed PhonePe and Google Pay, who have established a dominant share of the Unified Payments Interface (UPI) market.

“I think, we definitely missed the payments bus, and it is too late to catch up. Through YONO Pay, we are trying to get at least our own loyal customers to use it, and we are seeing good traction. But we are nowhere near the players you mentioned. I don’t think any bank can reach the kind of volumes they have built,” Setty said at the post-earnings media conference, while replying to a query on why banks have conceded space to UPI apps like PhonePe and Google Pay. 

Digital payments business based on UPI transactions by volume has turned out to largely be a two-player market in India. According to data from the National Payments Corporation of India (NPCI), PhonePe and Google Pay together enjoy 79% of the share.  

The opportunity lost was not just the size of the transactions the mass-market involved but the brand fortification SBI would have got. But YONO is making strong efforts to penetrate in the digital space, and analysts said it is shaping up well. 

On the costs banks have to bear in supporting the country’s digital payments infrastructure, Setty said it is difficult to specify an amount. "On the cost side, we cannot quantify specifically because most of the infrastructure is also a shared infrastructure. You can't assign that this is a cost which is happening on the UPI," he said.

Though UPI is free for consumers, banks and fintech companies have argued that it involves significant costs to develop technology infrastructure, cybersecurity, network operations and customer communication in supporting these voluminous transactions.

In July, the UPI processed a record 2,365.83 crore transactions amounting to Rs 29.88 lakh crore, according to the latest NPCI data.

The government is considering introducing a merchant discount rate (MDR) on UPI transactions, particularly those above Rs 2,000.

Asked to comment on the potential impact this would have on SBI, Setty said, "We have to see the fine print and whether the government chooses to exercise the enablers that are there."