Tez, Google's payments app for India that's built on top of the country's Unified Payments Interface (UPI), was launched in September last year. By early December - a little less than three months after the launch - the app had clocked 12 million users and 140 million transactions.
Those are impressive numbers, even if the government backed UPI app BHIM, which also launched last year, clocked 10 million users at a much faster rate - within 10 days. In terms of the number of transactions, however, Tez has completely blown past its competition.
When Gadgets 360 reached out to Google this week, the company reiterated that Tez has seen over 140 million transactions in the roughly three months since it launched on September 18. In contrast, according to figures from the National Payments Corporation of India - the entity that operates the payments interface UPI - the government-based BHIM app has seen just about 62 million transactions over 12 months, with only 9 million transactions in December.
Why the huge difference in the number of transactions, despite the two apps having similar user numbers? Is Google Tez such a game changer? At the time of the Tez launch, DD Mishra, Research Director, Gartner had said that Tez had the potential to do so. "It is too early to say whether it can be a game changer, but yes it has the capabilities to bring some disruption," he had said.
Google, on its part, credits the success of the Tez app to its "simplicity".
"People prefer simple, safe and trusted apps that are widely used. We’re happy that people are recommending Tez to their friends and family because they like the simplicity of the product," a company spokesperson told Gadgets 360.
However, although there's very little data that's publicly available, the feeling among many is that Tez's numbers are made possible thanks to a very generous cashback policy. Pay someone using Tez, and you win something that the company calls a "scratch card". These virtual tokens can be checked like lottery cards, and you stand to make a decent amount of money on each scratch card. There are limits in place - on how many scratch cards you'll receive, and there's a chance that you'll get nothing for the transaction - but this isn't necessarily a disincentive.
To see why, you can take a look at the world of video game design. A relatively recent phenomenon there is "loot boxes", where you get a reward, but you don't know what's inside. As it turns out, this taps into the same kind of addictive psychology as gambling - although you might see "better luck next time" more often than not, if you hear about the top tier rewards often enough, that's enough to keep you hooked.
This is something that you see even in the Google Play reviews for the Tez app - a significant number are just about the rewards, with one particularly frustrated user commenting, "This app should be named as better luck next time," although he did rate it four stars, so perhaps the experience wasn't that bad overall?
In the Gadgets 360 newsroom itself, we found ourselves being pressured by colleagues to sign up for Tez, even though they'd showed no interest in UPI apps before - and the reason, it turned out, was rewards. Another friend, a journalist in Delhi, also told us how he's received Rs. 1,000 in a single week through rewards on the Tez app.
Sushant Mathur is a college going student in Bengaluru, who has been steadily converting family and friends to Tez from other modes of payment. His reason is simple. "Every time someone signs up with my referral code and then spends Rs. 50, I get Rs. 50 too," he said. "It's like free money!" The listed reward for referrals is Rs. 51, but we didn't correct him. Instead, we asked Mathur about the scratch cards, and he was more dismissive. "That's just better luck next time all the time," he said.
"Though I got Rs. 150 on that once also," he added after a moment's reflection.
One former Google employee, who now works for a competitor and requested not to be named, told us that she and all of her colleagues have switched to Tez for from Paytm, the biggest mobile wallet operator in India that has raised funds from Alibaba and Softbank, among others .
"Earlier we used to send money via Paytm, you know, for things like someone ordered lunch and you want to pay your share, or you want to contribute to a birthday present kind of thing," she explained. "So earlier we all just used Paytm because we anyway had money in that for Uber right? But with Tez you know you get the rewards and it's also a really well made app so it's easy to use."
This was a common sentiment amongst all the people we spoke to about Tez; the design and ease of use were often mentioned, but not nearly as often as rewards and cash backs. It's no surprise though that Google downplays the role these incentives have played in Tez's phenomenal growth in India.
"Instant cash back for referral is a one-time token amount for a successful installation and transaction," the company stated. "Once installed people go on to use Tez to pay for variety of use cases. The UPI merchant base had been growing steadily in India, and there are more than 525,000-plus merchants on Tez. They’re using it to take payments."
Analysts, however, agree with the popular sentiment. "There are no specific numbers as RBI doesn't provide a breakup by the sources, but going by the secondary domain, Google Tez has 12 million users," says Hanish Bhatia, Senior Analyst with Counterpoint Research. "Our data on this is very qualitative, but it [rewards] played a significant role in the growth. Cash back as well as the other offering [referrals]. For many people it is the primary reason for getting the app."
However, he also agrees with Google's assessment that people do keep using the app afterwards.
"One thing that we have observed [through interviews] is that the value of transactions on Google Tez is comparatively high. Typically the average is something like $5 [roughly Rs. 320], but it appears higher for Tez."
Google refused to reveal the amount of money it has spent on cash backs and other incentives in promoting Tez usage. "We do not share details of our marketing and promotional budgets," the company said.
Paytm, which recently added UPI support to its app, also clocked some impressive numbers in the first month, backed by incentives of its own. Competitors claim that Paytm's numbers are also almost entirely driven by cashback incentives, rather than real usage, though both Google and Paytm have clarified that they do not count the cashbacks themselves as transactions.
In the two months before Paytm added UPI support to its app in December last year, Google's Tez accounted for 70 percent of transactions on the BHIM UPI platform. Whether it can sustain this kind of growth in the face of increased competition remains to be seen.
Editor's note: The story has been updated to clarify the claims made with reference to Paytm’s numbers.
Disclosure: Paytm’s parent company One 97 is an investor in Gadgets 360.