Amazon Pay: UPI Transactions Decline

Context:

Amazon Pay has seen a decline in UPI transaction volumes over the past three months, especially among its high-frequency users. Leadership wants to understand the root cause and identify tactical and strategic solutions to reverse this trend.

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Interviewer:
Amazon Pay’s UPI transaction volume has dropped by 18% over the last quarter. You’re leading a task force to fix this. What’s your first step?

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Candidate:
I would start by breaking this down into a structured approach across:

1. Understanding the Problem

2. Root Cause Hypotheses & Testing

3. Solution Design – Tactical and Strategic

4. Success Metrics and Pilots

Let me start with problem clarification questions.

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Clarifying Questions

• Is the drop across all customer segments or concentrated in a few?

• Is this a loss in volume per user or user base shrinkage?

• Any recent changes to the app, cashback policy, or onboarding flow?

• Are there external factors (e.g., UPI policy changes, new players, downtime)?

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Interviewer:
Good questions. The drop is more pronounced in Tier 1 cities and among regular users. There hasn’t been a major UI change, but some cashbacks have been reduced. Internally, there's chatter that PhonePe and GPay are growing faster.

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Candidate:
Got it. That helps refine my hypotheses. I’ll bucket the causes into 3 categories:

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1. Hypothesis: Internal Friction in Amazon Pay

• UX Drop-off: App navigation for UPI might be buried vs. GPay/PhonePe.

• Transaction Failures: Increase in tech glitches or bank-side failures?

• Incentive Fatigue: Cashback reduction may have disincentivized usage.

• Default UPI App Status: Users might not have Amazon Pay as default UPI.

Data to Analyze:

• Funnel drop-off: Initiation → PIN entry → success

• Failure rate vs. industry average

• App NPS for UPI cohort

• Bounce rate from UPI home screen

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2. Hypothesis: Competitive Pressure

• GPay/PhonePe offering higher rewards or better UX?

• Exclusive merchant tie-ups with competitors?

• Superior discoverability of QR pay or bill payments?

Action:

• Benchmark features: # of taps to pay, scan speed, bill reminders

• Competitive tracking on Play Store reviews, reward strategies

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3. Hypothesis: Behavioral Shifts

• Shift toward COD post-COVID reversal?

• Monthly bill payments moved to auto-debit or banks?

• Are users moving to credit-based payments?

Segments to Analyze:

• High-frequency users dropping off

• Segment by use case: P2P, QR merchant pay, utility, wallet top-up

• Weekday vs weekend patterns

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Interviewer:
Assume your analysis confirms that the biggest drops are in merchant QR and utility bill payments. Cashback cuts also correlate. What would you do next?

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Candidate’s Solution: Reignite UPI Growth

Tactical (Short-Term)

1. Recalibrate Cashback Smartly

   • Bring back targeted cashbacks for:

     • 1st transaction of the week

     • Specific merchant categories (grocery, fuel)

   • Gamify rewards: streak-based rewards, spin-the-wheel for frequent users

2. Improve Merchant Payment Flow

   • Reduce clicks from scan to pay

   • Autofill amount where available (for bills)

   • Launch “Scan & Save” challenges to build habit

3. QR Penetration Push

   • Incentivize merchants with “Accept via Amazon Pay” bonuses

   • Use Amazon delivery partners to onboard new QR merchants

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Strategic (Medium-Term)

1. Deep App Integration

   • Embed UPI deeper into Amazon retail checkout

   • Push UPI for auto-pay of subscriptions, Prime, Kindle

2. Sticky Use Cases

   • Partner with local utility companies for exclusive UPI-only discounts

   • “Split Bills” feature for shared spends among friends

3. Tiered Loyalty Program

   • Based on monthly UPI GMV, reward users with:

     • Prime vouchers

     • Partner discounts (Swiggy, IRCTC)

     • Free delivery credits

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Experiments & Pilots

• A/B test new cashback vs old cohort

• Push UPI-first flow for bill pay in 2 cities

• Use CRM nudges on likely-to-churn segment with a “win back” offer

• Merchant-side pilot: onboard 1,000 grocery stores with higher incentive

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Metrics to Track

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Risks & Mitigation

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Interviewer:
Good, now assume your solution improves metrics but adds to cashback costs. How would you ensure long-term sustainability?

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Candidate:
I would shift from blanket cashbacks to:

• Behavior-based rewards: Only for key nudges (new category, comeback)

• Subscription-linked rewards: UPI cashbacks for Prime members only

• Third-party funded rewards: Get FMCG/brands to sponsor QR-linked cashbacks at Kirana stores