No wider adoption: Why Fastag's growth beyond toll payments is limited
Fastag
may be used for toll payments pan India but its adoption for wider use cases still remains severely limited. The electronic toll collection system has shown negligible growth in the last fiscal year.
The system's growth, including transaction volumes and participating banks, has remained largely static.
According to National Payments Corporation of India statistics, Fastag processes between 350-380 million monthly transactions, maintaining consistent levels since January 2024. The monetary settlements have remained within Rs 6,000 to Rs 6,500 crore during this period. The number of banks offering Fastag services has stayed at 38, unchanged since May 2023.
UPI
, the leading digital payment platform, has expanded its network to include 675 participating banks, showing significant growth from 445 banks in May 2023.
Industry experts point to the limited application of Fastag beyond toll collection as a primary reason for its stalled progress.
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"Toll payments are undertaken by consumers only that many times in a month or a year, and even for commercial vehicles, almost the entire base has been already covered, and the sector is also not growing exponentially," said a top executive at a digital payments firm which processes Fastag payments.
"Overall, the payment method has stagnated at a certain level, the executive said according to an ET report.
Why is Fastag growth stalled?
Initially designed for digital toll collection on highways, Fastag's intended scope included various vehicle-related payments, including fuel purchases and parking fees.
Fastag growth stalled
"While a limited number of large commercial properties like shopping malls have started using Fastag as a payment method for their parking fees, fuel has shown almost no adoption," said the founder of a fintech startup offering this service.
Smaller commercial properties have been reluctant to implement Fastag systems due to substantial costs associated with installing compatible gates and tag readers.
"A large mall might be processing around Rs 30 to 40 lakh in parking payments per month, for that, the installation and maintenance might be a bit cumbersome," the founder added.
The installation expense for each gate is estimated to be between Rs 1.5 to 2 lakh, with additional upkeep costs to be considered.
"There is no margin to be made on fuel payments, hence that use case is also not picking up," said the executive of a digital payments firm cited above.
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In India, kerbside parking remains predominantly cash-based or QR code-dependent, with no significant movement towards Fastag adoption, despite being the country's most common parking method.
Financial industry experts indicate that fintech companies' disappointment with digital payment revenue generation has deterred private enterprises from new payment ventures.
The growth in UPI adoption was primarily driven by substantial marketing investments that provided customer incentives.
"No new-age fintech is pumping funds into digital payments right now. Fastag and such payment methods needed incentives to get more customers to use them readily, in the absence of incentives new use-cases are not building up," said the founder of a digital payments startup.
The Fastag system faces challenges with inadequate bank-based customer support, particularly regarding blocked tags and top-up difficulties. Despite distributors like PhonePe and Amazon Pay being involved, they depend on banks for customer service, which often fails to meet user expectations.
"Banks make money on the float they get through these payments, otherwise there is hardly any incentive for others to offer superior customer experience," said the founder cited above.
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