Govt Decides To Not Intervene In UPI’s 30% Market Cap Deadline

As the deadline capping Unified Interface Payments (UPI)’s market share per app to 30% approaches, the central government has taken a stance to not actively intervene in its enforcement or deferral.

According to an ET report quoting senior officials, the Centre believes that the matter lies within the purview of the National Payments Council of India (NPCI) and the Reserve Bank of India (RBI). 

Thus, while the Centre will monitor the decisions, it has decided not to take sides or intervene in the matter.

The move comes shortly after digital payment providers are at loggerheads at the implementation of the regulation capping individual apps’ market share to 30%. 

While Paytm believes that market capping should be implemented by the deadline of December 2022, PhonePe and Google Pay want an extension of three years on the deadline.

The latter own more than 85% of the market combined and the number and value of transactions have only been increasing. 

Although owing to the situation that the apps have not been able to reduce their market cap, NPCI is looking to postpone the deadline over the fear of market disruption.

The TPAP Guidelines & Its Impact On Fintech Ecosystem

The TPAP (third-party application) guidelines intend to discourage monopoly (or in UPI’s case duopoly), by limiting the market cap to 30% per payment app. 

That is, if any TPAP breaches the 30% mark, it would be disallowed to onboard new customers, i.e. customers will not be able to make payments through the app. 

Further, the respective UPI apps will have to inform users that they have exceeded the 30% limit and will only be available when NPCI allows.

While the working module of the 30% market cap was released in March 2021, it claimed to calculate the ‘30%’ limit based on the total volume of transactions processed on UPI during the previous three months by a player, on a rolling basis.

But, it posed several additional challenges including the mode of restriction, the market disruption and pushing for the movement of preference of customers.

While the move is likely a boon for several fintech players in the ecosystem, it does not pose good news for PhonePe and Google Pay. 

In September 2022, out of the total INR 11 Lakh Cr worth of transactions, PhonePe held nearly 50% of the market while Google Pay bagged nearly 35% of the market cap. Paytm was third in line, with an 11% market share.

Reducing the market cap to 30% would mean losing customers who pay via the platforms and then using the revenue-generating auxiliary services of the platform. The duo have, thus, asked NPCI to revisit its decision.

And naturally, till users do not move to other UPI apps (Amazon, WhatsApp Pay, BHIM) for default payments, it will be unlikely that NPCI will be able to implement the said restriction by January 2023.