NPCI Extends UPI Market Cap Deadline By Two Years

The National Payments Corporation of India (NPCI) has extended the compliance deadline of imposing a 30% market cap limit for third-party app providers (TPAPs) to December 31, 2024. The present extension marks the third time the NPCI has done so.

“Taking into account the present usage and future potential of UPI, and other relevant factors, the timelines for compliance of existing TPAPs who are exceeding the volume cap, is extended by two (2) years i.e. till December 31, 2024, to comply with the volume cap,” NPCI said in a circular.

The reports for an extension first emerged in June 2022, when it was widely reported that the NPCI was looking to extend the January 2023 deadline for its 30% market cap on TPAPs.

Speaking further on the matter, the NPCI said that existing and new players need to scale up their customer outreach for the growth of UPI and to achieve overall market penetration, because of the significant potential of digital payments and the need for multi-fold penetration from its current state.

Several key players, including PhonePe and Google Pay, reportedly reached out to the NPCI requesting a significant extension to the compliance deadline earlier this year. As a result, the payments body turned to the government and industry stakeholders for more direction on the matter in September.

However, at the beginning of November, the government pulled away from taking a stance on the matter, with government officials being cited in media reports as stating that the Centre believes that the matter lies within the purview of the NPCI and the Reserve Bank of India (RBI).

First announced in November 2020, the policy had an original deadline of January 2021. The mechanism described by the NPCI follows a three-step process.

The SOPs include warning the TPAP when it reaches 25% market share, issuing another warning at 27+% market share and barring it from onboarding new customers once it crosses the 30% market cap.

However, due to an increase in UPI and digital payments over the pandemic, the NPCI ended up pushing the deadline back by a year. The payments body extended the deadline till December 2022. 

In November 2022, UPI recorded 730 Cr transactions worth INR 11.91 Lakh Cr in November 2022, a 3.17% month-on-month (MoM) decline from October 2022. In terms of market share, PhonePe holds nearly 50% share in the UPI market while Google Pay holds nearly 35% as of November 30, 2022.