NPCI Likely To Decide On UPI Market Cap Implementation By November End

The National Payments Council of India (NPCI) is reportedly in talks with the officials of the Reserve Bank of India (RBI) to implement the market cap deadline of 30%. When implemented, the rule will limit the volume of the Unified Payments Interface (UPI) to 30% per app. 

The NPCI is evaluating all possibilities and no final decision has been taken on extending the deadline of December 31, ET reported citing sources. 

It added that NPCI has received requests from the stakeholders and may decide on the matter of implementation (or deferral) of UPI market cap guidelines by the end of this month.

The report comes on the heels of industry stakeholders and leading UPI players such as PhonePe and Google Pay holding talks with the NPCI to delay the implementation of market share cap rules. 

PhonePe has already put in a formal request to defer the December 31, 2022 deadline by at least three years. Some other players have reportedly sought the extension of the deadline by five years.

The NPCI is likely to reach a final decision on the issue by the end of November 2022 after examining representations and consulting the RBI.

The governing body has also been exploring ways to implement the market share cap without limiting the user experience of the end consumer. 

It is noteworthy that the NPCI was, at one point, considering deferring the implementation since nearly INR 10 Lakh Cr worth of UPI transactions are processed every month.

Understanding The TPAP Guidelines

To limit the duopoly within the UPI ecosystem and provide a level playing field to other UPI players, the market cap plan, dubbed the Third Party Applications (TPAP) guidelines, was notified in November 2020. 

The NPCI gave all payment players a time of two years to comply with the new rules, i.e., limit their customer onboarding and reduce their market cap or face payment failures upon reaching the 30% threshold.

Currently, PhonePe holds nearly 50% share in the UPI market, while Google Pay holds nearly 35% share. 

In case the TPAP guidelines get implemented in 2023, a UPI app would not be allowed to onboard new customers on breaching the 30% mark. Further, the respective UPI app will have to inform users that it has exceeded the 30% limit and will only be available when the NPCI allows.

While the NPCI is yet to come out with a detailed SOP, questions about monitoring transaction volume, disruption in user experience and the benefits of the restrictions are yet to be discussed.