NPCI Likely To Extend UPI Market Cap Deadline By Another Two Years

The National Payments Corporation of India (NPCI) has reportedly yet again decided to extend the timeline for the implementation of a 30% cap on the UPI market share of digital payments platforms. 

Sources told Reuters that the payments body plans to extend the deadline by as much as two years. The mandates were to kick in by December 2024, as per the NPCI’s last statement. 

If this goes through, this will be the second time that NPCI has extended the deadline. 

A final decision on the matter is expected to be communicated closer to the deadline. However, the publication cited a source as saying that the NPCI is not in “favour” of removing the market share cap.

As per the report, the timeline will likely be extended again as it is not possible for Walmart-backed PhonePe and Alphabet-owned Google Pay to reduce their respective market shares without “hurting” UPI payments growth.

The move will benefit PhonePe and Google Pay, who more or less have a duopoly over the homegrown digital payments space. The two players cumulatively accounted for 86.37% of the market share in terms of the number of transactions in April 2024.

While the payment companies have been asking to allow them to charge for UPI payments, the final call on the matter will be taken by the Centre, the report said. 

This comes a week after reports surfaced that the payments body was likely to review its decision to implement a 30% cap on the market share of digital payment players by the end of this year. 

First announced in November 2020, the NPCI had called for introducing a 30% market cap limit for third-party app providers (TPAPs). While the policy had an original deadline of December 31, 2022, it was extended to December 2024 in late 2022.

“PSP and TPAP shall ensure that the total volume of transactions initiated through the TPAP shall not exceed 30% of the overall volume of transactions processed in UPI during the preceding three months (on a rolling basis),” the NPCI’s circular said in 2020.

The potential move also comes at a time when many have flagged concentration risks with the digital payments ecosystem, especially as Paytm, the third-largest player in the space, has seen its market share fall amid restrictions by the Reserve Bank of India (RBI) on its payments bank. 

Earlier this week, RBI governor Shaktikanta Das also held a meeting with major stakeholders of the UPI ecosystem to deliberate ways to spur adoption of digital payments in the country and the rollout of new related offerings. 

Meanwhile, UPI continues to see rapid adoption across the board. As per NPCI data, the digital payments network clocked 1,330 Cr transactions worth INR 19.64 Lakh Cr in April 2024.