NPCI To Delay Market Share Caps On UPI

UPI Transactions Jump 3.6% MoM In August

SUMMARY

This move favours Google Pay and Walmart-backed PhonePe, as regulators focus on fostering growth rather than addressing market concentration concerns

NPCI plans to extend the year-end deadline by up to two years to cap the market share of any company processing payments via UPI at 30%

A final decision on the extension will be communicated closer to the deadline

India is again set to delay imposing market share limits on the Unified Payment Interface (UPI). This move favours Google Pay and PhonePe, as the regulators focus on fostering growth rather than addressing market concentration concerns.

The National Payments Corporation of India (NPCI) plans to extend the year-end deadline by up to two years to cap the market share of any company processing payments via UPI at 30%, Reuters reported.

India launched the UPI in 2016, prohibiting companies from charging for the instant digital payments service to encourage online transactions and decrease cash usage in the market.

Since they cannot charge for the service, banks and companies like Meta-owned WhatsApp and Amazon Pay have not aggressively promoted UPI-based payments, leading to concerns about market concentration. While PhonePe and Google Pay do not earn money directly from UPI payments, they have leveraged their UPI customer base to sell services such as loans and insurance.

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 deadline will have to be extended again, the report said citing the sources, noting that it is not feasible for PhonePe and Google Pay to reduce their market shares without negatively impacting UPI payments growth.

A final decision on the extension will be communicated closer to the deadline.

Recently, 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.

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.