Smaller Players Seek Incentives From NPCI To Curb UPI Dominance Of PhonePe, Google Pay

In a meeting with the National Payments Corporation of India (NPCI), smaller digital payments startups and companies reportedly pitched for incentives to curb the triopoly of Walmart-backed PhonePe, Alphabet-owned Google Pay, and Paytm in the UPI payments space.

As per The Economic Times, the 80-minute long meeting saw players batting for “specialised incentive structures” and enabling a “sort of a reservation system” to curb concentration risks in the UPI ecosystem and help weaker players grow. 

The brainstorming session was reportedly attended by the likes of Amazon Pay, Jupiter, Navi Technologies, Bajaj Pay, slice, Tata Neu, among others. 

PhonePe, Google Pay and Paytm were not invited to the meeting. It is pertinent to note that these three players together account for a market share in excess of 90% in terms of both UPI transactions and value. 

The report cited a source as saying that the NPCI wanted to gather inputs from stakeholders on how to enable smaller third-party application providers (TPAP) to grow. As per the report, participants called for an incentive scheme, modelled on the lines of the centre’s zero merchant discount rate (MDR) regime for RuPay, to support smaller UPI players. 

“The large players on UPI have massive financial support and technical prowess, so even in terms of features there is nothing that smaller players can do and they will not replicate quickly, so hardly there is any differentiation that can be created in terms of products,” a person told Economic Times.

Another person told Moneycontrol that smaller players lack the marketing budgets to offer cashback and rewards to woo users away from the top three digital payments platforms. The fintechs urged the NPCI to offer them longer timelines to implement new features, citing pressure on their UPI expenditures. 

A few representatives also complained that the merchant apps and websites, during the payment stage, show PhonePe, Google Pay and Paytm logos and club the rest under the “other UPI apps” category. However, the NPCI is said to have told the smaller players that this is the prerogative of the merchants.

Among other things, the attendees also sought better branding from the NPCI while the payments body urged the apps to offer more cashback to consumers.

However, there was reportedly no clarity on how to mitigate the concentration risk in the ecosystem, as per an attendee cited by Moneycontrol.

Meanwhile, a person who attended the meeting told ET that the NPCI may find it difficult to impose restrictive policies on the three major players who have pumped investments to expand UPI use-cases. 

Citing the imbroglio over the proposed 30% market cap for UPI players, an attendee reportedly said that the limit has been almost impossible to impose and could create problems for both the consumers and the regulator.

Meanwhile, the NPCI plans to hold monthly meetings with smaller digital payments players till December, which may also potentially extend beyond that timeline. 

The meeting comes close on the heels of the Reserve Bank of India’s (RBI) crackdown on Paytm Payments Bank for “material supervisory concerns”. The central bank has barred the payments bank from undertaking UPI transactions by March 15. It has also asked the payments bank to move all its merchant wallets to other partner banks. 

The payments body fears that the ongoing crisis at Paytm could further tilt the scale in favour of PhonePe and Google Pay and lead to the creation of a duopoly in the digital payments space. A recent report by a Parliamentary panel also red flagged the dominance of foreign-owned companies (PhonePe and Google Pay) in the UPI space.