In a relief to UPI payments market leaders, PhonePe and Google Pay, the National Payments Corporation of India (NPCI) has extended the deadline for Unified Payments Interface (UPI) to meet the market cap deadline of 30% to December 31, 2024. The earlier deadline to meet the market cap norm was December 31, 2022.
“Taking into account the present usage and future potential of UPI, and other relevant factors, the timelines for compliance of existing TPAPs (third-party app providers) who are exceeding the volume cap, is extended by two years, that is, till December 31, 2024 to comply with the volume cap,” NPCI said in a statement.
The extension of the deadline will mean that PhonePe and Google Pay – the two biggest players with market share of 47% and 34% as of October – will get two more years to adhere to NPCI’s guideline. Paytm, the third biggest player in the segment, has a market share of 15%.
UPI transactions, which had crossed Rs 10 trillion in May in value terms, stood at Rs 11.90 trillion in November compared to Rs 12.11 trillion a month ago, as per NPCI data.
“We are obviously relieved to see the UPI market share cap get extended by two years. At PhonePe’s scale, to reduce our UPI market share to 30%, we would be forced to deny UPI payment services to crores of Indians, and that would be totally detrimental to the incredible Indian digital payments growth story,” Sameer Nigam, CEO and founder of PhonePe said in a statement.
The guidelines requiring each UPI third-party app to adhere to a 30% transaction volume cap were first introduced in November 2020 to ensure that UPI volumes do not get concentrated in the hands of a few players. These three players, currently, make up for 96% of monthly UPI volumes.
Amazon Pay, WhatsApp Pay and others have a negligible share because users have chosen to stick with one of the top three UPI apps. The implementation of the guidelines will be a positive for Paytm, as it stands to gain. However, for PhonePe and Google Pay, it is a setback.
The announcement of this guidelines raised concerns about how players could reduce market share. As per the latest NPCI circular, the burden is on other existing and new UPI players to ínvest more to increase their own UPI market share, Nigam said further, adding the organic market share of participants in the UPI industry will not change significantly, and NPCI will have to keep extending the market cap indefinitely.