Market share cap rule for UPI apps on waiting list

PhonePe is the leading UPI app, with 3 billion transactions and a volume share of over 47% in July, followed by Google Pay, which recorded 2.13 billion transactions during the month, accounting for nearly 34% of UPI volumes.

NPCI is believed to be contemplating the extension as it may not be feasible within the current deadline to change the existing ecosystem dynamics where two players – PhonePe and Google Pay – account for over 80% of the market.
NPCI is believed to be contemplating the extension as it may not be feasible within the current deadline to change the existing ecosystem dynamics where two players – PhonePe and Google Pay – account for over 80% of the market.

The transition to a regime where the Unified Payments Interface (UPI) market share of a single app is capped at 30% is likely to be delayed by two to three years.

The National Payments Corporation of India (NPCI), after discussions with all stakeholders, may decide to extend the December 31, 2022 deadline by a few years, according to sources in the know. NPCI is believed to be contemplating the extension as it may not be feasible within the current deadline to change the existing ecosystem dynamics where two players – PhonePe and Google Pay – account for over 80% of the market.

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“If you try to change the market share situation within the current deadline, it will mess with UPI volumes. So, the choice really is between messing up UPI and extending the deadline. And a six-month kind of extension won’t be enough for something like this,” said a payments industry executive. Any plan to extend the deadline will be subject to a go-ahead from the government and the Reserve Bank of India (RBI), he added.

An email seeking NPCI’s response for this story remained unanswered till the time of going to press.

NPCI is understood to be working with ecosystem players like Paytm and WhatsApp to work towards increasing their market share in UPI. There is also work going on with Slice, Tata Neu and Bajaj Pay, which are on their way to becoming UPI apps. NPCI is rolling out a mobile mapper feature for UPI, which will help make mobile number-based payments fully interoperable and help increase volumes. The cap on market shares will eventually be enforced through the number of users being on-boarded by each app.

PhonePe is the leading UPI app, with 3 billion transactions and a volume share of over 47% in July, followed by Google Pay, which recorded 2.13 billion transactions during the month, accounting for nearly 34% of UPI volumes.

Indian lawmakers have expressed concerns around the emergence of what is seen by some as a duopoly in the UPI ecosystem. PTI reported in July that multiple members of Parliament (MPs), including some from the ruling party, had planned to raise the issue in Parliament during the monsoon session and in meetings of relevant Parliamentary panels.

NPCI had first mooted the idea of a 30% volume market cap for third-party app providers (TPAPs) in the UPI ecosystem in November 2020. “PSP (payment service providers) 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 circular dated November 5, 2020 said. It gave existing TPAPs a two-year timeframe, starting January 1, 2021, to comply with the requirement in a phased manner.

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