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May 9, 2024

NPCI Considers Two-Year Extension on Market Cap Deadline for UPI Payment Platforms

The National Payments Corporation of India (NPCI) is contemplating deferring the implementation of caps on market share for digital payment platforms by two years, reports Reuters. With only eight months remaining until the original deadline, NPCI appears inclined towards prioritizing growth over concerns about market concentration.

This potential decision stands to benefit India’s leading digital payment platforms, PhonePe and Google Pay, which collectively processed 11.5 billion UPI transactions in April alone.

As of April, PhonePe’s UPI market share surged to 48-49 per cent, following the Paytm crisis earlier in the year. Google Pay held a 38 per cent market share during the same period. Introduced in 2016, UPI aimed to promote online transactions and reduce cash usage by prohibiting companies in India from charging for the instant digital payments service.

However, the absence of revenue streams has deterred players like Meta-owned WhatsApp and Amazon Pay from aggressively promoting UPI-based payments, raising concerns about market concentration, according to Reuters.

Despite the inability to directly monetize payments, PhonePe and Google Pay have leveraged their UPI customer base to offer additional services like loans and insurance.

NPCI had initially announced a 30 per cent market share cap in 2020 with a deadline set for the end of 2024. However, given the challenges in reducing market shares for PhonePe and Google Pay without hindering UPI payment growth, another extension is likely.

Introducing sudden market caps and limiting users on UPI apps may also cause disruptions among citizens and merchants due to the popularity of the payment system in India.

NPCI had anticipated increased competition with smaller payment platforms entering the market, but this has not materialized. Meanwhile, Paytm, holding the third-highest share, experienced a decline in processed payments following regulatory restrictions.

Payment firms have urged NPCI to remove the market-share cap and permit charges for UPI payments to foster competition. However, NPCI appears hesitant to eliminate the cap, preferring to continue deliberation on the matter.

Recently, the Reserve Bank of India convened with industry executives to explore strategies for expanding the UPI user base, which stood at approximately 300 million users and 50 million merchants as of late last year, based on the latest available data.

In conclusion, NPCI’s potential decision to defer market share caps for UPI payment platforms underscores the delicate balance between promoting growth and addressing concerns about market concentration in India’s digital payments landscape.

Jhumpa Lahiri

Jhumpa Lahiri

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