The transition to a system where a single app’s Unified Payments Interface (UPI) market share is capped at 30% will likely be delayed by two to three years.
The National Payments Corporation of India (NPCI) may decide to extend the deadline by a few years to December 31, 2022, after discussions with all stakeholders, according to sources in the know. It is believed that NPCI is considering the extension as within the current deadline it may not be possible 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 up the UPI volumes. So the choice really is to screw up UPI and extend the deadline. And a six-month extension won’t be enough for something like this,” said a senior payments industry executive. Any plan to extend the deadline would be approved by the government and the Reserve Bank of India (RBI), he added.
An email requesting a response from NPCI to this story went unanswered as of press time.
NPCI is understood to be working with ecosystem players like Paytm and WhatsApp to work towards increasing their market share in UPI. Work is also underway on Slice, Tata Neu, and Bajaj Pay, which are on the way to becoming UPI apps. NPCI is launching a mobile mapper feature for UPI that will help make number-based payments fully interoperable and increase volume. The cap on market shares is finally enforced by the number of users onboarded by each app.
PhonePe is the top 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, which is almost 34% of UPI volume.
Indian lawmakers have raised concerns about the emergence of what some see as a duopoly in the UPI ecosystem. PTI reported in July that several Members of Parliament (MPs), including some from the ruling party, had planned to raise the issue during the monsoon session and at meetings of relevant parliamentary bodies in Parliament.
NPCI first discussed the idea of a 30% volume market cap for third-party apps (TPAPs) in the UPI ecosystem in November 2020. TPAP must not exceed 30% of the total volume of transactions processed in UPI in the previous three months (on a rolling basis),” states the circular dated November 5, 2020. It gave existing TPAPs a two-year timeframe from January 1, 2021 to phase in the requirement.