NPCI plans to counter PhonePe, Google's dominance in UPI payments
What's the story
India's National Payments Corporation (NPCI), the regulatory body for the Unified Payments Interface (UPI) mobile payment system, is planning strategic discussions with various fintech startups.
The aim is to counterbalance the growing market dominance of PhonePe and Google Pay.
This move comes in response to concerns raised by legislators and industry insiders about the concentrated market share of these two platforms, which together account for nearly 86% of UPI transactions by volume.
Collaboration
NPCI to collaborate with key fintech players
NPCI officials are set to meet with representatives from CRED, FamPay, Amazon, and other significant players in the fintech industry.
The agenda of these discussions is to strategize ways to increase UPI transactions on their respective apps and understand what support they require in this pursuit.
UPI, a product of a consortium of Indian banks, has emerged as the preferred method for Indians to conduct online transactions, processing over 10 billion transactions monthly.
Market dynamics
Market share shifts in India's mobile payment landscape
The market share of Google Pay and PhonePe has increased from 82.5% at the end of December to its current level of nearly 86%.
Walmart owns more than three-fourths of PhonePe.
In contrast, Paytm, the third-largest UPI player, saw its market share decline to 9.1% by the end of March from 13% at the end of 2023 due to restrictions imposed by the Reserve Bank of India (RBI) on Paytm Payments Bank.
Regulation
NPCI advocates for market share cap in UPI ecosystem
The NPCI has consistently advocated for capping individual companies' market share in the UPI ecosystem at 30%.
However, it has postponed the deadline for firms to adhere to this directive until December 2024.
The organization faces a unique challenge in enforcing this directive as it believes it currently lacks a technical mechanism to do so.
This initiative follows after the RBI expressed its dissatisfaction with NPCI over the growing duopoly in the payments space.
Incentive plan
RBI and NPCI encourage incentives for emerging UPI players
The RBI is considering an incentive plan to create a more level playing field for emerging UPI players.
Concurrently, the NPCI is urging fintech companies to offer incentives to their users.
The goal of these incentives is to promote the use of their respective apps for making UPI transactions.
This approach aligns with a parliamentary panel's recommendation in February, urging the government to support domestic fintech players capable of providing alternatives to PhonePe and Google Pay.