India Likely to Delay Imposition of Caps on UPI Payments Market Share Again
India is set to delay once again the implementation of caps on market share for a popular digital payments method, benefiting major players like Google Pay and PhonePe as authorities prioritize growth over concerns about market concentration. The National Payments Corporation of India (NPCI), acting as a quasi-regulator, plans to extend the deadline by up to two years to cap the market share of any company processing payments via the Unified Payment Interface (UPI), according to sources familiar with the matter.
Based on NPCI data, PhonePe’s share of UPI payments surged to 48.3% from 37% in April 2020, while Google Pay’s share declined to 37.4% from 44%. Together, these two giants processed 11.5 billion transactions in April, highlighting their significant influence in the digital payments landscape.
Since companies cannot directly charge for UPI transactions, various players, including banks and platforms like Meta-owned WhatsApp and Amazon Pay, have been relatively restrained in promoting UPI-based payments. However, Google Pay and PhonePe have leveraged their UPI customer base to offer additional services such as loans and insurance, further solidifying their dominance.
Initially announced in 2020, the 30% market share cap was later extended by NPCI to the end of 2024. However, according to one of the sources, given the challenges in reducing market shares without hindering UPI payments growth, another extension of the deadline is deemed necessary.
Despite hopes for increased competition with WhatsApp’s entry into UPI payments in 2020, the company has only captured a marginal market share of 0.2% as of April. Meanwhile, Paytm, India’s third-largest player, has faced a decline in processed payments following regulatory restrictions on one of its group entities.
Payment firms have been advocating for the removal of the market-share cap, proposing to NPCI that they charge for UPI payments to encourage competition. However, NPCI appears hesitant to remove the cap, indicating that the government will ultimately decide.
The volume of UPI transactions increased by 49.5% in April compared to the previous year, slightly lower than the 54% growth logged in March. The central bank recently convened with industry executives to explore strategies for expanding the UPI user base, which stood at approximately 300 million users and 50 million merchants last year.
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