Center to delay digital payments market share cap, help PhonePe, Google Pay

India will again delay setting market share limits for a popular digital payment method that would benefit Google Pay and Walmart-backed PhonePe as authorities prioritize growth over concerns about market concentration, two sources told Reuters. Have been.

National Payments Corporation of India (NPCI), the quasi-regulatory, has extended the year-end deadline for limiting the market share of any company processing payments through the Unified Payment Interface (UPI) to 30 per cent by two years. Will increase. Sources with direct knowledge of the matter told Reuters.

According to NPCI data, PhonePe’s share in UPI payments has increased from 37 percent to 48.3 percent in April 2020, while Google Pay’s share has declined from 44 percent to 37.4 percent. The two processed a combined 11.5 billion transactions in April, data shows.

NPCI and Google Pay declined to comment. PhonePe did not respond to an email seeking comment.

India launched UPI in 2016 but barred companies from charging for the instant digital payments service in an effort to boost online transactions and reduce the use of cash in Asia’s third-largest economy.

Because they can’t charge for it, India’s banks and others like Meta-owned WhatsApp and Amazon Pay have not aggressively pursued UPI-based payments, leading officials to worry about concentration risks.

While their apps don’t make money from payments, PhonePe and Google Pay are able to use their UPI customer base to sell services like loans and insurance.

NPCI, which has the regulatory mandate from the central bank, announced the 30 per cent cap in 2020 but later extended the deadline by two years to the end of 2024.

The deadline will have to be extended again, one of the sources said, as it is not possible for PhonePe and Google Pay to reduce their market shares without hurting UPI payments growth.

A final decision on the extension will be communicated closer to the deadline, said the sources, who asked not to be identified because they are not permitted to speak to the media.

NPCI had expected more competition when WhatsApp was allowed to offer UPI-based payments in February 2020, but as of April the company had just 0.2 per cent market share.

India’s Paytm, with the third-largest share, has experienced a decline in payments processed through its platforms after regulators imposed sanctions on a group entity.

Payments companies want to remove market share caps and are asking NPCI to allow them to charge for UPI payments to encourage competition, said an official at a payments company.

Two sources said the government will decide whether companies should be allowed to charge for UPI payments, but one said NPCI is not in favor of removing the share cap.

UPI transaction volume in April increased 49.5 percent from a year earlier, down from 54 percent growth in March.

The central bank on Tuesday held a meeting with industry executives to discuss ways to expand the UPI user base, which stood at about 300 million users and 50 million merchants at the end of last year, according to the latest data.

© Thomson Reuters 2024