The National Payments Corporation of India (NPCI), the governing body overseeing the country’s widely used Unified Payments Interface (UPI) mobile payment system, is taking steps to address the growing market dominance of PhonePe and Google Pay in the UPI ecosystem.
NPCI executives have scheduled meetings with representatives from CRED, Flipkart, Fampay, and Amazon, among other players, later this month to discuss their initiatives to boost UPI transactions on their respective apps and understand the assistance they require, according to sources familiar with the matter.
The UPI, built by a coalition of Indian banks, has skyrocketed in popularity as the preferred method for online transactions in India, with over 10 billion transactions being processed each month. However, concerns have been raised by lawmakers and industry players about the increasing market share concentration of Google Pay and PhonePe, which currently account for a staggering 86% of UPI transactions by volume (up from 82.5% at the end of December).
Walmart, which owns a majority stake in PhonePe, has a strong foothold in the market, making it a potential threat to smaller UPI players. This has led to the third-largest player, Paytm, seeing a decline in its market share to 9.1% by the end of March, down from 13% in 2023, reportedly due to regulatory pressure from the Reserve Bank of India (RBI).
The RBI has expressed its “displeasure” to the NPCI over the growing duopoly in the payments space, according to a source familiar with the matter. However, an NPCI spokesperson has declined to comment on the issue.
In February, a parliamentary panel in India had urged the government to support the growth of domestic fintech startups that could offer alternatives to PhonePe and Google Pay, both backed by foreign investments.
The NPCI has long advocated for limiting the market share of individual companies in the UPI ecosystem to 30%. However, the deadline for firms to comply with this directive has been extended to the end of December 2024. Enforcing this directive poses a unique challenge for the organization, as it currently lacks a technical mechanism to do so, according to a previous report by TechCrunch.
The RBI is also reportedly looking into an incentive plan to create a more favorable competitive field for emerging UPI players. The Economic Times reported that the NPCI is encouraging fintech companies to offer incentives to their users, promoting the use of their respective apps for UPI transactions.
