UPI Apps | NPCI: UPI apps may have more time to meet 30% market share cap

Bengaluru: The National Payments Corporation of India (NPCI), which enables the country’s digital payment and settlement systems, may extend the deadline for its controversial mandate requiring payment apps to hold no more than 30% market share, officials said. told ET people familiar with the development. The current deadline is January 2023.

“There is no choice but to actively consider this. They (NPCI) are wary of disrupting users and actually slowing the growth of UPI,” said a person with knowledge of the discussions.

According to sources, NPCI fears market disruption for consumers at a time when third-party payment providers such as PhonePe and Google Pay still hold around 47% and 34% market share, respectively, as of April this year. “New entrants like WhatsApp Pay have yet to make a significant dent in the market in terms of market share,” the person familiar with the ongoing discussions said.


An email sent to the NPCI elicited no response on the matter until press time on Sunday. Major third-party UPI apps such as PhonePe and Google Pay did not respond to ET’s questions about it.

NPCI’s tenure has seen the concerted rejection of several UPI apps, including market leaders PhonePe and Google Pay. Two other major players

and Amazon Pay have yet to break the leaders’ dominance.

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Meta-owned WhatsApp Pay, which has now been given permission to expand its user base to 100 million consumers, recorded 2.5 million transactions in April, compared to 2.6 billion on PhonePe.

Informed sources said that at least one of the largest UPI apps has told its key stakeholders that the market cap mandate is unlikely to be implemented at the end of 2022, and that it is therefore not slowing down its plans to expand its user base. .

“Although there is still time (six months) before the deadline expires, but unless a player rises dramatically to disrupt the market, a postponement of the said rule is being considered,” sources added. .

Tata Digital is also among the new entrants to UPI, as ET first reported.

UPI was one of the biggest beneficiaries of the tailwinds brought to digital payments with the onset of the covid pandemic, as consumers shunned cash for fear of virus transmission. Transactions on the UPI network have increased nearly sixfold since May 2020, when overall volumes on the UPI infrastructure first crossed 1 billion, with total volumes reaching 5.95 billion last month.

Progressive compliance
In November 2020, NPCI officially announced for the first time that it would issue a 30% cap on the volume of transactions clocked by a player from 2021. Players will have a two-year period from January 2021 to comply with the capping mandate in a phased manner, he had said.

By March 2021, the payment infrastructure provider has defined operational guidelines for digital payment players to limit their share. He said the 30% market cap will only be calculated based on the total volume of trades processed on UPI in the previous three months by a player, on a rolling basis.

PhonePe co-founder and CEO Sameer Nigam previously said capping UPI’s market share was not a good idea. He told ET in September last year that he was not worried about shrinking his market share. “If I follow all the interoperability rules, there’s not much I can do to reduce market share. I’d like to believe that now it’s user preference that starts to play out based on success rate (of transactions) and acceptance.” Google Pay had also expressed market share concerns in a statement to the media earlier.

UPI transactions clocked by applications in 2022_Graphic_ETTECHETtech

Can WhatsApp Pay disrupt the market?

WhatsApp Pay’s entry into UPI has been a cause for concern for the industry, with Paytm founder Vijay Shekhar Sharma sparking a firestorm over the Facebook-owned company’s entry into the e-payment network in 2018. NPCI’s most recent development allowing WhatsApp to grow its user base to 100 million here has once again shone a spotlight on the company. Since approval in late April, WhatsApp Pay has been offering cashback to existing users to incentivize them to make more transactions using its payment service and inviting new users.

“They (WhatsApp Pay) are trying to attract new users and the frequency of cashback as a hook has increased. But it has yet to exceed its previous user base limit of 40 million,” said someone familiar with the case. He added that the slower-than-expected disruption of new players is also a factor that adds to the current idea of ​​delaying the implementation of the market share cap.

In response to ET’s questions about cashback and rebates, a WhatsApp rep said the company “was running a campaign offering cashback incentives in a phased manner to our users to unlock the potential of payments.” on WhatsApp… We will continue to drive payments awareness on WhatsApp as part of our broader efforts to bring the next 500 million Indians into the digital payments ecosystem.”

However, according to industry experts, the lack of merchant payment use cases such as bill payments is also one of the main reasons the courier hasn’t been able to make a big dent. in the UPI landscape.

As of last month, peer-to-merchant (P2M) payments contributed about 40% of overall UPI volumes.

Lance B. Holton