India considers postponing UPI market share cap, allowing PhonePe and Google Pay to win

India’s mobile payments regulator is likely to extend the deadline for imposing market share caps on the popular UPI payments rail by one to two years, sources familiar with the matter told TechCrunch.

The National Payments Corporation of India (NPCI), a special arm of the Reserve Bank of India, plans to extend the deadline to introduce a 30% cap on the market share of individual UPI ecosystem participants, officials said.

The decision is expected to greatly benefit Google Pay and Walmart-owned PhonePe, which currently dominate the UPI payments market in the country.

UPI has become the most popular way to send, receive and pay money in India, with more than 11 billion transactions taking place each month on this channel. PhonePe currently has a market share of around 49% in terms of volume, followed by Google with his 37.4%. Its closest competitor, Paytm, saw its market share fall to 8% from 11% at the end of last year due to regulatory challenges.

NPCI originally planned to implement the market share cap in January 2021, but postponed that deadline to January 1, 2025. TechCrunch previously reported that regulators concluded there was no practical solution to addressing the market share cap and were moving to further extend the deadline. problem.

NPCI has not yet reached a final decision and could change its plans before the end of the year, officials warned.

A spokesperson for NPCI declined to comment on all questions regarding market share.

The decision is likely to invite criticism from other players in the ecosystem who have urged NPCI to follow through on its promises. Some companies are proposing solutions such as incentives that would benefit smaller players.

A parliamentary committee also called on New Delhi in February to counter the dominance of PhonePe and Google Pay. “As India is focusing on ‘Make in India’ in other sectors, the committee is of the opinion that local companies should be promoted in the fintech sector,” the parliamentary committee said. I wrote it down.

However, several UPI providers have acknowledged that incentive plans that unfairly differentiate PhonePe and Google Pay look bad for the ecosystem and may send the wrong signals to the investor community.

US-based investors such as Accel, Lightspeed, Tiger Global, Insight Partners, Invesco, Vanguard, BlackRock, and Fidelity are among the largest investors in Indian listed companies and startups. Some of the choices made by the RBI and other regulators have already surprised many investors.

RBI held a meeting on wednesday Regulars said they will discuss strategies with key players in the UPI ecosystem to expand the UPI infrastructure, expand the product portfolio, address ecosystem challenges, and brainstorm solutions to tackle these issues. .

Indian news agency Money Control first reported NPCI (paywalled) is considering extending the deadline further.

The market share dilemma is not the only challenge facing NPCI and RBI. Regulators are also discussing introducing further incentives for UPI service providers. Unlike credit card issuers such as Mastercard and Visa, which charge merchants fees for consumer transactions, UPI, which was founded seven years ago by a consortium of banks, works at almost no cost to merchants. ing.

While India’s UPI is “great on many levels,” it remains an “incredibly painful experience” for ecosystem participants and “ultimately everyone loses money as part of that proposition,” Mastercard said. Chief Financial Officer (CFO) Sachin Mehra said last year.