Reportedly, the caps on market share for a popular digital payments method in India will again get delayed hence benefiting Google Pay and Walmart-backed PhonePe due to the fact that the authorities prioritize growth over concerns about market concentration.
Delayed Caps On UPI Payments Market Shares
Further, the sources state that the National Payments Corporation of India (NPCI), the quasi-regulator, will extend by as much as two years a year-end deadline to cap at 30% the market share of any company processing payments via the Unified Payment Interface (UPI).
In the meantime, the share of PhonePe UPI payment has risen to 48.3% from 37% in April 2020.
Contrary to this, Google Pay’s share has declined to 37.4% from 44%, as per the NPCI data.
The NPCI data indicates that together, these two processed a combined 11.5 billion transactions in April.
So far, NPCI and Google Pay have not released any comment in this regard.
UPI was launched in India during 2016.
But they have barred companies from charging for the instant digital payments service in an effort to promote online transactions and reduce the use of cash in Asia’s third-largest economy.
But this has affected negatively as they cannot charge for it so India’s banks and others like Meta-owned WhatsApp and Amazon Pay have not pushed UPI-based payments aggressively.
This has left authorities worried about a concentration risk.
Although these apps do not earn money from the payments, the apps like PhonePe and Google Pay have been able to use their UPI customer base to sell services such as loans and insurance.
Earlier NPCI, announced the 30% cap in 2020 which has a regulatory mandate from the central bank.
Layer on, they extended the deadline by two years to the end of 2024.
It appears that they will have to extend the deadline again as it is not possible for PhonePe and Google Pay to reduce their market shares without hurting UPI payments growth, said the sources.
Further adding that the final decision on the extension will be communicated closer to the deadline,on the condition of anonymity.
Hoping For More Competition
Earlier in February, 2020, NPCI had hoped for more competition when WhatsApp was permitted to offer UPI-based payments.
But, the company had just 0.2% market share as of April.
Similarly, India’s Paytm, having the third-highest share, has experienced a decline in payments processed through its platforms after regulators placed curbs on a group entity.
Now, payment firms are asking NCPI for the removal of the cap on market-share, so that they can charge for UPI payments to encourage competition, said the sources.
It appears that the government will decide whether to allow firms to charge for UPI payments.
Although, NPCI does not favor removing the share cap.
Following the figures, the volume of UPI transactions rose 49.5% in April from a year earlier, interestingly it’s less than the 54% rise logged in March.
