UPI Apps Like Paytm, PhonePe & Others Won’t Be Allowed More Than 30% Share; NPCI Issues Guidelines

National Payments Corporation of India (NPCI) has limited third-party application providers (TPAPs) to 30% of market share of all transactions processed via Unified Payments Interface (UPI).

The mandate stated that from Jan 2021 popular TPAPs eg. Google Pay, PhonePe and Paytm will not be permitted to process over 30% of transactions done via UPI network. 

Benefits

This step would ensure the prevention of the establishment of an monopoly by a single company or an oligopoly comprising multiple cos. 

Other companies will also be granted equal opportunity to cash in on a burgeoning digital payment platform using UPI network. 

Risk of overloading the UPI infrastructure is also a benefit. 

Exemption will be allowed on an individual case by case basis. The exemption will be extended to a maximum 6 months in order to tend to customer convenience. 

Phases Of Alerts

NPCI will be alerting the concerned apps upon reaching a certain threshold of market shares in a 3 phase manner . 

• The first- is when a firm reaches market share of 25-27% of all UPI transactions. The alert received via email or letter will have to be acknowledged
• In the 2nd phase the firm and its Payment Service Provider (PSP) receives an alert upon reaching the 27-30% mark in terms of market share. This time the firms will have to furnish proof regarding steps implemented towards market cap compliance. 
• The 3rd alert will be received upon hitting market share capacity over 30%. In this stage the apps and partner banks will have to halt bringing in new users immediately. 

They would have to offer an explanatory letter for prospective users following this template-

 “Dear user, as per NPCI rules any UPI app with more than 30% market share cannot onboard new customers until their market share goes down. Currently, the UPI market share is % so unfortunately, you’ll have to wait a while before you can access our UPI services. We apologize for the inconvenience and promise to notify you as soon as NPCI allows us to onboard you again!”

Current Scenario

At present the market share of UPI transactions is dominated by Google Pay and PhonePe, both of whom account for over 85% of all UPI transactions.

The pandemic has given a filip to digital transactions given the new measures of social distancing and avoidance of surface contact. 

Currently Paytm is the only payments app which facilitates transactions through all digital methods- Paytm Wallet, Paytm UPI, cards and net-banking. 

Paytm has expressed its satisfaction by stating that this new development is practical and “implementation guidelines are clear”.

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