Indian government to delay digital payments market share cap
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New Delhi: India plans to postpone the implementation of caps on market share for popular digital payment platforms, benefiting companies like Google Pay and PhonePe as authorities prioritize growth over concerns regarding market concentration.
According to sources familiar with the matter, the National Payments Corporation of India (NPCI), a quasi-regulator, will extend the deadline to cap the market share of any company processing payments via the Unified Payment Interface (UPI) by up to two years. The move aims to provide more time for companies to adjust to the regulations, reported Reuters.
PhonePe's market share of UPI payments has increased to 48.3 percent, while Google Pay's share has declined to 37.4 percent. Despite the decline in Google Pay's share, both platforms processed a combined 11.5 billion transactions in April, according to NPCI data.
NPCI and Google Pay declined to comment on the matter. PhonePe did not respond to a request for comment.
India introduced UPI in 2016, aiming to promote online transactions and reduce cash usage in the economy. However, companies were prohibited from charging for the service, leading to concerns about market concentration.
While companies like Meta-owned WhatsApp and Amazon Pay have not aggressively pushed UPI-based payments due to the inability to charge for the service, PhonePe and Google Pay have utilized their UPI customer base to offer additional services such as loans and insurance.
NPCI initially announced a 30 percent cap on market share in 2020, which was later extended to the end of 2024. However, the deadline is expected to be extended again as reducing market shares without impacting UPI payments growth is challenging for PhonePe and Google Pay.
Industry executives have suggested removing the market-share cap and allowing companies to charge for UPI payments to encourage competition. However, NPCI is not inclined to remove the cap, according to sources familiar with the matter.
Despite the growth in UPI transactions, which increased by 49.5 percent in April compared to the previous year, the rate of growth has slowed down slightly. To address this, the central bank held discussions with industry executives to explore ways to expand the UPI user base, which stood at around 300 million users and 50 million merchants as of late last year.