Banks, fintechs push NPCI for imposing 30% UPI market share cap
Large banks and fintechs are pushing the National Payments Corporation of India (NPCI) to impose a 30 per cent cap on the market share of each payment player offering Unified Payments Interface (UPI) services by the end of 2024, people aware of the development say.
“Our view is that smaller players are rising, and the market has enough options today for this decision to be taken. It can be taken incrementally, and maybe only for new users to start with, and then you go live with the rest,” a large fintech firm founder said. A total of 20 new UPI apps have hit the market in the current calendar year, a record number of new entrants since the launch of UPI.
The NPCI had first proposed a 30 per cent market cap for third-party UPI app providers in November 2020 and later extended the deadline from December 2022 to December 2024. However, NPCI chief Dilip Asbe last month said the organisation is yet to decide if it will impose the market cap by December end. Payments industry association officials, too, have not received communication from the NPCI yet on whether the market cap will be imposed by year end.
Imposing a market cap of 30 per cent on each UPI players appears difficult, as two top players—PhonePe and Google Pay—continued to account for 85 per cent of overall UPI transaction volumes in the month of November, while PayTm accounted for another 7 per cent volume share.
Unfair advantage
According to a private bank chief, the success of top two players in the UPI space is primarily due to two reasons, seamless customer experience and financial incentives. The official noted that as the two top players are backed by Walmart and Google with deep pockets, they can burn money to continue providing financial incentives to users, a practise that small players cannot.
“I think concentration in anything is bad. Whether it be on loan side, any sector or product, or liability side where you are getting deposit from few of large depositors. Similarly, on digital side concentration won’t work because if something happens then whole system will be impacted. We need to have large enablers. Banks have built apps, they just need to ensure seamless customer experience,” they said.
The fintech founder quoted earlier shared similar views, saying the leaders have deep pockets to continue providing financial incentives to users.
“In our view, this whole system has been allowed to run for too long now. Also, I don’t think that larger players will suffer too much as their user bases are not growing rapidly. Smaller players are growing right now,” they said, adding that imposing a market cap on each player would enable more new entrants in the UPI space and enhance competition.