The UPI market share cap is divided between Paytm, PhonePe, and Google Pay 2022: who wants to extend it?

The UPI market share cap is divided between Paytm, PhonePe, and Google Pay: who wants to extend it?

Current disputes about the implementation of the Unified Payments Interface (UPI) market share cap involve Paytm, PhonePe, and Google Pay. Market giants PhonePe and Google Pay are allegedly asking for an extension of at least three years, while Paytm believes the “market capping to be applied as per the timeframe (December 2022)”. The National Payments Corporation of India (NPCI), which supports services like UPI Payment, is in charge of the problem. Thus, the government has made it plain that it won’t get involved.

What is the market share cap for UPI?

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The NPCI stated in November 2020 that it will impose a 30% restriction on the total amount of transactions processed by any one participant. The cap was slated to go into force in January 2023, giving third-party applications (TPAs) like Google Pay and PhonePe two years starting in January 2021 to gradually comply with the requirement.

NPCI published operational rules for digital payment companies in March 2021 to restrict their stake. The rules state that the entire amount of transactions performed over the past three months will be used to compute the 30% market cap (on a rolling basis).

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Position of the government on the matter

The government has stated that it won’t have any input because the Reserve Bank of India and the NPCI have the requisite power, according to a report by The Economic Times. Any choice that could have an impact on customers will be scrutinized, though.

There can be no side-taking by the Indian government. A top official from the IT ministry was reported as stating that there must ultimately be a balance between consumer products and the UPI ecosystem. According to reports, the NPCI is in a discussion about this with the RBI and several government agencies.

The biggest UPI players in the Indian market

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According to NPCI’s data on market share for September 2022, PhonePe has a 46.7% market share, followed by Google Pay with a 33.3% share, Paytm with a 15.1% share, Amazon Pay with a 0.8% share, and other smaller companies including WhatsApp Pay and Mobikwik with a 4.1% share.

PhonePe and Google Pay would suffer if the market cap restriction is put into place in December and goes into force in January 2023 since they will have to reduce their market shares. Other payment aggregators, like Paytm, Amazon Pay, and WhatsApp Pay, will profit from the circumstance. 

What transpires when the market cap reaches 30%

The market cap will be determined by the monthly transactions made on the app, rather than by the total number of users, by the rules.

When a firm’s app’s transactions exceed the 25% transaction limit, NPCI will send the company (which owns the app) a notification. When the transactions on the same app go beyond the 27% level, there will be another notice.

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After that, the corporation will need to take action to stay under the 30% cap. As of right presently, there are no specifics available.

Customer effects of UPI market share cap

People still favor some platforms over others when it comes to making payments, even if a single UPI code works with all apps. The September data suggests that PhonePe and Google Pay are the two most popular applications for UPI transactions. Customers could be compelled to switch platforms if the new rule goes into effect, which would be inconvenient for them.

People won’t have the choice of using an app they are accustomed to for transactional purposes. A setback in innovation in this area might result in sluggish UPI development, in addition to affecting customer choice and TPAs offering services. Additionally, clients wouldn’t be aware when a business has hit the transactional barrier.


UPI Effects of Digital Rupee

upi: paytm, phonepe, google pay divided on upi market share cap; government won't intervene - the economic times

The Reserve Bank of India (RBI) has started a pilot program for Digital Rupee in the Digital Rupee – Wholesale sector for government securities transactions. The first pilot in the Digital Rupee – Retail category is scheduled to go live in a few select areas within the next month, it was said.

The RBI may introduce Digital Rupee as an alternate means of payment if the TPAs receive the requested “at least three years’ extension.” The Digital Rupee would “boost India’s digital economy, increase financial inclusion, and make the monetary and payment systems more efficient,” according to the RBI’s Concept Note.

A bank acting as an intermediary in UPI is responsible for verifying and facilitating payments. A Central Bank Digital Currency (CBDC) will be a Reserve Bank liability rather than a commercial bank obligation. The RBI entering the market with its platform for processing payments may benefit end users by giving them more transaction options. RBI and UPI will face off in the world of online transactions.

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Edited by Prakriti Arora

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