Extended Deadline: NPCI Grants PhonePe and GPay 2 More Years to Increase UPI Market Share
MUMBAI: In a surprising turn of events, the National Payments Corporation of India (NPCI) has announced a two-year extension for third-party apps PhonePe and Google Pay to enhance their market share in the Unified Payments Interface (UPI) ecosystem. This decision comes as the apex payments body strives to promote healthy competition and prevent monopoly in the rapidly growing digital payments space.
Background
Back in November 2020, NPCI had set a deadline for third-party app providers, stipulating that no single entity should have a market share exceeding 30% of total UPI transaction volumes by the end of 2024. This move was prompted by the aftermath of the Yes Bank moratorium, which had a significant impact on PhonePe transactions and led to a sharp decline in UPI volumes overnight.
Market Dynamics
Despite the initial cap, PhonePe and Google Pay managed to increase their respective market shares to 48% and 37%, even as new players entered the UPI arena. The rise of these two giants came at a time when the third-largest player, Paytm, faced regulatory challenges due to actions taken by the Reserve Bank of India on Paytm Payments Bank.
Industry Outlook
According to Vishwas Patel, chairman of the Payment Council of India (PCI), the extension of the market cap is a positive development that will encourage the proliferation of new UPI apps in the market. While incumbents like PhonePe and Google Pay have dominated the space by investing heavily in user acquisition, emerging players such as Naavi, Cred, Bhim, WhatsApp Pay, and others are gaining traction.
Expert Insights
Industry insiders believe that the UPI ecosystem is poised to reach a billion transactions per day in the near future. With such high transaction volumes and a cost-effective operating structure, players in the market stand to benefit from potential revenue streams, even if nominal charges are imposed on large merchants.
As the digital payments landscape in India continues to evolve, the NPCI’s decision to extend the deadline for PhonePe and Google Pay reflects a commitment to fostering a competitive environment that benefits both consumers and businesses. With new players entering the fray and existing incumbents adapting their strategies, the UPI market is poised for further growth and innovation in the coming years.
