The National Payments Corporation of India (NPCI), responsible for overseeing the widely used Unified Payments Interface (UPI) mobile payment system in the country, plans to meet with several fintech startups this month. The objective is to devise a strategy to tackle the increasing market dominance of PhonePe and Google Pay within the UPI ecosystem, according to sources familiar with the matter.
Representatives from CRED, Flipkart, FamPay, and Amazon, along with other players, will meet with NPCI executives to discuss important initiatives aimed at enhancing UPI transactions on their respective apps. The meeting’s purpose is to gain insights into the assistance these players require.
A coalition of Indian banks developed UPI, which has become the preferred method for online transactions among Indians, reportedly handling over 10 billion transactions monthly.
These new meetings are part of an expanding initiative to tackle the concerns expressed by lawmakers and industry players regarding the market dominance of Google Pay and PhonePe. Together, these two platforms make up almost 86% of UPI transactions by volume, a notable increase from 82.5% at the end of December. PhonePe is primarily owned by Walmart.
Paytm, the third-largest UPI player, experienced a decline in its market share to 9.1% by March 31 from 13% at the end of 2023. This decrease was due to the Reserve Bank of India’s (RBI) stricter regulations.
According to a person familiar with the matter, the conversation arises from the central bank’s expressed concern regarding the increasing duopoly in the payments space. A spokesperson from NPCI declined to provide any comments.
In February, a parliamentary panel recommended that the Indian government provide support to domestic fintech players to foster competition against PhonePe and Google Pay.
The NPCI has consistently aimed to restrict the market dominance of individual UPI service providers to 30%. Nevertheless, the body decided to give firms more time to comply with this directive, extending the deadline until the end of December 2024. The organization is confronted with a distinct challenge when it comes to enforcing this directive. It is of the opinion that it currently does not possess the necessary technical mechanism to accomplish this.
According to another source familiar with the matter, the Reserve Bank of India is considering an incentive plan to foster a more favorable competitive environment for emerging UPI players. According to a report by The Economic Times, the NPCI is urging fintech companies to provide users with incentives for conducting UPI transactions on their apps.
