India is struggling to enforce long-delayed laws to curtail PhonePe and Google Pay’s dominance in its UPI payments network, which conducts over 10 billion transactions daily.
The National Payments Corporation of India (NPCI), a special unit of the Indian central bank, wants to limit individual companies’ market share in the popular Unified Payments Interface (UPI) system to 30%, a long-delayed effort to curb Walmart-backed PhonePe and Alphabet’s Google Pay’s 83% market share. However, with competitor Paytm floundering following rigorous regulatory action, the NPCI has a major task in reducing the dominating duopoly’s share: Has no idea how.
Two sources said NPCI officials feel there is a technological impediment to reaching the goal and have solicited industry participants’ opinions recently. NPCI, which postponed regulation enforcement until 2024, denied comment Tuesday.
The issue resurfaced this week when a parliamentary panel requested New Delhi help homegrown fintech startups compete with Walmart-owned PhonePe and Google Pay. The central bank said Paytm should suspend various activities at Paytm Payments Bank, the affiliate firm that conducts transactions for the financial services group.
UPI, India’s real-time digital payments system, has changed the country’s payments environment since 2016. About 500 banks, 70 million merchants, and 10 billion transactions occur monthly on the UPI network.
The NPCI recommended (PDF) a market share check to reduce system risks and “smoothen out all the transactions in the UPI ecosystem.” PhonePe and Google Pay had under 80% of the UPI market when they were proposed.
On Tuesday, Macquarie drastically dropped its 12-month price forecast on Paytm due to fears that financing partners and users may depart. Macquarie estimates Paytm’s price at $2.1 billion, taking into account its $1 billion cash balance. The Noida-based company is “fighting for its survival.”
Industry insiders warned that Paytm’s market share loss would favor the top two. Based on official statistics, the parliamentary panel stated PhonePe had a 47% market share and Google Pay had a 36% market share in October–November 2023.
PhonePe and Google Pay must cease increasing customers to meet the 30% restriction, according to industry officials. PhonePe keeps promoting to gain market share.
India was stuck on how to stop PhonePe and Google from dominating payments.
