India’s mobile payments regulator is likely to extend the deadline for imposing market share caps on the popular UPI payment rail by one to two years, sources familiar with the matter told TechCrunch.
The National Payments Corporation of India (NPCI), a special arm of the Reserve Bank of India, plans to extend the deadline for imposing a 30 percent cap on the market share of individual participants in the UPI ecosystem, the sources said.
The decision is expected to significantly benefit Google Pay and Walmart-owned PhonePe, which currently dominate the UPI payments market in the country.
UPI has become the most popular way to send and receive money and make payments in India and the channel records over 11 billion transactions per month. PhonePe currently has a volume market share of around 49%, followed by Google at 37.4%. Paytm, its biggest rival, saw its share fall to 8% from 11% at the end of last year due to regulatory challenges.
The NPCI had originally planned to enforce the market share cap in January 2021, but postponed the deadline to January 1, 2025. TechCrunch previously reported that the regulator is seeking a further extension of the deadline after concluding that there is none practical solution to solve the problem gives output.
The NPCI has not yet made a final decision and may make changes to its plan by the end of the year, the sources warned.
An NPCI spokesman declined to comment on any questions about market share.
This decision is likely to draw criticism from other players in the ecosystem who have called on the NPCI to honor its commitment. Some companies have proposed solutions, such as incentives that benefit smaller players.
A parliamentary panel also asked New Delhi in February to counter the dominance of PhonePe and Google Pay. “As India focuses on ‘Make in India’ in other sectors, the Committee is of the view that local companies in the fintech sector should be encouraged,” the parliamentary panel wrote.
However, several UPI providers admit that an incentive plan that is unfairly different from PhonePe and Google Pay is a bad look for the ecosystem and could send wrong signals to the investor community.
US-based investors such as Accel, Lightspeed, Tiger Global, Insight Partners, Invesco, Vanguard, BlackRock and Fidelity are among the most prolific investors in listed Indian companies and startups. Some of the decisions taken by the RBI and other regulators have already spooked many investors.
The RBI on Wednesday held a meeting with key players in the UPI ecosystem to discuss strategies to scale UPI infrastructure, expand product portfolio, address challenges in the ecosystem and brainstorm solutions to address these issues, the said Regular guest.
The Indian news agency Moneycontrol initially reported (paywall) that the NPCI was considering a further extension of the deadline.
The market share dilemma is not the only challenge facing NPCI and RBI. Regulators have also discussed introducing more incentives for UPI service providers. Unlike credit card issuers like Mastercard and Visa, which charge merchants a fee for consumer transactions, UPI — founded seven years ago by a consortium of banks — is mostly free for merchants.
India’s UPI is “fantastic on many levels” but remains an “incredibly painful experience” for ecosystem participants who “all lose money as part of this venture,” Mastercard CFO Sachin Mehra said last year.