PhonePe and Google Pay creating a duopoly in India’s UPI space? NPCI to check

The National Payments Corporation of India (NPCI) will collaborate with fintech startups in April to tackle the growing market dominance of PhonePe and Google Pay in the Unified Payments Interface (UPI) ecosystem, according to a report by TechCrunch.

NPCI is reaching out over concerns over the market share concentration of Google Pay and PhonePe, which together account for nearly 86 percent of UPI transactions by volume.

PhonePe has signed several agreements to promote UPI payments in Nepal, Singapore and the United Arab Emirates. Earlier this year, Google Pay also signed an agreement with NPCI to expand UPI for international payments.

Paytm, the third largest UPI player, has seen its market share fall this year, partly due to regulatory measures by the Reserve Bank of India (RBI).

The RBI has reportedly expressed “dissatisfaction” to the NPCI over the growing duopoly in payments.

A parliamentary panel has urged the government to support the growth of domestic fintech players and provide alternatives to PhonePe and Google Pay.

To address these concerns, NPCI executives will meet with representatives from CRED, Flipkart, Fampay, Amazon and other fintech companies to discuss initiatives aimed at boosting UPI transactions on their platforms. The meeting is also expected to help NPCI better understand the support these companies need to grow.

NPCI has advocated limiting the market share of individual companies in the UPI ecosystem to 30 percent, with a deadline extended to the end of December 2024. However, enforcement remains a challenge due to technical limitations.

In addition, the RBI is considering a plan to create a more favorable competitive landscape for emerging UPI players. The NPCI encourages fintech companies to offer incentives to users to promote UPI transactions through their apps.

Developed by Indian banks, UPI has become one of the most popular methods in the country to make online payments, processing more than 10 billion transactions every month. It has also gained momentum abroad, with countries such as Singapore, Malaysia, United Arab Emirates, France, Nepal, United Kingdom, Mauritius and Sri Lanka also accepting payments via this format.

First print: April 17, 2024 | 1:48 p.m IST