NPCI Plans to Counter PhonePe, Google Pay Dominance

NPCI plans to meet fintech startups to counter PhonePe and Google Pay’s dominance in UPI transactions.

In an effort to devise a plan of action to counter the increasing market dominance of PhonePe and Google Pay within the UPI ecosystem, the National Payments Corporation of India (NPCI), the regulatory body in charge of the nation’s extensively used Unified Payments Interface (UPI) mobile payment system, is scheduled to meet with a number of fintech startups this month.

People familiar with the situation told the media that NPCI executives plan to meet with representatives from CRED, Flipkart, Amazon, and Fampay, among other firms, to discuss their important initiatives targeted at expanding UPI transactions on their individual applications and understand the support they require. 

A consortium of Indian banks developed UPI, which has emerged as the most widely used online payment method in India, processing over 10 billion transactions each month.

The new sessions are a part of a larger initiative to address legislators’ and industry participants’ worries over Google Pay and PhonePe’s concentrated market dominance, which combined now account for about 86% of UPI transactions by volume, up from 82.5% at the end of December. Walmart owns more than three-quarters of PhonePe.

Following a crackdown by the Reserve Bank of India (RBI), Paytm, the third-largest UPI participant, saw its market share drop to 9.1% at the end of March from 13% at the end of 2023.

According to a person with knowledge of the situation, the central bank spoke with the NPCI in order to voice its “displeasure” with the increasing duopoly in the payments industry. A representative of the NPCI declined to comment.

In February, a parliamentary commission in India recommended that the government foster the growth of indigenous fintech companies as potential replacements for Walmart-sponsored Google Pay and PhonePe apps.

For a considerable amount of time, the NPCI has been in favor of capping the market share of individual businesses involved in the UPI ecosystem at 30%. However, it’s delayed until the end of December 2024 for businesses to comply with this requirement. As previously reported, the organization believes it does not currently have the technical means to enforce this instruction, which presents a special obstacle.

According to a second source familiar with the situation, the RBI is also considering an incentive scheme to level the playing field and make it more attractive for new UPI participants. The NPCI is pushing fintech businesses to provide incentives to their users in order to encourage the usage of their individual applications for UPI transactions, according to a second story published by the Indian daily Economic Times on Wednesday.