New Delhi: In November 2020, the National Payments Corporation of India (NPCI) had announced that there will be a market cap on UPI transactions to avoid market concentration risk.
The deadline for adhering to the market cap is around the corner (January 2023), but even now PhonePe has a market share of 47 per cent and Google Pay 35 per cent on the basis of volume of transactions.
So far, NPCI has not made any move to implement the guidelines or done any audit to review the market concentration.
Digital payments are accelerating in India especially since the launch of United Payments Interface or UPI. The UPI platform processed 6.57 billion transactions in August, 2022 amounting to Rs 10.73 trillion, making it a major part of digital payments in India.
With NPCI planning to expand UPI to other countries, the platform is gaining global recognition. However, it’s surprising that the Indian innovation of UPI is controlled by two foreign players-US-based Walmart-owned PhonePe and Google Pay.
In November 2020, the National Payments Corporation of India had announced that there will be a market cap on UPI transactions. This was hailed as a great move with India in focus as it would beat the market concentration risk driven by foreign third party apps like PhonePe and Google Pay.
It meant that third party apps can’t have more than 30 per cent market share in UPI. This was done to ensure that Indian fintech is not controlled by one player and if in case, one player fails the entire system doesn’t go down.
However, even with the deadline looming (January 2023), according to the latest data on value and volume-based transactions through UPI, PhonePe has a market share of 47 per cent and Google Pay 35 per cent on the basis of volume of transactions. This means that over 80 per cent of UPI transactions in India are controlled by foreign entities.
These two apps currently control 84 per cent of UPI transactions and approximately 20 Cr+ UPI user’s personal and financial Information.
The use of these apps by foreign companies who are outside the purview of financial regulators poses a huge systematic risk. Not only the personal information of the consumers who use them, but also their financial and transaction specific information are at risk of being leaked. It is very important to bring them under the regulatory purview of the rules.
On the NPCI guideline on UPI market cap, Sameer Nigam, CEO, PhonePe, in an interview to Money Control said, “It is not a norm, not even a regulation; it is an NPCI guideline. If Phonepe is the app of choice in a perfectly competitive market space, I can’t do anything about the market share cap.”
UPI services has been termed as a “public good” by the Ministry of Finance. The Reserve Bank of India has also repeatedly talked about the control of BigTech and foreign players over the Indian fintech ecosystem.