India’s mobile payments regulator is likely to extend the deadline to impose market share caps on the popular UPI payments rail by one to two years, sources familiar with the matter told TechCrunch.
The National Payments Corporation of India (NPCI), a special unit of the Reserve Bank of India, plans to extend the deadline for introducing a 30% cap on the market share of individual participants in the UPI ecosystem, the sources said.
The decision is expected to greatly 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 payments in India, and the channel sees over 11 billion transactions a month. PhonePe currently holds around 49% market share by volume, followed by Google at 37.4%. Paytm, their closest competitor, has seen its share fall from 11% at the end of last year to 8% amid regulatory challenges.
The NPCI had originally planned to impose the market share cap in January 2021, but pushed back the deadline to January 1, 2025. TechCrunch previously reported that the regulator was moving to further extend the deadline after concluding that no there is a practical solution to deal with the issue.
The NPCI has not reached a final decision yet and may make changes to its plan by the end of the year, the sources warned.
An NPCI spokesman declined to comment on all questions about market share.
This decision is likely to attract criticism from other ecosystem players who are urging the NPCI to stick to its commitment. Some companies have proposed solutions, such as incentives that benefit smaller players.
A parliamentary committee also asked New Delhi in February to tackle the dominance of PhonePe and Google Pay. “As India focuses on ‘Make in India’ in other sectors, the Commission is of the view that local entities should be promoted in the fintech sector,” the parliamentary committee wrote.
However, several UPI providers admit that an incentive plan that unfairly differentiates itself from PhonePe and Google Pay will be a bad look for the ecosystem and could send wrong messages to the investor community.
US-based investors including Accel, Lightspeed, Tiger Global, Insight Partners, Invesco, Vanguard, BlackRock and Fidelity are among the most prolific investors in Indian public companies and startups. Some of the choices made by the RBI and other regulators have already spooked many investors.
The RBI on Wednesday he held a meeting with key players in the UPI ecosystem to discuss strategies to scale the UPI infrastructure, expand the product portfolio, address challenges in the ecosystem and seek solutions to address these issues, the magazine said.
Indian news agency Moneycontrol reported for the first time (paywalled) that NPCI was considering another deadline extension.
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—operates largely at no cost to merchants.
India’s UPI is “fantastic on many levels” but remains an “incredibly painful experience” for ecosystem participants who “all end up losing money as part of this proposition,” Mastercard CFO Sachin Mehra said last year.
