PhonePe has over 4x of Paytm’s UPI market share! One of every two UPI transactions is taking place via PhonePe … and this could be concerning for NPCI.
The National Payments Corporation of India (NPCI) faces an acute challenge in bringing down the commanding share held by PhonePe, owned by Walmart, and Google Pay. These two platforms collectively handled over 10 billion transactions in volume, and accounted for 84% share of the UPI market in February 2024.
The duopoly of the two major fintech players in India’s UPI market continues to strengthen with each passing month. However, NPCI seems to find itself totally clueless when it comes to restricting these apps from acquiring the UPI market any further.
In February 2024, PhonePe emerged as the UPI payments market leader with a 47.36% share. Following closely are Google’s GPay with 36.67% and Paytm with a share of 10.84%.
However, here’s the kicker: NPCI is staring at the toughest challenge in enforcing rules to curb the dominance of PhonePe and Google Pay in India.
Despite multiple attempts to cap individual app market shares at 30%, PhonePe and Google Pay jointly command almost 84% of the market. The data indicates their iron grip on the Indian UPI market, which is on course to touch 1 billion daily transactions by the next year.
NPCI officials hold the belief that there exists a technical barrier to attaining the set goal and have reached out to industry players for ideas. The decision to implement the 30% rules, however, has been deferred until December 2024.
NPCI’s dilemma has come into focus again after a parliamentary panel asked last week to support domestic fintech firms to counter the dominance of PhonePe and Google Pay. The recommendation came after the RBI came down heavily on Paytm Payments Bank and barred it from offering all services. The PPBL (Payment Payments Bank Limited), the subsidiary of One97 Communications, is now staring at the cancellation of its NBFC license, which seems to be almost certain.
So, what’s the solution?
Many people believe that it’s high time to rally behind domestic fintech firms. India is brimming with innovative startups and homegrown players who are ready to disrupt the status quo.
By supporting homegrown talents, people foster competition and ensure a more diverse and inclusive payment landscape in India.
It’s a duty for policymakers and industry stakeholders to setup a level playing field and give homegrown champions a fighting chance against the behemoths.
India’s real-time digital payments system, UPI, has radically transformed the country’s payments landscape since its launch in 2016. The UPI network features about 500 banks, 70 million merchants, and a monthly transaction volume exceeding 10 billion.
Industry executives believe the only way for PhonePe and Google Pay to comply with the 30% cap is to stop adding new users. In the meantime, PhonePe continues to spend on marketing to quickly strengthen its market presence by acquiring more users before the limit is imposed.
In the meantime, the Reserve Bank of India (RBI) is suggesting that having a few players dominating the UPI market in India may not necessarily be a concern. RBI Deputy Governor Rabi Shankar indicated that the central bank does not express worry about UPI apps becoming too big. He emphasized that it is up to the market and users to determine which players should hold the numero-uno position and the extent of their growth. Ultimately, customer satisfaction and the delivery of the best services should emerge as the true determining factors for success.
Overall, the goal is not to favour one player over another; instead, it revolves around cultivating a vibrant and competitive fintech ecosystem that brings benefits to all stakeholders, including consumers, businesses, and the broader economy.
