NPCI extends deadline for GPay, PhonePe to cut UPI market share by 2 years

The National Payments Corporation of India (NPCI) has extended the deadline by two years for Google Pay and PhonePe to reduce their market share in the Unified Payments Interface (UPI). The original deadline was December 31, 2024.

NPCI also lifted the onboarding limit, capping the maximum number of users at 10 crore for WhatsApp with regard to UPI.

Also Read: WhatsApp Pay can now extend UPI Services to all users in India

This is the second time the NPCI has given a deadline extension to both the third-party apps. In November 2020, the apex payments body had said that no single third-party app provider should have a market share of more than 30 per cent of the total UPI transactions by December 31, 2024.

Reason for 30% cap

NPCI introduced the cap of 30 per cent after the temporary suspension of Yes Bank impacted PhonePe transactions and led to a 40 per cent drop in UPI volumes. The cap was introduced to limit the risk of single-point failure. PhonePe entered into association with several banks to process UPI transactions.

Google Pay and PhonePe later increased their market shares to 48 per cent and 37 per cent respectively. Their success was helped by the fact that the third-largest player, Paytm, faced regulatory challenges due to action on Paytm Payments Bank by the Reserve Bank of India.

Also Read: Watch: Paytm shares up 5% after NPCI nod makes it third-party app

Since there is little or no revenue available for players in this segment, the other players in the field do not spend much to acquire more transactions and have therefore failed to grow. Whereas Google Pay, owned by Alphabet, and Walmart-owned PhonePe have invested billions of dollars to attract more and more users to their apps.

Payment Council of India welcomes extension of deadline

Welcoming the extension of the deadline, the chairman of the Payment Council of India (PCI) Vishwas Patel said blocking the growth of incumbents is not the right strategy and would have slowed UPI’s growth.

“We welcome the extension of the market cap as we believe that people will choose from dozens of new UPI apps available. Paytm is regaining market share, and new apps like Naavi, Cred, Bhim, WhatsApp Pay and others are growing strongly. Banks are also getting their UPI app strategy in place. I believe that in the next two years, the market will resolve this market cap issue on its own. Blocking growth of incumbents is not the right strategy and would have surely slowed UPI’s growth,” said Vishwas Patel.

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As of December 30, 2024, there were 1,613 crore UPI transactions totalling ₹22.3 lakh crore for the month of December, according to a report in the Times of India. Industry experts believe that UPI will one day achieve a billion transactions a day, and that the apps can make money even if a small charge is imposed on large merchants.