Google Pay and PhonePe account for more than 85 percent of UPI-based digital transactions. NPCI feels that such high dependence on only two payment apps can be dangerous. If there is any technical problem with these, users will face problems. There will also be a risk of monopoly. Therefore, the rule of limiting the maximum market share of payment apps to 30 percent is going to be implemented.
National Payments Corporation of India (NPCI) had made a rule that no third party payment wallet will have more than 30 percent share in UPI transactions. If the share of any payment wallet exceeds 30 percent, arrangements will be made to reduce it.
This rule was initially scheduled to be implemented from December 2022, but later third-party app providers (TPAP) like Google Pay and Walmart’s PhonePe were given a two-year extension, which is going to end by the end of this year i.e. December 2024. . This means that payment apps whose share in digital transactions is more than 30 percent will have to make arrangements to reduce it by January 1, 2025.
How will the stake be reduced?
Only two third-party payment apps like Google Pay and PhonePe currently have 85 percent share in UPI-based transactions. At the same time, Paytm has been the most popular app in this segment, yet its share is quite low. These apps are also waiting to see whether any guidelines come from NPCI regarding reducing the share in digital transactions. NPCI runs the Unified Payments Interface (UPI), which is used for real-time digital payment at the time of purchase.
News agency PTI quoted sources as saying that NPCI will explain how to implement the 30 percent UPI market ceiling to reduce the risk. One solution to this could be to prohibit apps with more than 30 percent share from adding new customers. However, this work will be done in a phased manner, so that the users do not face any kind of problem.
There are still a few months left for the deadline to end. In such a situation, it is expected that NPCI will give more clarity on this in the coming time, so that this rule will be implemented without any hindrance.
Loss of users due to monopoly
A senior banker says, ‘When the transaction volume of two apps (Google Pay and Phone Pe) is so high, it increases the risk. If there is any problem with them, the entire payment system will be shaken. Due to this, users may have to face big problems. This is the reason why NPCI is making arrangements to reduce their share in digital transactions.
Sanjeev Sharma, a senior lawyer specializing in competition laws, says that in such a situation, the scope for competition is significantly reduced, due to which users may have to pay higher prices.
He said that big companies make huge investments to grab market share. When they gain a monopoly on the market, they increase the prices of their services to get higher returns on their investment. This also reduces the scope for innovation and small companies do not get a chance to flourish.
