BHIM targets 5% share to break into top five, challenge UPI duopoly

In a concentrated market where two players account for nearly 80 per cent of the transaction volume on the Unified Payments Interface (UPI), the National Payments Corporation of India’s (NPCI’s) application (app), BHIM (Bharat Interface for Money), is being positioned as a sovereign alternative to private players. The aim is to bring BHIM among the top five UPI apps, with a market share of around 5 per cent over the next three years, sources aware of the development said. 

According to the latest data, BHIM currently holds a 0.86 per cent share of UPI transactions. 

“BHIM is expected to compete with dominant players not only in terms of market share, but also in user experience and technological capabilities,” said a source with direct knowledge of the matter. This, the source added, could help address concentration risk in a market where two players corner about 80 per cent share. 

“It also ensures there is a viable alternative to private players — one that is as good as, if not better than, financial technology firms’ offerings,” the source said. 

The BHIM app, which saw limited traction in recent years, is now gaining momentum and is expected to scale up to a 5 per cent market share over the next three years, positioning itself as a sovereign alternative, another source said. 

BHIM was developed by NPCI and launched in 2016 to promote financial inclusion and advance India’s digital payments ecosystem. 

In February, BHIM processed nearly 176 million transactions worth ₹21,263 crore. This marks a sharp rise from February 2025, when it processed 36.88 million transactions and held a 0.23 per cent share — nearly a fivefold increase. 

In August 2024, NPCI incorporated BHIM as a wholly owned subsidiary, hiving it off into a new entity, NPCI BHIM Services (NBSL). Former banker Lalitha Nataraj was appointed chief executive officer. She has previously worked with IDFC First Bank and ICICI Bank. 

“This move aims to meet growing demand for digital transactions and evolving market expectations while keeping pace with innovation and shifting customer preferences. It also seeks to promote financial inclusion,” NPCI had said in a statement.

The creation of NBSL comes as NPCI addresses the challenge of a duopoly in India’s UPI market. 

BHIM’s growth coincides with stepped-up customer acquisition efforts, including retention measures such as rewards and cashbacks. The app also underwent a major revamp in March last year to improve user experience, especially in low-network areas, and to enable access to the latest UPI features. 

Former India men’s cricket team captain M S Dhoni has been appointed brand ambassador for the BHIM payments app.

“It is not a number that BHIM is chasing right now. What matters is consistent growth. The app is investing continuously, and in that process, it will gain market share. The growth has to be meaningful,” a source said. 

Latest data shows PhonePe and Google Pay together controlled 78.8 per cent of the UPI market as of February 2026, down marginally from 83.8 per cent a year earlier. 

Both currently exceed the 30 per cent market share cap that the NPCI aims to enforce, with a deadline of December 31, 2026. In December 2024, NPCI extended the deadline for implementing the market share cap by two years. 

The proposal, first introduced in November 2020, seeks to prevent any single digital payments firm from holding more than 30 per cent of total UPI transaction volume to curb excessive concentration and encourage competition. 

“BHIM alone cannot address market concentration. The view is that if the government introduces a merchant discount rate (MDR) on UPI in three years, the market will begin to correct itself. Right now, companies are not investing further due to limited incentives,” another source said. 

For UPI transactions, the Reserve Bank of India and NPCI currently maintain a zero-MDR policy for person-to-merchant payments. The government introduced this regime in January 2020 to encourage digital payments and accelerate UPI adoption. 

Payment companies and banks have repeatedly argued that zero MDR affects the sustainability of the ecosystem, as they bear infrastructure and operational costs without earning transaction fees.

 

Plan ahead

• PhonePe and Google Pay control 78.8 per cent of UPI market
• Competition to focus on user experience and capabilities
• Customer acquisition efforts include rewards and cashbacks 
• NPCI aims to bring 30% cap in market share by end of 2026