PhonePe, Google Pay creating a duopoly in India's UPI space? NPCI to check

Google Pay and PhonePe, together account for 86% of UPI transactions by volume in India and are also expanding to offer UPI services abroad

The National Payments Corporation of India (NPCI) will engage with fintech startups in April to address the growing market dominance of PhonePe and Google Pay in the Unified Payments Interface (UPI) ecosystem, according to a report by TechCrunch.

NPCI is reaching out amid concerns about the market share concentration of Google Pay and PhonePe, which together account for nearly 86 per cent of UPI transactions by volume.

PhonePe has signed several agreements to promote UPI payments in Nepal, Singapore, and the United Arab Emirates. Earlier this year, Google Pay also signed an agreement with NPCI to expand UPI for international payments.

Paytm, the third-largest UPI player, has seen its market share decline this year, partly due to regulatory actions by the Reserve Bank of India (RBI).

The RBI has reportedly expressed "displeasure" to the NPCI over the growing duopoly in the payments space.

A parliamentary panel has urged the government to support the growth of domestic fintech players to offer alternatives to PhonePe and Google Pay.

To address these concerns, NPCI executives will meet with representatives of CRED, Flipkart, Fampay, Amazon and other fintech firm to discuss initiatives aimed at boosting UPI transactions on their platforms. The meeting is also expected to help NPCI better understand the support these companies require to grow.

NPCI has advocated for capping the market share of individual companies in the UPI ecosystem at 30 per cent, with a deadline extended to the end of December 2024. However, enforcement remains challenging due to technical limitations.

Separately, the RBI is considering a plan to create a more favourable competitive landscape for emerging UPI players. The NPCI is encouraging fintech companies to offer incentives to users to promote UPI transactions through their apps.

UPI, developed by Indian banks, has become one of the most popular methods in the country to make online payments and processes more than 10 billion transactions monthly. It has also gained momentum abroad with countries like Singapore, Malaysia, the United Arab Emirates, France, Nepal, the United Kingdom, Mauritius, and Sri Lanka also accepting payments through this format.