Call for change: UPI Meta plan draws pushback from smaller players

In a joint representation, smaller payment apps urged NPCI to widen consultations, warning the proposed checkout framework could entrench the dominance of larger rivals

Smaller Unified Payments Interface (UPI) applications (apps) have formally opposed a new checkout framework by the National Payments Corporation of India (NPCI), called UPI Meta (also known as UPI Checkout), warning that the project under development could further cement the dominance of larger apps such as PhonePe and Google Pay.

 

In a joint representation to the apex retail payments body, app players said the checkout framework did not have “compelling customer benefits to justify the significant ecosystem, competitive, operational, and architectural implications associated with its implementation”.

 

They have urged NPCI to hold broader consultations with the ecosystem, especially smaller UPI apps in India. Business Standard has reviewed a copy of the letter. However, it could not be ascertained whether NPCI has received it. NPCI did not immediately respond to a request for comment.

 

“We respectfully request NPCI to undertake broader consultation with third-party application providers (TPAPs) and other ecosystem participants and comprehensively evaluate the concerns highlighted above before progressing with the proposed framework,” the apps said in the joint letter.

 

The potential launch of Apple Pay in India this year has sharpened concerns within NPCI, according to a person aware of the matter. Tokenised credit cards, paired with biometric authentication and one-click checkout, have narrowed the advantage UPI holds in online payments. Credit cards also compete in higher-ticket transactions, especially since the real-time payments system is free of any merchant discount rate. At the heart of the objection is what UPI Meta could take away from smaller apps.

 

The proposed feature would let merchants store a buyer’s UPI ID and linked bank accounts, much as saved cards already work at online checkout, allowing a payment to proceed from the merchant’s page straight to the authentication or PIN screen without the customer’s UPI app ever opening.

 

That could shift the choice of payment app from a decision users make at every transaction to a preference set once during sign-up, at a time when two players — PhonePe and Google Pay — already account for the majority of UPI transactions.

 

Companies argue that once faced with a one-time choice at checkout, most customers are likely to link the app they already use most — which, for the bulk of India’s UPI user base, would be one of the dominant apps.

 

Once saved, that preference is unlikely to be revisited, since changing it would require going into a merchant’s saved-payment settings rather than simply tapping a different app icon. Smaller apps, which today compete transaction by transaction through cashback and offers, would instead have to win a one-time set-up decision they may never get another chance to contest.

 

“While customers may continue to retain the ability to modify or remove linked applications, based on observed customer behaviour across digital ecosystems, default preferences established during onboarding tend to persist unless customers have a specific reason to change them. Consequently, the TPAP selected during onboarding may become the default application for a substantial proportion of future transactions," the letter said.

 

Since TPAPs would no longer interface directly during checkout for each transaction, the framework would not only reduce their visibility to users but also limit competition among players. “Reduced competition at the point of checkout may also diminish incentives for TPAPs to continuously invest in improving transaction success rates, customer experience, fraud prevention capabilities, and adoption of newer payment instruments and UPI capabilities such as UPI Circle, Credit Card on UPI, Credit Line on UPI, UPI Lite, and other ecosystem innovations,” the letter read.

 

An environment without a TPAP interface during transactions would also require clear guardrails for scenarios such as outdated payment instrument information, synchronisation failures, incorrect account or instrument display, consent or revocation mismatches, transaction failures arising from data inconsistencies, and associated customer disputes, they argued.

 

Today, when a user chooses to pay via UPI, the selected app opens and displays a list of linked accounts and payment modes. It also indicates if certain bank servers are down, warning users of potential transaction failures.

 

When the app interface opens, users also have access to features such as adding new accounts, linking RuPay cards, checking balances, viewing offers, and other controls. “The proposed framework effectively shifts UPI towards a default routing model, where payment initiation becomes increasingly detached from the TPAP experience,” the letter added. 

Call for change

• NPCI urged for broader consultation with the ecosystem including TPAPs
• Proposed feature to link buyer’s UPI ID and bank account, without opening UPI app
• Smaller UPI apps argue that the feature shifts UPI towards a default routing model