The industry is anxiously anticipating NPCI's imposition of a 30% UPI market share ceiling

The industry is anxiously anticipating NPCI's imposition of a 30% UPI market share ceiling

In December 2022, the National Payments Corporation of India (NPCI) decided to extend by two years, to December 2024, the deadline for third-party UPI participants to reach its 30% volume ceiling in digital payment transactions.

The industry is anxiously anticipating NPCI's imposition of a 30% UPI market share ceiling.

Industry participants are eagerly anticipating the implementation and steps to attain the limit from January 1 as the NPCI's extended deadline for the 30% UPI market ceiling draws near.

In December 2022, the National Payments Corporation of India (NPCI) decided to extend by two years, to December 2024, the deadline for third-party UPI participants to reach its 30% volume ceiling in digital payment transactions.

Currently, 85 percent of UPI-based transactions are made via third-party app providers (TPAP), such as Google Pay and Walmart's PhonePe. NPCI is the operator of the Unified Payments Interface (UPI), which facilitates instantaneous payments between peers or between businesses and customers.

In an effort to reduce concentration risk, sources claim that NPCI will outline how to apply the 30% UPI market cap.

According to reports, one solution would be to cease onboarding new users for those with more over 30% of the market in UPI transactions. This could be implemented gradually to minimize any inconvenience to consumers.

According to sources, NPCI is anticipated to provide some clarification on this in the next months, well in advance of the deadline, to prevent any issues.

According to a top banker, "The risk of a single point of failure remains elevated when the two players (Google Pay as well as Phone Pe) dominate such a high volume of activity, which can lead to disorderly services and disruption in services." Regarding UPI concentration According to Sanjiv Sharma, a prominent attorney with expertise in competition law, significant firms engage in aggressive pricing as a means of securing a dominant market share.

"These players monetize their services after they have monopoly status in order to recover their investment with substantial profits. Smaller companies find it difficult to provide services at a competitive level due to this general "price game," according to Sharma.

"Taking into account the present usage and future potential of UPI, along with additional relevant factors, the timelines for compliance of existing TPAPs and she are exceeding the volume cap, have been increased by two years i.e. till December 31, 2024 to comply with the volume cap," the NPCI said in a circular.

The NPCI went on to say that other players, both new and old (banks and non-banks), must step up their consumer outreach in order to support UPI's expansion and maintain market equilibrium, given the enormous potential of digital payments and the need for a multiplication of its current state.