Google Pay, PhonePe win as India delays market share caps

India is set to postpone implementing caps on market shares for Unified Payment Interface (UPI) transactions, sources familiar with the matter told Reuters.

This delay will benefit major players like Google Pay and Walmart-backed PhonePe by extending the market share cap deadline by up to two years beyond the year-end deadline. Initially, the National Payments Corporation of India (NPCI), the body overseeing UPI regulations, planned to limit any single company’s share to 30% to prevent market concentration.

As of now, PhonePe leads with 48.3% of UPI transactions, up from 37% in April 2020, while Google Pay holds 37.4%, down from 44% during the same period. Together, these firms processed about 11.5 billion transactions in April alone, indicating their dominant position in the market.

This extension is seen as a move to prioritize the growth of digital payments over concerns about market dominance.

Launched in 2016, UPI has been a revolutionary step towards digital payments in India, and the service is free of charge to promote online transactions and minimize cash usage. The lack of fees has led other companies like Meta-owned WhatsApp and Amazon Pay to be less aggressive in promoting UPI payments, leading to concerns about market concentration among the few who do promote it.

In response to these dynamics, some payment firms are urging NPCI to remove the market-share cap entirely and allow charges for UPI transactions to ensure more competition. However, decisions regarding these suggestions will be made by the government, and NPCI currently seems disinclined to lift the cap.

The matter of extending the deadline and other related policy decisions will likely be finalized closer to the current deadline at the end of 2024. Meanwhile, UPI continues to see substantial growth, with a 49.5% increase in transaction volume this April compared to last year, albeit a slight deceleration from March’s 54% growth.