The Future of UPI Market Share Limits in India
The governing body overseeing India’s popular UPI payments rail is considering easing its proposed market share cap for operators like Google Pay, PhonePe, and Paytm as it struggles to enforce limitations, according to sources familiar with the matter.
National Payments Corporation of India (NPCI), which reports to India’s central bank, is contemplating increasing the market share that UPI operators are allowed to hold to more than 40%, up from the previous proposed limit of 30% to encourage competition in the space. UPI has become the most widely used way people send and receive money in India, processing over 12 billion transactions a month. Walmart-backed PhonePe currently commands roughly 48% market share by volume and 50% by value, while Google Pay holds a 37.3% share by volume.
On the other hand, Paytm, once a heavyweight in the space, has seen its market share drop to 7.2% from 11% at the end of last year amid regulatory challenges. The NPCI increasing market share limits is likely to be a controversial move, with several UPI providers hoping regulators would step in to curb the dominance of PhonePe and Google Pay, according to industry executives.
The regulator had initially planned to enforce the market share limits in January 2021 but pushed back the deadline to January 1, 2025, as it has struggled to find a feasible way to enforce its proposal. The stakes are high, particularly for PhonePe, which is the most valuable fintech startup in India with a $12 billion valuation.
PhonePe’s co-founder and chief executive, Sameer Nigam, expressed concerns about the regulatory uncertainty impacting the startup’s ability to go public. Nigam highlighted the importance of clarity in market share limits for investors and stakeholders, urging regulators to find a solution to address concerns and provide transparency regarding the regulatory landscape.
