The National Payments Corporation of India (NPCI) is actively reviewing its decision regarding the 30% market share cap for Unified Payments Interface (UPI) transactions. Initially set to be enforced from January 2021, this cap aimed to prevent any single digital payments app from dominating the rapidly growing UPI ecosystem, which is crucial for ensuring a balanced competitive environment.
Background of the 30% Cap
The 30% cap, introduced by the NPCI—an umbrella organization created by the Reserve Bank of India and the Indian Banks’ Association—was designed to regulate the market share of third-party app providers (TPAPs). This regulation mandates that no single TPAP exceeds 30% of the total volume of UPI transactions over a rolling three-month period.
Current State of the Market
As of the latest updates, major players like PhonePe and Google Pay collectively hold over 80% of the UPI market share. This dominance raises concerns about market concentration and the potential stifling of competition among newer or smaller apps. The NPCI’s cap was seen as a move to curb this dominance and foster more equitable competition.
Industry Response and Extensions
The implementation of this market cap has been postponed multiple times, most recently extended until December 2024. This delay provides existing market leaders additional time to adjust to the new limits while allowing the market to continue growing unimpeded. The extension also reflects the challenges in immediately enforcing such caps without disrupting the consumer experience and the overall market dynamics.
Future Considerations
NPCI is considering further extensions or revisions to the cap policy as it monitors the market’s evolution. The body is also contemplating exemptions for players that exceed the cap, based on justifications they provide, which could include strategic efforts to expand digital payment adoption without harming the competitive landscape.
The ongoing review and potential adjustments to the policy reflect NPCI’s commitment to nurturing a healthy, competitive market that supports both innovation and fair access to digital payment technologies.
