NPCI Extends Deadline for 30% Market Cap on UPI Apps Till 2026
The National Payments Corporation of India (NPCI) has announced an extension for implementing the 30% cap on the market share of third-party app providers (TPAPs) such as PhonePe and Google Pay by another two years, pushing the deadline to December 31, 2026.
Background of the Market Cap Initiative
Introduced in November 2020, the 30% market cap was aimed at ensuring a competitive and balanced UPI ecosystem. This measure was designed to prevent market dominance by any single entity and promote equal opportunities for all payment service providers. Initially, the deadline for compliance was set for December 31, 2022, which was later extended to December 31, 2024, and now further to 2026.
Relief for Dominant Players
This decision provides significant relief for PhonePe and Google Pay, the two leading players in the UPI space, which collectively dominate over 60% of the market share. These companies will now have more time to adjust their operations and bring their market share within the stipulated limits.
Earlier reports in 2023 had already hinted at delays in the implementation of this market cap, citing various challenges in enforcing the policy effectively.
Key Developments
- WhatsApp Pay’s Unrestricted Onboarding:
The NPCI has lifted restrictions on the onboarding of users for WhatsApp Pay, a move that could intensify competition in the UPI landscape. Previously, WhatsApp Pay was allowed to onboard users in phases. With the removal of this restriction, it can now expand its UPI services to its entire user base in India, while ensuring compliance with UPI regulations. - Growing UPI Transactions:
UPI transactions continue to witness exponential growth. In November 2023, transactions surged by 37% year-on-year, reaching a record 15.48 billion. This demonstrates the increasing reliance on digital payment systems in India. - Regulatory Support for UPI Expansion:
The Reserve Bank of India (RBI) has recently allowed fully KYC-compliant prepaid wallets to integrate with UPI systems, thereby promoting wider adoption. Additionally, India is actively engaging with other countries to expand UPI’s global presence, further solidifying its role in the digital payments ecosystem.
Importance of These Changes
1. For Existing TPAPs:
- The extension provides more time for dominant players to comply without major disruptions.
- It ensures the continuity of user convenience and system stability.
2. For New Entrants:
- The removal of onboarding caps for platforms like WhatsApp Pay opens doors for increased competition.
- Smaller players get a fairer chance to grow and capture market share.
3. For UPI Ecosystem:
- Ensures balanced growth without sacrificing innovation.
- Promotes consumer choice and service quality.
Implications for the Digital Payments Landscape
The extension of the market cap deadline reflects NPCI’s recognition of the complexities involved in limiting the dominance of TPAPs without disrupting UPI’s massive growth. Meanwhile, regulatory initiatives, coupled with WhatsApp Pay’s enhanced market access, are expected to foster a more competitive environment and accelerate the overall adoption of UPI services.
This regulatory evolution is set to redefine the Indian digital payments ecosystem while ensuring robust growth and global integration of UPI as a preferred payment method.
