India’s mobile payments regulator is considering extending the deadline for imposing market share caps on the popular UPI payments rail by one to two years, according to sources familiar with the matter. The National Payments Corporation of India (NPCI), a unit of the Reserve Bank of India, is planning to delay the introduction of a 30% cap on the market share of individual UPI ecosystem participants.
This decision is expected to benefit Google Pay and Walmart-owned PhonePe, which currently dominate the UPI payments market in India. UPI has become the most popular way to send and receive money and make payments in the country, with over 11 billion transactions per month. PhonePe holds roughly 49% market share by volume, followed by Google at 37.4%.
The NPCI had initially planned to enforce the market share cap in January 2021 but postponed the deadline to January 1, 2025. The regulator is now considering extending the deadline further after concluding that there is no practical solution to address the issue.
This potential extension is likely to draw criticism from other players in the ecosystem who have been urging the NPCI to follow through on its commitment. Some companies have proposed solutions, such as incentives that benefit smaller players. The RBI recently held a meeting with key players in the UPI ecosystem to discuss strategies for scaling UPI infrastructure and addressing challenges in the ecosystem.
The market share dilemma is not the only challenge facing the NPCI and the RBI, as they have also discussed introducing more incentives for UPI service providers. Despite its popularity, UPI remains a challenging experience for ecosystem participants, with many losing money as part of the proposition. Investors are closely watching these developments, as decisions made by regulators could impact the future of the UPI ecosystem in India.