NPCI considering extending UPI deadline, potentially benefiting Google and PhonePe

The National Payments Corporation of India (NPCI) is reportedly considering extending the deadline for implementing a 30% market share cap on companies processing payments through the Unified Payment Interface (UPI) by one to two years, according to sources familiar with the matter.

This decision is expected to benefit major players like Google Pay and Walmart-backed PhonePe, which currently dominate the UPI payments market. With UPI processing over 11 billion transactions per month, PhonePe holds a 48.3% market share, followed closely by Google Pay at 37.4%. In contrast, their competitor Paytm has seen its share drop to 8% due to regulatory challenges.

Initially planned for January 2021, the NPCI postponed the market share cap deadline to January 1, 2025. However, a final decision on the extension is yet to be communicated closer to the deadline.

The move to extend the deadline is likely to face criticism from other players in the ecosystem who have been pushing for the NPCI to follow through on its commitment. Some companies have suggested offering incentives that would benefit smaller players in the market.

The NPCI and the Reserve Bank of India (RBI) are also facing challenges in introducing more incentives for UPI service providers. Unlike credit card issuers like Mastercard and Visa, UPI operates at no cost to merchants, making it difficult to introduce incentives.

Despite hopes that Meta’s WhatsApp would help break the duopoly, the app only holds a 0.2% market share as of April this year. The RBI recently held a meeting with key players in the UPI ecosystem to discuss strategies for scaling UPI infrastructure and addressing challenges.

An NPCI spokesperson declined to comment on market share questions, and sources suggest that the regulator may make changes to its plan by the end of the year.