India to Postpone Caps on UPI Payments Market Share Once Again

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India is expected to further delay the implementation of caps on market share for digital payments processed via the Unified Payment Interface (UPI), benefiting platforms like Google Pay and PhonePe. The National Payments Corporation of India (NPCI), responsible for overseeing UPI, is reportedly planning to extend the deadline by up to two years beyond the year-end target, according to sources familiar with the matter.

Currently, there is a proposed cap of 30% on the market share of any company processing payments through UPI. However, PhonePe’s share of UPI payments has surged to 48.3%, while Google Pay’s has declined to 37.4%, based on NPCI data. With a combined 11.5 billion transactions processed in April, these platforms dominate the UPI ecosystem.

The absence of fees for UPI transactions, mandated by the government to promote digital payments, has limited the revenue potential for payment service providers. Despite this, PhonePe and Google Pay have leveraged their large user base on UPI to offer additional services such as loans and insurance.

NPCI initially announced the 30% market share cap in 2020, with a deadline set for the end of 2024. However, given the challenges in reducing market share without hampering UPI growth, the deadline is likely to be extended again.

While some payment firms advocate for removing the market-share cap and allowing charges for UPI payments to encourage competition, NPCI is reportedly not inclined to eliminate the cap. The decision on whether to permit charges for UPI transactions will be made by the government.

Despite the exponential growth of UPI transactions, the rate of increase in April was slightly lower than in March. The central bank recently convened a meeting with industry stakeholders to explore strategies for expanding the UPI user base, which stood at around 300 million users and 50 million merchants as of late last year.