 "NPCI to review by end of year decision on 30% UPI market share cap")
The National Payments Corporation of India (NPCI) will review its decision to implement a 30 per cent cap on the market share of payment players offering Unified Payments Interface (UPI) services by the end of 2024, said two people close to the development.
The deadline to introduce the limit remains unchanged: December 2024. “There is still time for it. The 30 per cent cap on the transaction volume of payments players offering UPI services will be reviewed by the end of this year,” said a person, who requested he not be named.
NPCI, which operates UPI, did not respond to queries sent by ‘Business Standard’.
In March, the NPCI met with new UPI players and discussed how UPI could grow. In November 2022, the NPCI had proposed a 30 per cent volume cap on third party application providers. It asked UPI players to limit their market share to 30 per cent in two years.
Two companies, PhonePe and Google Pay, have almost 86 per cent of the UPI market share in terms of transaction volumes, according to NPCI data. The two hold 48.3 per cent and 37.6 per cent share, respectively (see adjoining chart).
Paytm Payments Bank, the third UPI largest player, is way behind and its market share has declined after the Reserve Bank of India (RBI) enforced restrictions on the company in January this year. The next two, Cred and Axis Bank Apps, have a market share of less than a per cent each.
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Paytm processed 1.23 billion transactions in March, down from 1.57 billion in January 2024. The firm had a 9 per cent market share in UPI as of March this year.
UPI fees?
The person quoted above said companies are not investing in the UPI ecosystem as transactions are free and do not levy a merchant discount code (MDR).
Large fintech companies invested and found UPI to be a funnel for acquiring customers.
“UPI has the ability to grow multifold. However, zero MDR is restricting newer players to come in or for them to invest (in the ecosystem). Once that is done, the market should balance itself on its own,” said another person in the know.
The person said a discussion on having MDR on UPI transactions can only be done with the government after general elections.
Dilip Asbe, NPCI’s managing director and chief executive officer, said at an event in January that large merchants making UPI transactions may incur a “reasonable” fee on related transactions in three years. He did not say what the fee would be.
“From the long-term perspective, a reasonable charge, not on the small merchants but the larger ones, will come. I don’t know when it will come. It may be one, two, or three years down the line,” he said.
Last year, NPCI introduced an interchange fee on prepaid payment instrument (PPI)-based merchant transactions through UPI. A PPI issuer pays an interchange fee of up to 1.1 per cent if the transaction value is over Rs 2,000, depending on the type of merchant.
NPCI clarified that the fee was only for PPI-based merchant UPI transactions. Overall UPI transactions in India grew 56 per cent in volume and 44 per cent in value in Financial Year 2023-24 (FY24) compared to the previous year.
FY24 was the first time that UPI transactions crossed 100 billion to close at 131 billion in a financial year. There were 84 billion transactions in FY23.
In March 2024, transaction volume grew 55 per cent to 13.44 billion. Value was up 40 per cent to Rs 19.78 trillion compared to March 2023.