NPCI To Review 30 Per Cent Cap On UPI Market Share By Year-End: All About It

The National Payments Corporation of India (NPCI) is set to reevaluate its decision to impose a 30 per cent cap on the market share of payment players offering Unified Payments Interface (UPI) services by the end of 2024.

As reported by Business Standard, the move comes in the wake of discussions with new UPI players in March on strategies to foster UPI's growth.

Introduced in November 2022, the proposed cap aimed to limit the market share of third-party application providers to 30per cent within two years.

Currently, two major players, PhonePe and Google Pay, dominate the UPI market, collectively holding 86 per cent of the market share in transaction volumes.

However, the market dynamics have shifted, with Paytm Payments Bank, the third-largest UPI player, experiencing a decline in market share following regulatory restrictions imposed by the Reserve Bank of India in January.

Concerns have been raised about the absence of transaction fees and merchant discount codes (MDR) in the UPI ecosystem, discouraging investments from companies.

While fintech giants have utilized UPI to acquire customers, the lack of MDR has hindered the entry of new players into the market.

“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 a person familiar with the matter.

Also, NPCI's Managing Director and CEO, Dilip Asbe, hinted at the possibility of imposing reasonable fees on large merchants conducting UPI transactions in the long term.

“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.

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