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NPCI extends UPI market cap deadline to December 31, 2024, in a relief to PhonePe, Google Pay – Moneycontrol

The National Payments Corporation of India (NPCI) has extended the deadline for Unified Payments Interface (UPI) players to adhere to a market cap of 30 percent by two years to December 31, 2024.

The guidelines requiring each UPI third-party app to adhere to a 30 percent transaction volume cap were first introduced in November 2020 in an attempt to avoid the concentration of UPI volumes in the hands of a few players.

Currently, three players – PhonePe, Google Pay, and Paytm – account for approximately 96 percent of monthly UPI volumes.

“Taking into account the present usage and future potential of UPI, and other relevant factors, the timelines for compliance of existing TPAPs who are exceeding the volume cap, is extended by two (2) years i.e. till December 31, 2024 to comply with the volume cap,” NPCI said in a statement.

The earlier deadline set by NPCI was December 31, 2022, after which all players would have to have a share of 30 percent or less in monthly UPI volumes.

According to the most recent NPCI app-wise data, PhonePe had a 47 percent market share in volume for the month of October. Google Pay accounted for 34 percent of total volume in the month, while Paytm accounted for 15 percent.

Other players such as Amazon Pay, WhatsApp Pay, and others currently have a negligible share because users have chosen to stick with one of the top three UPI apps.

While the market cap can be a setback for PhonePe and Google Pay, it could be seen as a positive for Paytm as it may get a larger share of volumes if the guideline is implemented.

The announcement by NPCI to enforce a 30% market cap raised concerns about how UPI players could reduce market share, effectively raising doubts about the ability to implement these guidelines. Since the announcement, UPI has grown dramatically, with the top three players remaining unrivalled.

In a September 2021 interview with Moneycontrol, Sameer Nigam, co-founder and chief executive officer of PhonePe, expressed surprise at the market cap guidelines, stating that the platform cannot do anything to reduce its share.

“If PhonePe is the app of choice in a perfectly competitive market space, I can’t do anything about the market share cap…they have to do what they want to. What do you want me to do? Tell the next person that installs PhonePe: ‘Don’t use me’? Can my next TV advertisement be ‘Please don’t install the PhonePe app’ because our market share is the best?” he had said.

According to industry experts, customers do not see the need for multiple UPI apps and instead stick to their preferred apps, allowing the top players to gain market share.

Since November 2020, UPI volumes have grown by over 230 percent from 2,210 million to 7,309 million in November 2022. Enforcing a market share at this point could have also slowed down the growth momentum for UPI, according to industry experts.