The National Payments Corporation of India (NPCI) is mulling on putting a 33 percent market share cap on payment apps such as Google Pay that use the Unified Payments Interface (UPI), business newspaper Mint reported. UPI based payment apps such as PhonePe and Paytm compete with search behemoth Google’s UPI app for market share, which enjoys the dominance in the domestic market.

NPCI is an umbrella organization that enables seamless mobile payments between multiple banks via UPI. It was created to drive the Indian government’s goal of promoting digital transactions which could be tracked, broaden financial inclusion, and catalyse economic growth.

According to mobile app tracker Sensor Tower, Google Pay and PhonePe were the most downloaded fintech apps worldwide last year. Industry reports indicate they account for over two-thirds of UPI transactions, the Mint report added. Alibaba-backed Paytm is a distant third, while many other UPI-based payment apps, including NPCI’s BHIM, are seeing their share dwindle.

Although, PhonePe and Paytm have substantial market share, the biggest piece of the market is still held by Google Pay. It entered Indian markets two years ago as ‘Tez’, at a time when the government was working on boosting digital adoption in the market. It was later rebranded to Google Pay.

In response to these reports, Google executives in India discouraged the step in media statements, claiming it would stifle innovation and go against the government’s objective of bringing hundreds of millions more into digital payments, the Mint report added. The move would deny a new consumer the choice of using the app they prefer.

If this regulation is enforced, India may see wallets like Paytm stage a comeback. As of now, UPI trumps mobile wallets in higher value transactions, according to RedSeer. The total value of mobile wallet transactions in the last financial year was 1.84 trillion rupees, while the UPI transaction value was nearly five times that amount, the Mint report added.

Privacy regulators also need a deep dive to understand the behaviour of users to ensure their needs are served, the report said. India has an opportunity to create its own tech regulation framework suited to its society and economy, just as it did with citizen ID and mobile payments. And, it is very important to do it well because India will have the largest number of people coming online outside China.

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by Krishna V Kurup
Senior Market Analyst at IBS Intelligence
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