The Parliamentary Standing Committee on Communications and Information Technology has raised concerns about the high market share of foreign-owned fintech platforms in India, specifically mentioning Google Pay and Walmart-backed PhonePe.
“Google Pay, Phone Pe are two ticking time bombs. BHIM app is hardly used while Google Pay and Phone Pe apps are used (widely). What is the government doing on digital or cashless economy?” Supriya Sule said.
In a report presented in Parliament, the committee highlighted the concentration of Unified Payments Interface (UPI) market share by volume of transactions processed. The National Payments Corporation of India (NPCI) has proposed capping this market share at 30 percent. The report noted that Google Pay and PhonePe held 83.3 percent of the market share in October-November 2023, while the indigenous BHIM UPI had only 0.22 percent market share.
PhonePe commanded 46.91% of the UPI market share by volume during the period of October to November 2023, the parliamentary committee on communications and IT wrote in its report. Google Pay held a market share of 36.39% during the same period, the report said.
The 58-page report, which includes a series of recommendations, comes at a time when Paytm, another leading payments firm in the country, is reeling from a clampdown on its payments bank business.
The committee emphasized that fintech companies, apps, and platforms owned by foreign entities dominate the Indian fintech sector. It also expressed concerns about the potential use of some fintech companies for money laundering.
Recommendation to Promote Local Indian Players
The committee recommended focusing on the promotion of local Indian players in the fintech sector. It cited the example of the indigenously developed BHIM UPI, which has a low market share in the UPI market. The report emphasized the importance of supporting local Indian players in line with the “Make in India” initiative.
Money Laundering Concerns and Virtual Accounts
The committee’s report highlighted the use of virtual cards provided by international fintech companies as virtual accounts to move money out of India using VISA and MasterCard networks. While virtual accounts provide convenience in making fund payments and reconciliation, the report noted that they can be used to mask the funds trail during payments. Currently, virtual accounts are not monitored and may evade anti-money laundering (AML) and counter-terrorism financing (CTF) mechanisms.
Awareness and Safety Measures
The committee recommended that fintech firms should generate awareness about safe transaction methods and educate users about the fraudulent methods used by scammers. It suggested that fintech apps should incorporate creatives, pop-ups, and other forms of communication to inform users about safe transaction practices and protect them from fraud.
Protection of User Information
The report also raised concerns about the personal information of individual users linked to fintech apps. It noted that these apps/platforms contain details of bank accounts and other personal information, which should be protected to ensure user privacy and data security.
In summary, the Parliamentary Standing Committee on Communications and Information Technology has expressed concerns about the dominance of foreign-owned fintech platforms in India, particularly Google Pay and PhonePe. The committee has recommended promoting local Indian players in the fintech sector and addressing issues related to money laundering, virtual accounts, user awareness, and data protection.
