The National Payments Corporation of India (NPCI), the government-owned body responsible for overseeing the Unified Payments Interface (UPI), recently conducted a meeting to explore ways to empower new players in the UPI ecosystem. As per a report in the Economic Times, NPCI is encouraging several new third-party payment apps on UPI to invest and incentivize consumers.
Prominent entrants such as Cred, Slice, Fampay, Zomato, Groww, and Flipkart are actively seeking to acquire users and encourage them to adopt the in-house UPI service. Interestingly, major players like Google Pay, PhonePe, and Paytm were not invited to this meeting. This exclusion is attributed to the fact that these three companies control over 90% of the UPI transaction volume and value. NPCI sought insights from stakeholders to level the playing field for smaller third-party application providers (TPAPs).
While PhonePe and Google Pay have dominated the market, recent disruptions at Paytm due to a central bank order to shut down its payments bank services have led to an even greater concentration of users among the top two apps.
Participants in the meeting advocated for incentive programs akin to the government’s zero Merchant Discount Rate (MDR) scheme for RuPay cards. This scheme offers benefits to merchants who accept RuPay payments, making them more competitive compared to other cards. Similarly, attendees proposed incentive structures to encourage users to adopt UPI platforms offered by smaller players.
Another concern raised was the dominance of PhonePe, Google Pay, and Paytm in app interfaces. Many merchant apps and websites prioritize these three platforms during checkout, relegating other UPI options to a generic “other UPI apps” category. NPCI clarified that merchants have the discretion to choose how UPI options are displayed.
The meeting also addressed the issue of brand recognition. Smaller players requested more promotional support from NPCI to enhance their visibility. Additionally, NPCI urged these platforms to consider offering cashback programs to attract consumers.
While the discussions aimed to address the dominance of major players, reports suggest that no clear solutions emerged on how to mitigate concentration risk within the UPI ecosystem. The current deadline for implementing a 30% cap on UPI transactions is the end of this calendar year.