In a bid to curb the overwhelming dominance of PhonePe and Google Pay, the Indian government is planning strategic interventions to foster a more competitive landscape in the UPI payment market. With these tech giants currently holding around 80 percent of the market share, concerns have risen about the emergence of a duopoly, especially following the recent ban on Paytm.
Key Points of Government’s Plan:
- Market Share Capping: The government is contemplating a new plan that involves implementing a 30 percent cap on UPI payment services to prevent the undue dominance of specific companies like PhonePe and Google Pay. The National Payment Corporation of India (NPCI) is leading this initiative to create a more diverse and competitive ecosystem.
- Preventing Duopoly: With more than 10 billion UPI transactions occurring monthly, the government aims to prevent the market from being exclusively controlled by two American tech giants, considering the potential risks associated with a duopoly.
- Parliamentary Panel Recommendation: The move aligns with a recommendation from a parliamentary panel, emphasizing support for domestic fintech firms to reduce reliance on foreign players in the UPI market. The recent suspension of Paytm by the Central Bank has heightened the need for such measures.
- NPCI’s Leading Role: The National Payment Corporation of India (NPCI) is taking a proactive role in implementing these changes, ensuring fair competition and preventing the concentration of power in the hands of a few players.
- Context of UPI Growth: Since its introduction in 2016, UPI has become a significant player with around 500 banks and facilitating transactions exceeding Rs 10 billion each month across more than 70 million merchants. The government’s move aims to balance the ecosystem and promote inclusivity.
