Why UPI market cap deadline has been extended by 2 years, who benefits from it

After touching a new high of Rs 12.11 lakh crore in October, the UPI transaction value for the month of November came in at Rs 11.90 lakh crore.

NPCI had initially planned to enforce the market cap rules in January 2021, but the deadline has been postponed several times. (Illustration: C R Sasikumar)

The National Payments Corporation of India (NPCI) has extended by two years the deadline to comply with its 30 per cent cap on the market share of platforms operating on the Unified Payments Interface (UPI). The move is being seen as a major relief for Walmart and Flipkart-backed PhonePe and Google Pay, which currently command a majority of the UPI market share.

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Why did NPCI extend its UPI market cap deadline?

NPCI had initially planned to enforce the market cap rules in January 2021, saying it would limit any single payments app from processing more than 30 per cent of UPI transactions in a month, but has postponed the timeline several times since.

In a circular issued Friday, it extended the deadline yet again until December 31, 2024, “taking into account the present usage and future potential of UPI and other relevant factors”.

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“In view of the significant potential of digital payments and the need for multi-fold penetration from its current state, it is imperative that other existing and new players (banks and non-banks) shall scale-up their consumer outreach for the growth of UPI and achieve overall market equilibrium,” read the NPCI circular.

How could it impact UPI platforms?

Industry analysts believe the move comes as a shot in the arm for PhonePe and Google Pay, which collectively control more than 80 per cent of UPI’s market share. For platforms like Paytm and WhatsApp Pay, however, the extension could be seen as a natural loss. As of October, Paytm had a market share of 15 per cent on UPI. In comparison, PhonePe had a 47 per cent market share, while GooglePay accounted for around 35 per cent.

“We are obviously relieved to see the UPI market share cap get extended by two years. At PhonePe’s scale, to reduce our UPI market share to 30 per cent we would be forced to deny UPI payment services to crores of Indians, and that would be totally detrimental to the incredible Indian digital payments growth story,” Sameer Nigam, CEO and founder of PhonePe said in a statement.

He added that the new regulatory circular “acknowledges that the burden is on other existing and new UPI players to invest more time, effort and money to increase their own UPI market share.”

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How is UPI performing?

After touching a new high of Rs 12.11 lakh crore in October, the UPI transaction value for the month of November came in at Rs 11.90 lakh crore. However, the transaction count at 7.3 billion in October remained the same in November.

According to the Reserve Bank of India’s Payment Vision 2025, UPI is expected to register an average annualised growth of 50 per cent.

Soumyarendra Barik

Soumyarendra Barik is Special Correspondent with The Indian Express and reports on the intersection of technology, policy and society. With over five years of newsroom experience, he has reported on issues of gig workers’ rights, privacy, India’s prevalent digital divide and a range of other policy interventions that impact big tech companies. He once also tailed a food delivery worker for over 12 hours to quantify the amount of money they make, and the pain they go through while doing so. In his free time, he likes to nerd about watches, Formula 1 and football. ... Read More

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