Exclusive: NPCI set to roll back 33% market share cap for third party UPI apps

National Payments Corporation of India (NPCI) is looking to roll back its plan to put a cap of 33% on the market share of third-party Unified Payment Interface (UPI) apps, said two people aware of the matter.

“The decision to roll back the proposal was taken for some unknown reasons. It may be a result of lobbying by TPAPs (third-party app providers) opposing the proposal,” said one the sources mentioned above on condition of anonymity.

NPCI has been mulling capping UPI market share to 33% for all third-party apps. According to a meeting held in August last year, it was expected to come out with detailed guidelines and notification on the capping volume of TPAPs from April this year. 

However, there has been no notification released so far by the umbrella organization.

According to the guidelines formulated by the steering committee almost eight months ago, all third party and bank apps have to put a limit on the volume and value of transactions which starts at 50% in the first year of operations, 40% in the second year and 30% in third years of incorporation.

The proposal was mainly aimed at curbing the concentration of volume of transactions from a few limited firms such as Google Pay, PhonePe and Amazon Pay.

In case such regulation came into effect, it would have impacted the volume and value processed by Google Pay and PhonePe, which have been clocking over 33% of total transactions via UPI. Collectively, Google Pay, PhonePe, Amazon Pay and Paytm have a market share of 90%.

While Paytm had dropped out of the race of commanding more market share in the UPI ecosystem last year, Google Pay and PhonePe have been battling hard for supremacy.

“The delay by NPCI in releasing the proposed notification is quite surprising and certainly hints at a strong criticism from the TPAPs. We all know how foreign firms use trade and diplomatic channels to convince the regulator and political class for the favourable ecosystem. It might be a result of the same,” added the second source who too requested not to be named.

After the story was published, an NPCI official responded to Entrackr's queries sent earlier, saying "the news is not correct".

Sources emphasised that limiting transaction volume can cause significant inconvenience to users who transact frequently via a preferred app. While it could be one of the reasons that guided NPCI not to release the notification, Entrackr couldn’t ascertain the actual reason for the regulator’s silence.

Putting a cap on UPI market share was among few rules which could not get a go-ahead from NPCI while other rules such as doubling UPI transactions to Rs 2 lakh and cash withdrawal from merchants using UPI apps were allowed by the organisation.

These two proposals were the part of the same meeting where the steering committee had agreed to cap an app’s market share. 

The rollback decision will encourage the UPI payments ecosystem as there is a fall in online payments due to the coronavirus outbreak. As per the latest data, UPI had recorded a slight reduction in monthly transaction volume in March as compared to the previous month.