New guidelines for UPI payment system
BENGALURU: The National Payments Corporation of India (NPCI) is exploring the option of imposing a cap on the market share or transaction value of individual payment entities on the Unified Payments Interface (UPI) platform.
The move could address concerns that concentration of transactions through non-banking players such as Google Pay and PhonePe could pose a systemic risk to the digital payments ecosystem in the country.
This issue was discussed in a meeting of the UPI steering committee led by the NPCI last week, three people present at the meeting told ET. “There was a proposal on limiting each company’s market share to not more than 33% of all UPI transactions so that no one enjoys a monopoly over payments in the country,” said a top banker, who was present at the steering committee meeting. But discussions around this proposal are at a preliminary stage and nothing has been finalised.
The steering committee’s mandate is to discuss and finalise rules and regulations regarding UPI. It’s attended by representatives from NPCI, banks and select payment companies.
Cap on Daily Transaction Numbers Another Option
When contacted, NPCI declined to offer a comment on ET’s query.
“We do not know yet how this will be done but have to figure out a way without causing customer inconvenience,” said a senior executive who was also present at the meeting. He said limiting the number of transactions customers can undertake per day may be a potential option.
Industry experts said implementing a cap or restricting the quantum of transactions will not be easy.
UPI is an inter-bank payments network, developed by NPCI, which facilitates real time fund transfers. Global tech giants like Google, Facebook-owned WhatsApp and Amazon have all built their payment products around this system in partnership with banks.
Out of the 918 million UPI transactions carried out in August, Flipkart-owned PhonePe recorded the highest number at 342 million followed by Google Pay at 320 million. Paytm stood third at 157 million. WhatsApp is expected to join the payments bandwagon soon. The share of each company is not shared by NPCI publicly, but has been sourced by ET from industry executives.
Google, WhatsApp and Phone-Pe did not respond to ET queries till press time.
The concerns have mainly stemmed from these companies offering payment services in India without any regulatory licence. “The rapid rate at which UPI has grown driven by only three main players Paytm, PhonePe and Google Pay has caused the regulator and NPCI to become cautious of there being a concentration risk at some later point in time,” said another source present in the meeting.
The RBI had spoken about a similar risk on payments ecosystem while circulating a discussion paper on setting up other retail payment systems like UPI.
NPCI is also understood to be looking at ways of ensuring UPI payments get distributed among multiple partner banks. At present, a large chunk of UPI transactions flow through Yes Bank, Paytm Payments Bank, State Bank of India, ICICI Bank, HDFC Bank and Axis Bank. While PhonePe is the only app among the top UPI apps to have one banking partner, Google Pay and WhatsApp are working with four banks.
“There were also discussions around allowing each third party payment app to have maximum 10 banking partners to encourage diversification,” said one of the people mentioned above.