Smaller UPI apps seek NPCI support to challenge dominance of PhonePe, Google Pay

NPCI officials held a meeting with representatives of smaller UPI apps

Smaller Unified Payments Interface (UPI) apps requested National Payments Corporation of India (NPCI), which operates retail payments and settlement systems, to support and incentivise them to challenge the dominance of PhonePe and Google Pay in the digital payments ecosystem.

NPCI runs the country's most popular mobile payments platform, UPI, which records more than 12 billion transactions a month, representing around 80 percent of all digital payments.

In a meeting called by the NPCI, the smaller UPI players said that they did not have the marketing budget to offer cashback and rewards to move consumers away from their existing payment habit of using the top three apps.

The meeting was attended by Amazon Pay, Slice, Jupiter, Navi Technologies, Bajaj Pay and Tata Nue, among others. The top three UPI service providers -- PhonePe, Google Pay and Paytm -- were not invited to the virtual meeting that discussed the trio's dominance.

"Everyone wants to take market share from the top three but no one has any clear idea on how to. The players who entered later could not attract customers even with cashback. Since there were around 50 participants, not everyone was willing to discuss their future strategies openly," said a participant representing a private sector bank.

NPCI is planning to hold monthly meetings till December and possibly beyond that to address the lopsided market share in UPI, where the top three players control around 95 percent of the total transaction volume and value. The meeting held today lasted around 80 minutes.

Most smaller apps wanted NPCI to give them more time to implement new features as this increases their expenditure budgets for UPI. They also sought better incentives and branding from NPCI while the organisation requested the apps to offer more cashback to consumers.

A few of the apps also complained that the merchant apps and websites at the payment gateway only show PhonePe, Google Pay and Paytm and club everyone together as other UPI apps. Since this is the prerogative of the merchants, NPCI could not do anything, the organisation's representative said.

PhonePe has around 47 percent market share, while Google Pay has 36.4 percent market share. As reported by Moneycontrol , Paytm's share fell to 11 percent in February as its banking arm battles a regulatory crisis.

There is a fear that if Paytm's market share drops even further because of the Paytm Payments Bank crisis, the top two players will increase market share and create a duopoly in the market.

NPCI had set end of 2022 as the deadline to cap the market share of a single player at 30 percent but extended it to 2024.

The deadline had to be extended as it would create confusion for end-users as the existing players would have been stopped onboarding new customers. It would also have forced platforms to stop customers from carrying out more transactions.

Recently, a parliamentary panel had flagged PhonePe's and Google Pay’s dominance of the UPI market, both of which are majority-owned by US companies.