The Indian government is reportedly crafting strategies to address the significant dominance of PhonePe and Google Pay in the UPI payment market. These two American tech giants currently command around 80 percent of the market share.
The concern stems from the possibility of a duopoly forming in the UPI market, particularly after the ban on Paytm. Given that India witnesses over 10 billion UPI transactions monthly, the government is striving to avoid the market becoming solely controlled by two American corporations.
In response to this concern, the government is considering a new plan that involves imposing a 30 percent cap on UPI payment services. The National Payments Corporation of India (NPCI) is spearheading this initiative to prevent the excessive dominance of specific companies like PhonePe and Google Pay in the UPI landscape. By limiting the market share of a single UPI payment service to 30 percent, the government aims to promote a more competitive and diverse ecosystem.
This action follows a recommendation from a parliamentary panel, which advocated for the support of domestic fintech firms to reduce reliance on foreign players in the UPI market. This proposal is particularly relevant following the recent suspension of Paytm by the Central Bank.
Introduced in 2016, UPI encompasses approximately 500 banks and facilitates transactions exceeding Rs 10 billion each month across more than 70 million merchants.