PhonePe and Google Pay maintain dominance in UPI market. The National Payments Corporation of India (NPCI) has not yet decided whether it will implement a 30% market share cap for payment platforms offering Unified Payments Interface (UPI) services by the end of 2024. This statement was made by NPCI’s Managing Director and CEO, Dilip Asbe, on Tuesday. Asbe clarified that a decision on the matter has not been made yet, adding, “The decision is yet to be taken. I don’t think I can comment on that (imposition of 30% cap).”
Asbe also commented on the increasing number of UPI app providers entering the market. He mentioned that many leading banks, including the State Bank of India (SBI) with its Yono app, have upgraded their platforms to integrate UPI functionality. “We have started seeing more app providers coming into play. Now, all leading banks, including SBI (Yono app), have modified their apps to be UPI apps. Obviously, it is going to take time, we are aware of that,” he added.
Market Domination
As of October, PhonePe and Google Pay continue to dominate the UPI market, holding a combined share of over 85% of the total transaction volume, according to data shared by NPCI. Paytm, the third-largest payment app by transaction volume, had a market share of 7% during the same period, while apps ranking below the third position had less than 1% of the total market share. This indicates the significant market power that PhonePe and Google Pay hold in the UPI space, with the top two players continuing to vastly outpace their competitors in terms of transaction volume.
Potential 40% Market Share Cap
Reports from TechCrunch suggest that NPCI is considering increasing the market share cap for UPI operators, possibly raising the limit to 40% or higher. This would apply to the market share that any single UPI provider could hold, particularly as the top two players continue to dominate. Originally, NPCI proposed a 30% cap on the market share for third-party UPI apps in November 2020. This cap was introduced as a measure to promote competition and prevent market monopolization. The deadline for implementing the cap, which was initially set for December 2022, has since been extended to December 2024, reflecting the complexity of implementing such a regulatory measure in a rapidly growing digital payments ecosystem.
UPI Growth and Record Transaction Volume
India’s UPI system achieved a major milestone in October, setting a new record with a total of 16.58 billion transactions, valued at ₹23.50 lakh crore. This surge was largely driven by the festive season, which boosted consumer spending and contributed to a 45% year-on-year increase in UPI transactions. The growth in UPI usage reflects its increasing importance as a primary mode of payment in India, with both person-to-person (P2P) and person-to-merchant (P2M) transactions continuing to rise steadily.
While P2P transactions account for the majority of the transaction value, the growth in P2M transactions is also notable. Leading banks in the UPI ecosystem, such as the State Bank of India (SBI), HDFC Bank, and YES Bank, are the top remitters and beneficiaries in the system, playing a crucial role in driving the volume and adoption of UPI.
The continued dominance of major payment platforms like PhonePe and Google Pay, along with the potential changes to market share caps, highlights the dynamic and evolving landscape of the digital payments industry in India. The future of UPI will likely depend on how NPCI addresses the competitive balance in the market, particularly as more players join the ecosystem and consumer adoption grows further.