NPCI Extends Deadline for UPI Market Share Cap for PhonePe and Google Pay {update}

This extension marks the second time NPCI has pushed back the deadline. It originally introduced a 30% market share cap in November 2020 to prevent risks associated with single-point failure. The cap was a response to the Yes Bank moratorium that disrupted PhonePe’s transactions and caused a 40% drop in UPI volumes overnight.

Industry Dynamics and New Players

In December 2024 alone, UPI transactions reached an impressive 1,613 crore, with a total value of Rs 22.3 lakh crore. Despite these volumes, new entrants like Naavi, Cred, and WhatsApp Pay have struggled to significantly impact the market. Experts believe this is due to their limited investment in transaction acquisition, unlike PhonePe and Google Pay, which have collectively spent billions of dollars to capture market share.

Vishwas Patel, Chairman of the Payment Council of India, welcomed the market cap extension, stating, “Blocking the growth of leading players would have slowed UPI’s progress. With new players and banks focusing on UPI apps, the market will naturally balance itself in the coming years.”

BHIM’s Strategy Shift

NPCI’s own app, BHIM, initially gained traction during its launch but lost momentum after being offered as a white-label service to banks. Recently, BHIM has been restructured into a separate division, and NPCI plans to promote it more aggressively to compete in the expanding UPI market.

Future of UPI

Industry insiders believe UPI is on track to achieve a billion transactions per day soon. With such high volumes and low operational costs, there’s potential for revenue generation through minimal charges on large merchant transactions. This optimistic outlook underscores UPI’s critical role in India’s digital payments ecosystem.

The extension gives existing and new players time to strengthen their presence while promoting diversity in UPI apps. However, as the market matures, competition is expected to increase, driving innovation and enhanced user experiences.