NPCI holds meeting with UPI players to address market challenges

In a bid to foster inclusivity and address market challenges within the Unified Payments Interface (UPI) ecosystem, the National Payments Corporation of India (NPCI) held a meeting with key stakeholders, sources have told CNBC-TV18. The meeting saw participation from major banks, select Non-Banking Financial Companies (NBFCs), and smaller Third-Party App Providers (TPAPs).

Among the notable attendees were banking giants such as State Bank of India (SBI), HDFC Bank, Punjab National Bank (PNB), and Canara Bank. Additionally, representatives from leading financial institutions including Airtel, Shriram Financial, Aditya Birla Capital, Kiwi, Slice, Cred, and Amazon Pay were present at the meeting.

The primary agenda of the meeting was soliciting feedback on the challenges faced by smaller players in expanding their market share within the UPI ecosystem.

During the discussions, participants highlighted several hurdles hindering the growth of smaller UPI players. Concerns were raised regarding customer inertia, which poses challenges in persuading users to switch from their default UPI apps to alternatives. The network effect enjoyed by larger players was also cited as a significant barrier, making it difficult for smaller apps to attract and retain users.

Currently, three players dominate more than 90% of the market share in UPI payments. As per data from NPCI, PhonePe had a 47% share in the UPI volumes, GooglePay 36.40%, and Paytm 11.80% as of January 2024.

The meeting comes after Paytm, the third largest player in the UPI ecosystem in terms of volumes processed, is facing challenges from RBI’s restrictions on its banking arm, Paytm Payments Bank.

UPI transactions done on Paytm’s app were thus far processed by Paytm Payments Bank, but the fintech subsequently moved the nodal account to Axis Bank to continue allowing UPI payments on its app, and is also in talks with other banks.

The NPCI has also proposed to cap the volume share by the players in the ecosystem to prevent any concentration risk. As things stand, NPCI has extended the deadline to implement a 30% volume cap on Third-Party Application Providers (TPAPs) in the UPI market to December 30, 2024.