The move to cap the share of transactions a third-party application can process — at 30 per cent of the total volume in Unified Payments Interface (UPI) by the National Payment Corporation of India (NPCI) — has not gone down well with industry players.
Most have expressed surprise over the move, saying it could have implications on millions of people who use UPI for their daily payments.
But, industry insiders suggest that this is aimed at bringing a balance in the UPI ecosystem, which is dominated by a few large players. Furthermore, entry of the newest player WhatsApp into the system, which has a huge base already on its messaging service, may make the market more skewed, if not for the cap. NPCI
has reasoned this move will help to address the risks and protect the UPI ecosystem as it further scales up.
According to Mihir Gandhi, partner, leader - Payments Transformation, PwC, “This move is aimed at de-risking the concentration risk from one or two players that currently dominate the UPI market share and ensure that new players are given an opportunity. UPI has the opportunity to grow atleast 10 times from the levels what we are seeing now. So, there should be protection against concentration risk. The entry of WhatsApp into the ecosystem will be a game changer but it also has to adhere to the 30 per cent cap. And, PhonePe as well as Google Pay will also have to reduce their share over a period of two years, which have over 30 per cent share currently.”
Industry players suggested UPI being an interoperable platform there should be a stance on monopoly but having hard limit is not the best way to go about it. A hard cut off at 30 per cent is not the best way to curb dominance, either. Furthermore, it stifles competition and makes people stick to edges.
Sajith Sivanandan, business head, Google Pay, said, “This announcement has come as a surprise and has implications for millions of users who use UPI for their daily payments. It could impact the further adoption of UPI and the end goal of financial inclusion.”
“Digital payment in India is still in its infancy and any intervention at this point should be made with a view to ccelerate consumer choice and innovation. A choice-based and open model is key to driving this momentum,” he added. On the contrary, dominance of a handful of players makes the platform susceptible to challenges wherein if a big player faces any technical issue, there could be a huge number of failed transactions.
A P Hota, former managing director (MD), NPCI, said, “It is a welcome move, considering that the leading players have not given emphasis to customer grievance and are busy widening the territories. They need to be brought under control to prevent customer backlash all of a sudden. This is the mildest form of control that can be thought of. I would suggest that it should be supplemented by large players disclosing the number of grievances received, frauds detected and pending position every Monday.
The move to cap the share of transactions for third-party applications is also being seen in tandem with the green light given to WhatsApp to go live on the UPI platform.
WhatsApp will be working with five leading banks in India: ICICI Bank, HDFC Bank, Axis Bank, the State Bank of India, and Jio Payments Bank.
Experts believed, with WhatsApp coming in to the market, these third party apps will face increased competition, given it already has a huge user base. “What NPCI
is trying to do is ensure that WhatsApp does not run away with the majority of the UPI market. So, I think the NPCI
is trying to soften the entry of WhatsApp into the UPI space so that it does not become the biggest player overnight,” said Ashneer Grover, chief executive officer and co-founder, BharatPe.