To Break Monopoly Of Google Pay & PhonePe, NPCI May Limit Volume Of UPI Transactions On Third Party Apps

Soon, UPI users may not be able to make unlimited payments via UPI payment apps. UPI payment apps like Google Pay, PhonePe, and others may have to impose a transaction volume limit to adhere to NPCI's 30% market share rule.

The National Payments Corporation of India (NPCI), which operates the UPI digital pipeline, is in discussions with the RBI about implementing its proposed December 31 deadline for limiting player volume to 30%, as per an IANS report.

No Volume Cap At Present

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There is currently no volume cap, and Google Pay and PhonePe enjoy the monopoly, as they occupy roughly 80% of the UPI market.

In order to avoid the concentration risk and provide a level playing ground, in November 2022, NPCI had proposed a 30% volume cap for third-party app providers (TPAP). A meeting has already taken place to comprehensively look at all aspects. Besides NPCI officials, senior officials of the finance ministry and RBI also reportedly participated in this meeting.

As of now, no final decision has been made to extend the December 31 deadline because the NPCI is evaluating all options. However, the NPCI is expected to make a decision on UPI market cap implementation by the end of this month.

The Proposed 30% Rule

Earlier in 2020, NPCI issued a directive capping the share of transactions that a third-party application provider could process at 30% of the volume of transactions handled on UPI, effective January 1, 2021, which would be calculated based on the volume of transactions processed in the previous three months, the report mentioned.

So, any app that went above the 30% threshold would be prohibited from adding new users, which would therefore prevent users from using the app to make payments. Also, consumers would need to be informed by the relevant UPI apps that they have exceeded the 30% restriction and that they will only be accessible when NPCI approves it.

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Moreover, in order to improve the volume and fully interoperate mobile number-based payments, NPCI is reportedly releasing a mobile mapper tool for UPI. The number of users that each app onboards will eventually be used to enforce the market share cap of 30%.

The workings of the 30% market cap were revealed by NPCI in March 2021, in accordance with a mandate, and it is claimed that the transaction volume limit will be determined based on the total number of UPI transactions processed by a player over the previous three months, on a rolling basis.

Also Read: Explained: How RBI Will Help NRIs Pay Bills

RBI Paper On UPI Charges

In August 2022, a new concern had clouded the minds of those who transact through UPI, after a discussion paper was put out by the Reserve Bank of India (RBI), that had sought suggestions on whether charges should be levied on transactions through UPI and other payment systems and interchange fees on cards.

Post the release of that paper by RBI, the possibility of the UPI (Unified Payments Interface) transactions getting charged had become a worrying point for users, given that UPI has remained free ever since it was launched as a payment system.

But a few days later, the government had put to rest all such concerns surrounding UPI-related charges.

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The finance ministry had tweeted to say that the government is not considering any charges for UPI payment services and that service providers' cost recovery will have to be met through other means. Govt will continue to provide support to the digital ecosystem this year also to encourage further adoption of the digital economy, the finance ministry had said, setting clear the government's thinking on the issue.

Also Read: RBI Proposes Linking Credit Cards To UPI

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