India scrambles to curb PhonePe and Google’s dominance in mobile payments

The National Payments Corporation of India (NPCI), the governing body that oversees the country’s widely used Unified Payments Interface (UPI) mobile payment system, is set to engage with various fintech startups this month to develop a strategy aimed at responding to PhonePe’s growing market dominance. and Google Pay in the UPI ecosystem.

NPCI executives plan to meet representatives from CRED, Flipkart, Fampay and Amazon, among other players, to discuss their key initiatives to boost UPI transactions on their respective apps and to understand the support they require, they said. people familiar with the matter told TechCrunch.

UPI, built by a coalition of Indian banks, has become the most popular way for Indians to transact online, processing more than 10 billion transactions per month.

The new meetings are part of a growing effort to address concerns raised by lawmakers and industry players over the concentrated market share of Google Pay and PhonePe, which together account for nearly 86% of transactions UPI by volume, up from 82.5% at the end of last year. December. Walmart owns more than three-quarters of PhonePe.

Paytm, UPI’s third-largest player, saw its market share decline to 9.1% at the end of March, from 13% at the end of 2023, following a crackdown by the Reserve Bank of India (RBI).

An overview of India’s UPI ecosystem. (Image: Macquarie)

The conversation follows the central bank’s expression of “dissatisfaction” with the NPCI over the growing duopoly in the payments space, a person familiar with the matter said. An NPCI spokesperson declined to comment.

In February, an Indian parliamentary panel urged the government to support the growth of domestic fintech players that can offer alternatives to Walmart-backed PhonePe and Google Pay apps.

The NPCI has long advocated limiting the market share of individual companies participating in the UPI ecosystem to 30%. However, it extended the deadline for businesses to comply with this directive until the end of December 2024. The organization faces a unique challenge in implementing this directive: it believes it currently lacks a technical mechanism for doing so, TechCrunch previously reported.

The RBI is also considering an incentive plan to create a more favorable competitive field for emerging UPI players, another person familiar with the matter said. Indian daily Economic Times reported on Wednesday that the NPCI is encouraging fintech companies to offer incentives to their users, by promoting the use of their respective apps to carry out UPI transactions.