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UPI Market Cap Deadline


The National Payments Corporation of India (NPCI) has extended by two years the deadline to comply with its 30 per cent cap on the market share of platforms operating on the Unified Payments Interface (UPI).


GS III: Indian Economy

Dimensions of the Article:

  1. What is Unified Payments Interface (UPI)?
  2. Why did NPCI extend its UPI market cap deadline?
  3. How could it impact UPI platforms?
  4. About National Payments Corporation of India

What is Unified Payments Interface (UPI)?

  • Unified Payments Interface (UPI) is a system that powers multiple bank accounts into a single mobile application (of any participating bank), merging several banking features, seamless fund routing & merchant payments into one hood.
  • UPI, which was introduced in 2016, has become one of the most used digital payments platforms in the country.
  • The volume of UPI transactions has already reached ₹76 lakh crore in the current year, compared to ₹41 lakh crore in FY21 ,
  • Advantages of UPI Includes – Immediate money transfer through mobile device round the clock 24*7 and 365 days.
  • UPI Enables Single mobile application for accessing different bank accounts with Single Click 2 Factor Authentication – Aligned with the Regulatory guidelines yet provides for a very strong feature of seamless single click payment.
  • It also features Virtual address of the customer for Pull & Push providing for incremental security with the customer not required to enter the details such as Card no, Account number; IFSC etc.

Why did NPCI extend its UPI market cap deadline?

  • NPCI had initially planned to enforce the market cap rules in January 2021, saying it would limit any single payments app from processing more than 30 per cent of UPI transactions in a month, but has postponed the timeline several times since.
  • Recently, it extended the deadline yet again until December 31, 2024, “taking into account the present usage and future potential of UPI and other relevant factors”.
    • In view of the significant potential of digital payments and the need for multi-fold penetration from its current state, it is imperative that other existing and new players (banks and non-banks) shall scale-up their consumer outreach for the growth of UPI and achieve overall market equilibrium.

How could it impact UPI platforms?

  • The move is being seen as a major relief for Walmart and Flipkart-backed PhonePe and Google Pay, which currently command a majority of the UPI market share.
  • Industry analysts believe the move comes as a shot in the arm for PhonePe and Google Pay, which collectively control more than 80 per cent of UPI’s market share.
  • For platforms like Paytm and WhatsApp Pay, however, the extension could be seen as a natural loss.
  • As of October, Paytm had a market share of 15 per cent on UPI.
    • In comparison, PhonePe had a 47 per cent market share, while GooglePay accounted for around 35 per cent.

About National Payments Corporation of India

  • National Payments Corporation of India (NPCI), an umbrella organisation for operating retail payments and settlement systems in India, is an initiative of Reserve Bank of India (RBI) and Indian Banks’ Association (IBA) under the provisions of the Payment and Settlement Systems Act, 2007, for creating a robust Payment & Settlement Infrastructure in India.
  • Considering the utility nature of the objects of NPCI, it has been incorporated as a “Not for Profit” Company under the provisions of Section 25 of Companies Act 1956 (now Section 8 of Companies Act 2013), with an intention to provide infrastructure to the entire Banking system in India for physical as well as electronic payment and settlement systems.
  • The Company is focused on bringing innovations in the retail payment systems through the use of technology for achieving greater efficiency in operations and widening the reach of payment systems.

-Source: Indian Express

December 2023