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National Payments Council of India caps UPI transactions to check monopoly

Bengaluru: The National Payments Council of India (NPCI) has set out new norms that limit digital payment apps’ share in the overall volume of transactions on the unified payment interface (UPI) at 30 per cent in a bid to end the monopoly of Big Tech firms on the growing payments market in India.

Players have time until January 2023 to comply with the norms. In the case of non-compliance, however, the regulator could prevent them from onboarding new users.

According to the new guidelines, the NPCI will send three alerts to the third party payment aggregators (TPAs) and its partner banks when they hit a specified UPI transactions cap. Upon breaching the 30 per cent cap, TPAs will get six months exemption on “case-to-case basis” so as to not disrupt the user experience.

The payment apps will have to acknowledge after receiving the alerts from the regulator. The NPCI has also started publishing UPI transactions by value and volume on its website monthly and will be monitoring the TPAs for a three-months period.

Walmart-backed Phone Pe and Google Pay, which command more than 80 per cent of the market share as of December 2020, have onboarded millions of users on their platforms. Analysts are divided on whether the specified guidelines will also be applicable to Paytm, which is now a payments bank and has third highest share in the market. Amazon Pay and Whatsapp Pay, too, have rolled out their payments services in India last year in addition to many other homegrown firms.

“This is done in a way to ensure that the users on-boarded already are not impacted and that their transaction will not decline, to the extent possible. Further there will be a provision to exempt the players to some extent when the Volume cap is reached, so that it does not create sudden disruption in the market,” NPCI stated. NPCI said it expects UPI transactions volumes to treble to two billion per day with growing smartphone usage and internet penetration.