NPCI Grants Two-Year Extension to PhonePe and Google Pay

In a significant move, the National Payments Corporation of India (NPCI) has extended the deadline for third-party apps PhonePe and Google Pay to decrease their market share in the Unified Payments Interface (UPI) by two years. Additionally, NPCI has removed the onboarding limit for WhatsApp, setting a maximum user cap at 10 crore for UPI transactions.

This marks the second extension by NPCI, as PhonePe and Google Pay have seen their market shares rise to 48% and 37%, respectively, despite new entrants in the market. The initial cap was introduced in November 2020 to mitigate the risk of single-point failure, following the moratorium on Yes Bank that significantly impacted PhonePe transactions.

Market Dynamics and Future Prospects

Vishwas Patel, chairman of the Payment Council of India (PCI), welcomed the extension, highlighting the growing competition among UPI apps and the strategic positioning of banks in the UPI ecosystem. With 1,613 crore UPI transactions worth Rs 22.3 lakh crore recorded in December, the industry is optimistic about achieving a billion transactions per day.

Despite the presence of numerous players, the market dominance of Google Pay and PhonePe, backed by Alphabet and Walmart, respectively, remains unchallenged due to their substantial investments in user acquisition. Meanwhile, NPCI's Bhim app is undergoing a strategic revamp to regain its lost momentum in the UPI space.