Recently, the flagship payments processor of India, NPCI or National Payments Corporation of India has issued an order that third-party payments apps will not be allowed to process more than 30% of its transactions on the UPI framework.
UPI stands for United Payments Interface and this framework allows seamless peer-to-peer transactions. This framework is backed by the government of India and 30% capping on Third-Party Apps’ transaction will be induced considering the total volume of money transactions.
This decision by the government of India was recently criticised by Google. The tech giant says that the capping of 30% on transactions that the government has imposed will act as a roadblock in the mushrooming ecosystem of digital payments in India.
30% capping will significantly impede with the growth of Third-Party App’s (TPAs) in the digital payments sector of India which has a lot of scope and potential. The government intends to profit home-grown digital payment services like Paytm Payments Bank and Jio Payments Bank as they are backed and supported by valid bank permits.
Third-Party Applications include Google’s GPay, Walmart’s PhonePe and Facebook’s recently launched WhatsApp Pay.
According to reports revealed by the NPCI, More than 2 billion UPI transactions were made in the month of October by Third-Party Applications and India-based applications, out of which 45% of transactions were made by Walmart’s PhonePe, followed by Google’s GPay and the remaining 20% of the share was taken by Paytm and other players in the money transfer business.
Google Pay’s business head, Sajith Sivanandan mentioned in a statement that this decision taken by the Indian government will directly affect millions of users who use UPI framework as their daily money transfer mode and also, it could seriously impact India’s UPI adoption rate and financial inclusion process.
However, good news strikes for Paytm and Reliance Payments bank because they do not fall into the Third-Party Application category as both of these money transferring platforms are backed by valid banking licenses.
The National Payments Corporation of India explicitly mentioned only Third-Party Applications and this statement points directly to one thing- foreign players operating in India and Indian Players doing business in the same ecosystem.
When asked about the same a Paytm spokesperson commented that NPCI has taken correct measures to influence growth of Unified Payments Interface (UPI) framework in India.
Furthermore, a digital payments analyst, Ram Rastogi stated that if only two digital money transfer platforms, Walmart’s PhonePe and Google’s GPay is occupying over 80% of the market share, then it poses a series of systematic risks as a duopoly in the Indian market. NPCI’s decision to put 30% capping on total transactions is healthy for the industry as it aims to promote healthy competition in other digital money transfer players who split 20% of the remaining market share.
The restrictions also ensure fewer risks of potential cybersecurity threats as it helps regulators to keep all transactions in check.