Smaller UPI apps seek NPCI support to compete with Google Pay and PhonePe

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Smaller Unified Payments Interface (UPI) apps have reportedly approached the National Payments Corporation of India (NPCI), an umbrella organisation for operating retail payments and settlement systems in India. The companies are seeking support and incentives to compete with the dominant players like Google Pay and PhonePe.

What are the main concerns raised by smaller UPI players?

In a meeting by NPCI, smaller UPI players stated their inability to offer cashback and rewards mostly because of the limited marketing budgets, which has been hindering their ability to attract consumers away from established and highly used online payment apps like Google Pay and PhonePe.

It is worth noting that the attendees included Amazon Pay, Jupiter, Slice, Bajaj Pay, Navi Technologies, Tata Nue, and more, while the top three UPI service providers were notably absent.

What are the challenges faced by the small UPI apps?

Participants highlighted that it is highly difficult to bring up the strategies to capture market share from the top players, even after offering cashback incentives.

PhonePe, Google Pay, and Paytm control the market share of around 95 per cent of total transactions, which remains an NPCI concern.

What is NPCI's response and further plans?

NPCI aims at holding monthly meetings to address the market share imbalance in UPI, which got extended beyond December (possibly).

Smaller UPI apps have requested more time to implement new features, increase incentives, and bring better branding from NPCI. Furthermore, NPCI urged applications to offer more cashback to the consumers.

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NPCI clarified that merchant apps and websites at payment gateways have the privilege to display preferred UPI apps, limiting NPCI's intervention.

Market share dynamics

PhonePe holds a 47 per cent market share, which is followed by Google Pay with 36.4 per cent, and Paytm's share drops down to 11 per cent due to regulatory issues.

Concerns have arisen over the potential for a duopoly in the market if Paytm's market share continues to decline. Necessitating NPCI's extended deadline to cap single-player market share at 30 per cent by 2024.