From creating specialised incentive structures for small players on the Unified Payments Interface to enabling a sort of a reservation system among third-party apps to help the weaker ones grow, multiple ideas came up to mitigate the concentration risk on UPI during a meeting on Tuesday.
The meeting was attended by payments industry executives and officials of the National Payments Corporation of India (NPCI) that runs UPI.
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“NPCI mainly wanted to understand how they can enable smaller apps to grow on UPI and help distribute the load from the top three players to others in the market,” said a senior industry executive on the condition of anonymity.
Participants at the meeting cited the example of the government-backed zero MDR (merchant discount rate) support scheme on RuPay debit cards which has helped the card payments space to see significant inroads for the domestic card scheme, the executive said.
To break the duopoly of American payment giants Mastercard and Visa, the government had incentivised the use of the NPCI-backed RuPay debit cards.
Also read | Paytm crisis brings 30% market share cap plan back in focus
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One suggestion was to imagine a similar supporting scheme on UPI too.In the UPI-based payments market, Walmart-backed PhonePe and Google Pay between them have around an 80% market share. Paytm held more than half of the remaining market share as of January.
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“The large players on UPI have massive financial support and technical prowess, so even in terms of features there is nothing that smaller players can do, and they will not replicate quickly. So, hardly there is any differentiation that can be created in terms of products,” the executive told ET.
ET wrote on March 5, that NPCI had called a meeting with top executives at fintech and ecommerce startups who run third-party payment apps on UPI. Multiple banks also attended the meeting.
While a definite strategy could not be built on the way forward, NPCI listened to the reasons why many apps, despite being large players in their own fields, could not grab market share on UPI. Groww, Cred, Amazon Pay and WhatsApp are active on UPI, but have not seen any significant traction.
“There is a definite concentration risk building up on UPI; it has gotten the central bank and NPCI alarmed. But the market is at a position from where it is going to be very difficult to change that,” said another executive who attended the meeting. “Nothing concrete came out, but we exchanged suggestions and points and this was a good starting point,” he added.
NPCI also agreed to organise more such meetings with banks and small fintechs operating on UPI to keep the conversations happening around the issue of concentration risk on UPI.
Meanwhile, the sector regulator is worried about a flight of transaction volumes from Paytm in the aftermath of the regulatory action on Paytm Payments Bank, which could skew the market dynamics further, industry insiders said.
While multiple suggestions were floated, the core issue remains as a retail payment network, NPCI will find it very difficult to impose restrictive policies on the large players who have spent a lot to expand UPI use cases.
Like a senior banker who attended the meeting pointed out that even the 30% market cap suggested by the NPCI on UPI has been almost impossible to impose.
“You cannot do that without creating problems for the consumers and the regulator will never support such a move,” he added.
From creating specialised incentive structures for small players on the Unified Payments Interface to enabling a sort of a reservation system among third-party apps to help the weaker ones grow, multiple ideas came up to mitigate the concentration risk on UPI during a meeting on Tuesday.
The meeting was attended by payments industry executives and officials of the National Payments Corporation of India (NPCI) that runs UPI.
Elevate Your Tech Prowess with High-Value Skill Courses
Offering College
Course
Website
Indian School of Business
ISB Professional Certificate in Product Management
“NPCI mainly wanted to understand how they can enable smaller apps to grow on UPI and help distribute the load from the top three players to others in the market,” said a senior industry executive on the condition of anonymity.
Participants at the meeting cited the example of the government-backed zero MDR (merchant discount rate) support scheme on RuPay debit cards which has helped the card payments space to see significant inroads for the domestic card scheme, the executive said.
To break the duopoly of American payment giants Mastercard and Visa, the government had incentivised the use of the NPCI-backed RuPay debit cards.
Also read | Paytm crisis brings 30% market share cap plan back in focus
Discover the stories of your interest
One suggestion was to imagine a similar supporting scheme on UPI too.In the UPI-based payments market, Walmart-backed PhonePe and Google Pay between them have around an 80% market share. Paytm held more than half of the remaining market share as of January.
ETtech
“The large players on UPI have massive financial support and technical prowess, so even in terms of features there is nothing that smaller players can do, and they will not replicate quickly. So, hardly there is any differentiation that can be created in terms of products,” the executive told ET.
ET wrote on March 5, that NPCI had called a meeting with top executives at fintech and ecommerce startups who run third-party payment apps on UPI. Multiple banks also attended the meeting.
While a definite strategy could not be built on the way forward, NPCI listened to the reasons why many apps, despite being large players in their own fields, could not grab market share on UPI. Groww, Cred, Amazon Pay and WhatsApp are active on UPI, but have not seen any significant traction.
“There is a definite concentration risk building up on UPI; it has gotten the central bank and NPCI alarmed. But the market is at a position from where it is going to be very difficult to change that,” said another executive who attended the meeting. “Nothing concrete came out, but we exchanged suggestions and points and this was a good starting point,” he added.
NPCI also agreed to organise more such meetings with banks and small fintechs operating on UPI to keep the conversations happening around the issue of concentration risk on UPI.
Meanwhile, the sector regulator is worried about a flight of transaction volumes from Paytm in the aftermath of the regulatory action on Paytm Payments Bank, which could skew the market dynamics further, industry insiders said.
While multiple suggestions were floated, the core issue remains as a retail payment network, NPCI will find it very difficult to impose restrictive policies on the large players who have spent a lot to expand UPI use cases.
Like a senior banker who attended the meeting pointed out that even the 30% market cap suggested by the NPCI on UPI has been almost impossible to impose.
“You cannot do that without creating problems for the consumers and the regulator will never support such a move,” he added.
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