NPCI extends 30% market share cap on UPI apps by another two years, removes user limits for WhatsApp

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The National Payments Corporation of India (NPCI), which runs the popular mobile payments platform UPI, has extended the market cap deadline by another two years, a move that is likely to come as a relief for dominant apps such as PhonePe and Google Pay.

In a move to boost digital payments and spur competition, NPCI has also removed user onboarding limits for WhatsApp Pay. It had earlier put a cap on the digital payments platform at 100 million users.

This is the second time NPCI has extended the timeline by two years, as PhonePe and Google Pay corner a nearly eighty five percent share of digital payments in India, even as new players entered the fray this year.

"Considering various factors, the timeline for compliance of existing TPAPs who are exceeding
the volume cap, is extended by two years i.e. till December 31, 2026," the RBI said in a circular on December 31.

In November 2020, NPCI had introduced a cap to ensure no single third-party app provider (like Google Pay or PhonePe) controls more than 30 percent of total UPI transaction volumes, with a deadline of December 31, 2024 to comply.

The idea was to avoid concentration risk in the market  and ensure user and system security as digital payments via UPI continue to surge, crossing  171 billion transactions in 2024, a 45 percent growth compared to the previous year.

As per the latest available data, both PhonePe and Google Pay exceed the cap with the former commanding 48 percent of the market and the latter cornering another 37 percent of the market.

During this year, Navi, super.money and Fampay broke into the top 10 UPI apps, giving NPCI hope that new players can create a space for themselves in the market. However, these players together have less than 2 percent of the market, hardly enough to create any dent in the PhonePe-Google Pay duopoly.

In 2024 alone, 20 companies received third-party application provider (TPAP) approval from NPCI, which is required to provide customers with UPI services. According to the NPCI website, 40 firms have received TPAP approval since 2016.

UPI market share will balance out, but it will take more time than we initially envisaged: NPCI CEO Dilip Asbe

To be noted, the market cap rule does not apply to bank apps, but the banks are minor players as of now. The popular UPI payment platforms are TPAP and partner with banks to connect to the NPCI network to facilitate transactions.

Moneycontrol had exclusively written in May about NPCI leaning towards extending the deadline again to avoid any disruption in India's rapidly growing digital payments ecosystem.

The possibility of deadline extension was further hinted by NPCI chief Dilip Asbe in an exclusive interview with Moneycontrol in October, wherein he acknowledged that it will take longer than expected for the market share to balance out.

"Network effects have kicked in, there is no doubt about that… but now the pipeline is good, and the interest is renewed, many of them will also look at credit and credit line on UPI. I think the market will balance out, but it will take some time. It will need some more time than what we earlier envisaged. But for sure the market will balance this out," he said.

Additionally, he defended the role of Bhim as a “national infra” and not in competition with third-party apps, noting, “Bhim is the country’s own app. Today when the countries are looking at UPI globalisation, in fact, BHIM also is going back as one of the apps to be given back to that country so that country can operate a Bhim app of their own. But obviously, our primary goal is to ensure that Bhim remains popular."

Is NPCI playing fair? Concerns grow over BHIM’s advantage in UPI market

The NPCI in August spun off its BHIM app as a separate company to aggressively grow the market share and also appointed veteran banker Lalitha Nataraj as its chief executive officer.