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NPCI holds meeting to discuss ways to reduce concentration risk in UPI: Report

NPCI aims to shake up the UPI market, pushing for a more diverse ecosystem beyond the PhonePe and Google Pay dominance.

The National Payments Corporation of India (NPCI), which operates UPI, met with payment industry executives on March 5 to discuss ways to reduce concentration risk in UPI by promoting smaller UPI apps, the Economic Times reported. Among the ideas discussed were specialised incentive structures for small players and a sort of reservation system among third-party apps, the outlet reported, but did not elaborate. The fact that two companies, PhonePe and Google Pay, dominate the UPI space is not news. Together, they've commanded over 80% of the total UPI volume for years now. Most recently, the Parliamentary Standing Committee on Communications and Information Technology, in its report on digital payments, urged the government to do more to promote local fintech entities, noting that two foreign entities dominate the space. The NPCI itself took cognisance of the dominance of PhonePe and Google Pay as early as November 2020, when it announced a 30 percent volume cap on market share per app. NPCI initially gave existing players until December 2022 to comply with this cap, but this was subsequently extended to December 2024. However, there seem to be no signs of the market share of Google Pay and Phone reducing, or the market share of competitors increasing. Moreover, Paytm, which has the third-highest market share, faces a massive challenge as the RBI has placed various restrictions on its associate company Paytm Payments Bank, which provided UPI services for Paytm. While Paytm is working with other banks to keep services running as usual, it…

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