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NPCI Collaborates with Fintech Startups to Counter Market Dominance of PhonePe and Google Pay

by Kabir Khan
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In a bid to counter the growing market dominance of PhonePe and Google Pay within the Unified Payments Interface (UPI) ecosystem, the National Payments Corporation of India (NPCI) is gearing up to engage with various fintech startups this month.

Representatives from notable entities such as CRED, Flipkart, Fampay, and Amazon, among others, are slated to convene with NPCI executives. The primary agenda is to strategize on bolstering UPI transactions on their platforms. Sources familiar with the matter disclosed this development to TechCrunch.

Since its inception, UPI, a collaborative effort of Indian banks, has emerged as the go-to mode for online transactions among Indians, handling a staggering 10 billion transactions monthly.

The move to engage with fintech startups comes amid mounting concerns voiced by lawmakers and industry stakeholders regarding the overwhelming market share enjoyed by Google Pay and PhonePe. Together, these platforms command nearly 86% of UPI transactions by volume, a significant increase from 82.5% recorded in December. Notably, PhonePe is predominantly owned by Walmart.

Fintech is not a threat, it’s an opportunity.

Jamie Dimon, CEO of “JPMorgan Chase”

Meanwhile, Paytm, the third-largest player in the UPI landscape, witnessed a decline in its market share to 9.1% by March’s end. This downturn follows regulatory actions by the Reserve Bank of India (RBI). Sources revealed that the RBI expressed discontent to NPCI over the burgeoning duopoly in the payments sector. However, an NPCI spokesperson declined to comment on the matter.

Earlier this year, a parliamentary panel urged the government to foster the growth of domestic fintech entities capable of providing viable alternatives to PhonePe and Google Pay, both of which have significant foreign backing.

Despite NPCI’s long-standing advocacy for capping individual company market shares at 30%, the organization has extended the compliance deadline to December 2024. Challenges in enforcing this directive persist, with NPCI citing the absence of a robust technical mechanism, as previously reported by TechCrunch.

Concurrently, the RBI is contemplating an incentive scheme to level the competitive playing field for emerging UPI players. Additionally, reports suggest that NPCI is encouraging fintech firms to incentivize users, thereby promoting the usage of their respective UPI-enabled apps for transactions.

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