The National Payments Corporation of India (NPCI) has set a 30% limit on the total volume of UPI transactions processed by third party application providers (TPA), which will take effect from January 2021. UPI, The unified payments interface has surpassed two billion transactions, according to the NPCI, and TPAs such as Google Pay and PhonePe account for most of this figure. Now, the NPCI has placed a cap on the proportion of transactions that a single company can process, in order to “address risks and protect the UPI ecosystem as it further expands,” the NPCI wrote. This will greatly affect Google Pay and PhonePe, and will present an opportunity for others like Paytm and MobiKwik. There is also a concern that limiting the number of transactions a business can do in a month could lead to higher transaction failure rates.
The UPI ecosystem is heavily dominated by just two companies: Google Pay and PhonePe. According to a recent report, both companies account for about 40 percent of the number of transactions, each. Aside from this, two other companies, Paytm and MobiKwik together account for nearly 20 percent of UPI’s transactions. All other apps, from the government’s BHIM UPI app to the many banking apps, barely have a stake.
SEE ALSO: WhatsApp Pay receives green signal from NPCI
With this new rule, companies will see their participation change: the 30 percent limit will be calculated based on the total volume of transactions processed in UPI during the previous three months continuously. According to the announcement, TPAs with more than 30 percent ownership will have a two-year period to fulfill in a phased manner.
It is not clear what will happen if a business reaches a limit: if it would be allowed to carry out more transactions at that time or if it would have to stop. This means that if you are using a popular TPA like Google Pay or PhonePe, would this lead to more failed transactions? At present, this is not safe. WhatsApp is another contender in this space that has been waiting behind the scenes for permits, and now the NPCI has given it permission to move forward with its implementation.
WhatsApp Pay is now allowed to expand its users gradually, with a maximum user base of up to 20 million users. For comparison, PhonePe recently announced that it has hit the 250 million user mark.
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