A day after the National Payments Corporation of India (NPCI) announced a 30% market capitalization for digital payments companies in UPI, market leader Google Pay said it could affect further UPI adoption in the country.
The cap comes at a time when WhatsApp Pay launched in India on Friday after the long-awaited approval, with NPCI limiting its entry to a maximum registered user base of 20 million for UPI.
Google Pay has hinted that NPCI’s intervention through market capitalization needs to be reconsidered, as Indian consumers must have a “choice” to make digital payments.
“Digital payments in India are still in their infancy and any intervention at this point must be done with a view to accelerating consumer choice and innovation. An open, choice-based model is key to driving this momentum. This announcement has been a surprise and has implications for hundreds of millions of users using UPI for their daily payments and could affect UPI adoption and the ultimate goal of financial inclusion, “said Sajith Sivanandan, Business Head, Google Pay and Initiatives. of the next billion users, India.
WhatsApp’s entry into India’s digital payments space is expected to broaden UPI adoption by both individual users and small and medium-sized businesses (SMEs), who leverage the WhatsApp Business app to have a fingerprint. It will now also allow companies to complete digital transactions on its platform.
However, this will be at the cost of rival UPI service providers losing their clients to the new entrant. Currently, Google Pay and PhonePe, owned by Flipkart, are market leaders at UPI, each with more than 40% share.
WhatsApp will enable the service in 10 regional languages and has partnered with ICICI Bank, HDFC Bank, Axis Bank, State Bank of India and Jio Payments Bank.
The decision on market capitalization has left payments companies confused about how they can curb their market share and stop the “network effect” of payments.
“WhatsApp entering payments can tilt the market and help all other players to exceed the required market cap of 30%. With no limit on the value of the transaction, players can begin to focus on larger ticket payouts. But the transition will be perfect. However, the challenge will continue to be how players reduce market share now, without affecting the UPI payments experience, “said Bhavik Hathi, Managing Director of Alvarez & Marshal.
Although, with the entry of WhatsApp, the share of each payment company is expected to decrease even more, due to the scope and scale of the application.
PhonePe founder Sameer Nigam had said in a previous interview that UPI’s market capitalization runs counter to the principle that it is an “open and interoperable” infrastructure.
Two executives from payment companies said that market capitalization may give WhatsApp, which is the ‘default’ messaging app, an edge for more than 400 million Indians.
“In the event that a UPI payment fails for a user because a certain service provider has reached their threshold, instead of downloading another application, they will be willing to switch to WhatsApp, which is already installed on their phone. This gives WhatsApp an advantage, as it will eventually ask NPCI to increase its market capitalization, “said one executive, who asked not to be named.
PhonePe, Paytm, Amazon Pay, did not respond to Mint’s inquiries.
On Friday, Facebook boss Mark Zuckerberg said in a video message that with UPI, India has created something ‘truly special’, which will open up a world of opportunity for the micro and small businesses that are the backbone of the Indian economy.
Total UPI volumes in the country reached an all-time high in October, crossing the transaction count of 2 billion, reaching ₹Rs 3.86 crore lakh in value, growing approximately 13-15% month-on-month.
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