The Unified Payments Interface (UPI) is operated by the National Payments Corporation of India (NPCI) and is utilised for real-time payments between peers or at the point of sale by businesses. A single third-party app will now be limited to handling no more than 30% of the total volume of UPI transactions, according to NPCI's announcement from November 2020. The cap was scheduled to go into effect on January 1, 2021.
More Details About the Enforced Cap
The National Payments Corporation of India on Friday extended by two years, to the end of December 2024, the deadline for third-party UPI players to cap their 30 percent volume threshold in digital payment transactions. Third-party app providers (TPAPs), which account for the majority of UPI-based transactions and include Walmart's PhonePe and Google Pay, may find respite from the judgement.
However, the third-party app providers who were exceeding the cap were granted two years to gradually comply with the rules. In addition, NPCI stated that other current and new players (banks and non-banks) must step up their consumer outreach in order for UPI to grow and for the market to reach overall equilibrium. This is due to the significant potential of digital payments and the requirement for multi-fold penetration from its current state.
According to a circular from NPCI, the deadline for existing TPAPs who are exceeding the volume cap to comply with the cap has been extended by two (2) years, or until December 31, 2024, taking into account both the current and potential future use of UPI and other pertinent factors.
In order to add users and handle their payments, TPAPs typically collaborate with banks at the back end. Last month, it was revealed that the NPCI intended to ask the Reserve Bank of India to adopt the earlier deadline of December 31, 2023, for setting a cap on the number of players at 30%. It should be noted that there is currently no volume cap, because of which about 80% of the market share is held by Google Pay and PhonePe.
