The National Payments Corporation of India (NPCI) has granted a two-year extension for third-party apps like PhonePe and Google Pay to reduce their market share in the UPI ecosystem. The new deadline has been set to December 31, 2026. Additionally, the NPCI has lifted the user limit on WhatsApp’s UPI service, allowing the app to onboard up to 10 crore users. This marks the second time the NPCI has extended the deadline for PhonePe and Google Pay, despite their growing market shares, which now stand at 48% and 37%, respectively.
In November 2020, the NPCI had set a cap of 30% market share per third-party provider to reduce the risks of system failure, especially after Yes Bank’s moratorium, which led to a 40% drop in UPI transactions overnight. This cap aimed to ensure a more diversified ecosystem to prevent over-reliance on a few players. However, as new entrants like Paytm faced regulatory challenges, PhonePe and Google Pay continued to dominate the market.
As of December 2023, UPI transactions reached 1,613 crore, valued at Rs 22.3 lakh crore. Despite new apps like Naavi, Cred, and WhatsApp Pay growing steadily, Google Pay and PhonePe continue to hold a strong position, thanks to their heavy investments. Industry experts believe the market will naturally adjust over the next two years, resolving the market cap issue without stifling the growth of existing players. They argue that blocking growth could hinder the overall expansion of UPI.
