Various proposals were discussed during a meeting on Tuesday to address concentration risk on the Unified Payments Interface (UPI), ranging from developing specialized incentive structures for smaller players to implementing a reservation system among third-party apps. Industry executives and National Payments Corporation of India (NPCI) officials attended the meeting, where the focus was on enabling smaller apps to thrive on UPI and distributing the transaction load more evenly. An anonymous senior industry executive noted that NPCI sought ways to support smaller apps and alleviate the dominance of major players like Walmart-backed PhonePe, Google Pay, and Paytm.
The meeting participants drew parallels with the government-backed zero Merchant Discount Rate (MDR) support scheme on RuPay debit cards, which successfully increased adoption in the card payments space. The aim is to replicate this success in the UPI market and break the duopoly of Mastercard and Visa. However, challenges were acknowledged, including the significant market share held by a few major players and the lack of differentiation in terms of product features for smaller apps.
Although a concrete strategy did not emerge, NPCI expressed its commitment to ongoing discussions with banks and small fintechs operating on UPI to address the concentration risk issue. The potential impact of regulatory actions on Paytm Payments Bank, leading to a potential flight of transaction volumes from Paytm, also raised concerns among industry insiders. Despite various suggestions, the central issue of concentration risk on UPI remains unresolved.
