An Indian parliamentary panel has reportedly highlighted a need to support the growth of domestic FinTech players in India’s digital payments market.
PhonePe holds a market share of 46.91% of the Unified Payments Interface (UPI) market, while Google Pay follows with 36.39%, according to the parliamentary committee on communications and information technology, per the report. These two platforms have emerged as leaders in the mobile payments market, leaving local player BHIM UPI with a 0.22% market share.
UPI, a real-time payments system that was founded by the Reserve Bank of India (RBI) and dates back to 2016, enables instant money transfers directly between bank accounts and has caught on among users.
The National Payments Corporation of India (NPCI), which oversees UPI payments, has expressed concerns about the duopoly in the mobile payments market, according to the TechCrunch report. The NPCI had previously proposed enforcing a cap on market share, ensuring that no single player processes more than 30% of UPI transactions in a month. However, this proposal has been extended until the end of 2024.
The report comes at a time when Paytm, another leading payments firm in India, is facing challenges due to a clampdown on its Paytm Payments Bank business, the report said. The RBI’s directive has asked this business to stop accepting deposits, which is expected to further diminish Paytm’s market share in UPI. Industry executives have cautioned that this disruption could benefit PhonePe and Google Pay, solidifying their dominance in the market.
PYMNTS Intelligence found that digital wallets have become the preferred payment method for 55% of retail purchases in India.
Eighty percent of digital wallet users choose UPI, while 12% select bank transfers as the underlying payment method, according to the PYMNTS Intelligence report “2023 Global Digital Shopping Index: India Edition.”
The report attributed Indian consumers’ preference for digital wallets and UPI to the convenience and ease of use of these payment methods.