An Indian parliamentary panel has urged the government to support the growth of domestic fintech players that can provide alternatives to the Walmart-backed PhonePe and Google Pay apps that currently command more than 83% of the country’s fast-growing digital payments market.
The 58-page report, which includes a series of recommendations, comes at a time when Paytm, another leading payments firm in the country, is reeling from a clampdown on its payments bank business.
The Reserve Bank of India’s directive last week all but asks Paytm to cease operations of Paytm Payments Bank, which processes most of the transactions for the financial services firm. The disruption at Paytm will likely cause the payment app’s market share in UPI to fall further to rivals PhonePe and Google Pay, industry executives cautioned.
PhonePe commanded 46.91% of the UPI market share by volume during the period of October to November 2023, the parliamentary committee on communications and IT wrote in its report. Google Pay held a market share of 36.39% during the same period, the report said.
The market share by volume of indigenous BHIM UPI was only 0.22%, the report said. PhonePe and Google Pay likely possess a large market share of UPI by transaction value.
The National Payments Corporation of India (NPCI), a special unit of the Indian central bank RBI, has previously expressed similar concerns about the clear duopoly in the mobile payments market in South Asia. It had earlier proposed enforcing a check on the market share for players, ensuring that no single player shall process more than 30% of the UPI transactions in a month.
The NPCI, which oversees UPI payments network, in late 2022 extended the deadline for the new check to the end of 2024. Google Pay and PhonePe assumed less than 80% market share at the time when the NPCI originally proposed a check in 2020.
“As India, focusing on ‘Make in India’ in other sectors, the Committee are of the opinion that local entities are to be promoted in the fintech sector,” the report added.