Google Pay and PhonePe are affected by India’s decision to limit digital payment players
Global tech giant Google on Friday criticized India’s decision to limit the proportion of transactions that some businesses within the country’s digital payments space can account for, saying it would hamper the country’s burgeoning digital payments economy.
Of Google The criticism came after India’s flagship payment processor, National Payments Corp of India (NPCI) said Thursday that third-party payment apps, as of January 1, will not be able to process more than 30 per cent of the total transaction volume under the state-backed United Payment Interface (UPI), which that facilitates seamless exchange between peers. Money transfers.
The move will likely hamper the growth of payment services offered by Facebook, Alphabet Google and Walmart, while boosting the likes of Reliance Jio Payments Bank and SoftBank backed Paytm, who are armed with bank permits.
More than 2.07 billion UPI transactions were processed in October, according to NPCI, and Walmart’s PhonePe accounts for just over 40 per cent of those transactions. Google payment was a close second, with rivals like Paytm and dozens of others splitting the remaining 20% stake.
Companies like PhonePe and Google, which currently exceeds the NPCI limit, will have two years to comply with the new rules.
“This announcement has come as a surprise and has implications for hundreds of millions of users who use UPI for their daily payments and could affect UPI adoption and the ultimate goal of financial inclusion,” said Sajith Sivanandan, Business Head of Google Pay, India said in a statement.
The new limits do not apply to Reliance’s Jio Payments Bank or Paytm, which have niche banking licenses and do not fall into the category of “third-party applications.”
“This plays off the whole theory of foreign versus Indian players, at some level,” said a senior executive at a digital payments company, who asked not to be named. “Why couldn’t the NPCI say that the limit was for all players, why only third-party application providers?”
A Paytm spokesperson said NPCI had taken appropriate steps to grow the UPI system.
“The transaction volume limit imposed on various payment applications will ensure that NPCI has eliminated risks and diversified the UPI platform,” he said.
PhonePe is committed to ensuring that NPCI’s new rule does not disrupt services for its customers, said founder and CEO Sameer Nigam.
NPCI and Reliance did not respond to requests for comment.
The new rules came when NPCI finally granted Facebook approval for the launch. WhatsApp payments in India, offsetting a limited rollout of the service to 20 million users.
While the long-delayed approval is a reprieve for Facebook, the limited launch thwarts WhatsApp’s push for payments in its largest market with more than 400 million users.
Still, the Menlo Park, California-based firm welcomed the approval on Friday, saying the combination of WhatsApp and UPI would boost rural participation in the digital economy.
Ram Rastogi, a digital payments strategist and former NPCI executive, said NPCI’s decision to limit transactions for each third-party payment provider would encourage healthy competition.
“If just two technology service providers (PhonePe and Google Pay) are capturing around 80% of the market share, then it poses systemic risks and NPCI’s decision to put a cap is intended to correct that,” Rastogi said.
The move to cap some players comes at a time when Google is already coming under intense scrutiny in India, where it faces at least four major antitrust challenges.
The restrictions are also expected to help regulators limit any potential cybersecurity threats.
“It is important that there is more competition, which makes the space less vulnerable and leads to better controls,” said Abizer Diwanji, EY’s director of financial services in India.