India’s payments regulator will decide on Monday whether to curb the dominance of Walmart and Google’s PhonePe in the country’s fast-growing mobile payments market, a move that could reshape the way its billion-plus population gets around the money.
The decision centers on UPI, or Unified Payments Interface, a network supported by more than 50 retail banks that has changed the way Indians pay for everything from groceries to taxi rides. The platform processes over 13 billion transactions per month, making it one of the largest digital payment networks in the world. It is also, by far, the most popular way Indians transact online.
At issue is whether the National Payments Corporation of India, which reports to India’s central bank, will enforce a rule that limits companies from handling no more than 30% of all UPI transactions.
The rule, first proposed in 2020, would specifically affect Walmart-owned PhonePe, which handles 47.8% of all UPI payments, and Google Pay, which processes 37.1%.
The uncertainty has cast a shadow over PhonePe’s plans to go public. The startup, valued at $12 billion and backed by Walmart, would be one of the most prominent tech IPOs in India. PhonePe co-founder and chief executive Sameer Nigam said in August that the startup may not go public “if there is uncertainty on the regulatory side”.
“If you are buying a stock at Rs 100 and you value it assuming we have 48-49% market share, then there is uncertainty as to whether and by when it will come down to 30%,” Nigam (pictured above) said in a fintech conference. “We’re asking them (the regulator) if they can find another way to at least resolve any of their concerns or tell us what the list of concerns is.”
The issue also affects the growth potential of many fintech startups that are trying to make deeper inroads into digital payments. If the regulator puts limits on the ability of PhonePe and Google Pay to onboard new users or controls how many transactions they process, many more startups will gain ground.
The regulator is likely to delay implementing the cap again or could raise the limit to more than 40%, people with knowledge of the situation told TechCrunch. The agency has already pushed back the deadline several times, from January 2021 to 2023, and then to 2025, after having difficulties with implementation. She held talks with many stakeholders last week about the decision.
Enforcing a market share cap will affect the consumer experience, some of the people said.
The situation highlights India’s efforts to balance technological innovation with market competition. UPI has been a cornerstone of Prime Minister Narendra Modi’s push to digitize India’s economy and reduce its reliance on cash. The system allows instant transfers between bank accounts using simple identifiers such as phone numbers, making it more accessible than traditional banking services.
A market share cap would mark one of India’s most significant forays into its technology sector, which has attracted massive investment from global companies such as Walmart, Google and Meta. These companies see India, with its young, increasingly digital population, as a crucial growth market.
