Indian Parliamentary Panel Calls for Support of Domestic FinTechs Amid Digital Payments Duopoly

A recent report from an Indian parliamentary panel has cast a spotlight on the need for bolstering domestic FinTech companies in the face of overwhelming dominance by PhonePe and Google Pay in India's digital payments sector. According to TechCrunch, these two platforms collectively command over 83% of the market share, leaving scant room for local and emerging players to thrive.

The Unified Payments Interface (UPI), a revolutionary real-time payment system introduced by the Reserve Bank of India (RBI) in 2016, has significantly transformed the landscape of digital transactions in the country. Despite its widespread adoption and success, the distribution of market share among UPI service providers has raised concerns. PhonePe leads the pack with a 46.91% share, followed by Google Pay at 36.39%, while the indigenous BHIM UPI app trails significantly with just 0.22%.

The National Payments Corporation of India (NPCI), the regulatory body overseeing UPI payments, has previously voiced apprehensions regarding the market's duopolistic nature. In response, it suggested implementing a cap to ensure no single entity processes more than 30% of UPI transactions monthly. This measure, aimed at fostering a more equitable competitive landscape, has seen its enforcement deadline extended to the end of 2024.

This report emerges amid challenges faced by Paytm, another key player in the Indian payments ecosystem. Following the Reserve Bank of India's directive halting Paytm Payments Bank from accepting new deposits, there is speculation that the disruption could inadvertently reinforce the market stronghold of PhonePe and Google Pay.

The parliamentary committee's emphasis on supporting domestic FinTechs reflects a broader concern for ensuring a competitive and diverse digital payments ecosystem in India. With digital wallets now the preferred payment method for 55% of retail purchases in the country and 80% of digital wallet transactions conducted via UPI, the stakes for maintaining a balanced market dynamic have never been higher.

The "2023 Global Digital Shopping Index: India Edition" by PYMNTS Intelligence underscores the pivotal role of digital wallets and UPI in shaping consumer payment preferences. As India continues to navigate its digital payments evolution, the parliamentary panel's call to action highlights the critical need for regulatory and policy interventions that support domestic innovation, ensure market competitiveness, and safeguard the interests of consumers and small businesses alike.