The Unified Payment Interface (UPI) has changed the face of payments in the country and has become the epitome of digital payments around the world. It has influenced Fednow, an instant payment system in the US, and P27, a real-time cross-border payment system in the Nordic countries. While the real-time payment transfer system was an instant hit, it created an entirely different market concentration challenge for the Indian government: the interface is dominated by Google’s PhonePe and GPay. PhonePe has almost 50% of the market share with recent funding and valuation as one of the largest fintechs in the country, followed by Google Pay with more than 34%, and Paytm has a share of 10%, and the value of these transactions could reach 10 trillion. rupees by 2026
Market concentration is one of the biggest challenges, as it gives immense power to platforms and big technologies. India is one of many countries facing these problems. The Reserve Bank of India (RBI) is contemplating a solution to end the duopoly by limit capping. Initially it was planned to start this year, but now it is delayed. It will take a few more years with a strategic plan to support new entrants for their growth, finally introducing a cap on market share to avoid market concentration. However, ongoing developments and new initiatives around UPI make it imperative to address concentration risk as the top priority, as it creates challenges such as a lack of competition, which can result in higher prices for consumers and the companies. It can also stifle innovation and limit customer choice.
confusion, distrust
In a concentrated market, a single payment system or a small number of systems that dominate the market can also have a lot of power and influence over the economy, potentially hurting smaller businesses and individuals. It could also lead to a need for more transparency in how transactions are processed and fees are calculated, which can lead to confusion and mistrust between consumers and businesses. Market concentration creates barriers to entry and makes competition for new entrants more difficult. It also poses a risk of data and security breaches.
It can lead to higher costs, limited choice, and a lack of transparency, which negatively impacts the economy and consumers.
The writer is a globally recognized fintech and payments expert.
