50 New Payment Apps Set To Join UPI Despite Zero MDR, Says NPCI CEO
50 New Payment Apps Set To Join UPI Despite Zero MDR, Says NPCI CEO
In a significant development for the digital payments ecosystem, 50 new third-party application providers (TPAPs) are eager to join the Unified Payments Interface (UPI) network, despite the absence of a merchant discount rate (MDR), according to Dilip Asbe, Managing Director and CEO of the National Payments Corporation of India (NPCI). While the lack of a revenue model on UPI had previously discouraged new entrants, Asbe revealed that interest in the system has surged in the last year.
“The absence of an MDR initially slowed the influx of new players, but in the past year, we have seen a strong resurgence. Nearly 50 new TPAPs are showing interest in entering the UPI space. This growth also coincides with existing TPAPs making fresh investments,” Asbe shared in an interview with MoneyControl. New participants in the UPI market include players like Navi, BharatPe, and super.money.
Currently, most UPI debit transactions remain free for users, with banks and fintech firms bearing the processing costs. Asbe noted the potential introduction of MDR fees for larger merchants in the future, clarifying that smaller businesses with an annual turnover below Rs 20 lakh would likely remain exempt from such fees.
Asbe also addressed concerns over market dominance by a few players. With PhonePe and Google Pay handling nearly 87% of monthly UPI volumes, the NPCI is monitoring the ecosystem. However, Asbe believes that newer innovations like credit products on UPI, including credit cards and credit lines, will help balance the market.
In November 2022, NPCI proposed a 30% cap on the market share for TPAPs, giving UPI platforms two years to comply. The decision on implementing this cap remains pending. Asbe assured that the government’s objective, along with that of the Reserve Bank of India (RBI) and NPCI, is to create a balanced market without hindering UPI’s rapid growth.
Additionally, the NPCI is leveraging artificial intelligence (AI) for risk and fraud management, and compliance with anti-money laundering (AML) guidelines, Asbe noted. The apex payment body has been focusing on mitigating fraud through AI-based advisories, targeting issues like mule accounts.
The growing interest in UPI underscores the resilience and expansion of India’s digital payments landscape, which continues to attract new players despite ongoing challenges with the revenue model.
