Government plans to break the dominance of PhonePe and Google Pay in UPI market

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The Indian government is reportedly devising strategies to curb the overwhelming dominance of PhonePe and Google Pay in the UPI payment market, where the two American tech giants currently hold approximately 80 percent of the market share. 

The concern arises from the potential risk of a duopoly emerging in the UPI market, especially following the ban on Paytm. With more than 10 billion UPI transactions occurring monthly in India, the government aims to prevent the market from being exclusively controlled by two American companies.

To address this issue, the government is contemplating a new plan that involves implementing a 30 percent capping system on UPI payment services. 

The National Payment Corporation of India (NPCI) is leading this initiative to prevent the undue dominance of specific companies, such as PhonePe and Google Pay, in the UPI landscape. By restricting a single UPI payment service’s market share to 30 percent, the government hopes to foster a more competitive and diverse ecosystem.

The move follows a recommendation from a parliamentary panel, urging support for domestic fintech firms to reduce the reliance on foreign players in the UPI market. This proposal gains significance in the context of the recent suspension of Paytm by the Central Bank. 

The UPI, introduced in 2016, comprises around 500 banks and facilitates transactions exceeding Rs 10 billion each month across more than 70 million merchants.