Google has criticized NPCI’s decision to cap the share of transactions of certain companies.
Google on Friday criticized the decision of digital payments agency NPCI to cap the share of transactions of some companies, saying it would hamper the country’s burgeoning digital payments economy.
Google’s criticism came after payment processor NPCI said on Thursday that third-party payment apps, as of January 1, would not be allowed to process more than 30% of total transaction volume on the framework. State-backed UPI (United Payments Interface), which facilitates money transfers between individuals.
The move will likely hamper the growth of the payment services offered by Facebook, Alphabet’s Google and Walmart, while also stimulating the likes of Reliance’s Jio Payments Bank and SoftBank-backed Paytm, which are armed with banking licenses.
More than 2.07 billion UPI transactions were processed in October, according to NPCI, with Walmart’s PhonePe accounting for just over 40% of those transactions. Google Pay followed closely behind, with competitors like Paytm and dozens of others sharing the remaining 20%.
Companies like PhonePe and Google, which currently exceed the cap stipulated by NPCI, will have two years to comply with the new rules.
“This announcement came as a surprise and has implications for the hundreds of millions of users who use UPI for their daily payments and could impact UPI’s subsequent adoption and the end goal of financial inclusion.” Sajith Sivanandan, commercial director at Google Pay, India, said in a statement.
The new caps do not apply to Reliance’s Jio Payments Bank, nor to Paytm, which have niche banking licenses and do not fall under the category of “third party apps”.
“It goes against the whole theory of foreign actors versus Indians, on one level,” said a senior executive at a digital payments company, who asked not to be named. “Why couldn’t the NPCI say the cap was for all players, why only third-party app providers?”
A spokesperson for Paytm said NPCI has taken the right steps for the growth of the UPI system.
“The transaction volume cap placed on various payment applications will ensure that NPCI has reduced risk and diversified the UPI platform,” he said.
PhonePe is committed to ensuring that NPCI’s new rule does not disrupt services for its customers, Founder and CEO Sameer Nigam said.
NPCI and Reliance did not respond to requests for comment.
Facebook blocked
The new rules came as NPCI finally granted Facebook permission to launch WhatsApp payments in India, allowing a limited rollout of the service to 20 million users.
While the long-delayed approval is a reprieve for Facebook, the limited rollout thwarts WhatsApp’s push into payments in its largest market with more than 400 million users.
Nonetheless, the Menlo Park, Calif., Based company welcomed the approval on Friday, saying the combination of WhatsApp and UPI will boost rural participation in the digital economy.
Ram Rastogi, digital payments strategist and former NPCI executive, said NPCI’s decision to cap transactions for each third-party payment provider would promote healthy competition.
“If only two technology service providers (PhonePe and Google Pay) capture around 80% of the market share, this poses systemic risks and NPCI’s decision to put a cap aims to correct this,” Rastogi said.
The move to limit some players comes at a time when Google is already under intense scrutiny in India, where it faces at least four big antitrust challenges.
The restrictions should also help regulators limit potential cybersecurity threats.
“It is important that there is more competition which makes the space less vulnerable and leads to better controls,” said Abizer Diwanji, head of financial services at EY in India.
