In an effort to regulate the market and mitigate risks associated with high transaction volumes, the National Payments Corporation of India (NPCI) has introduced a new rule that limits any third-party payment wallet’s share in UPI transactions to a maximum of 30%. This move is aimed at reducing monopolistic practices and promoting a healthy competitive environment.

Details of the New Regulation

Initially set to be enforced from December 2022, the implementation of this rule was postponed to give major third-party app providers (TPAPs) like Google Pay and Walmart’s PhonePe sufficient time to comply. These platforms, which currently dominate the market, now have until the end of December 2024 to adjust their transaction shares to meet the new requirements by January 1, 2025.

Current Market Scenario

Currently, Google Pay and PhonePe hold an overwhelming 85% share of UPI-based transactions. This concentration in the hands of a few players presents significant risks; any operational hiccup could potentially destabilize the entire payment system. The new NPCI directive is therefore designed to safeguard the digital transaction ecosystem from such vulnerabilities.

Potential Methods for Reducing Market Share

While NPCI has yet to release detailed guidelines on how these companies should reduce their market shares, possible strategies might include prohibiting these apps from acquiring new

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