New Delhi: Companies operating the PhonePe and Google Pay services have heaved a sigh of relief with the proposed curbs on the Unified Payments Interface (UPI) market being postponed by two years.

There will be no restrictions for the next two years on these two apps accepting new customers and carrying on with financial transactions without hindrance.

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The restrictions in the sector will not affect other UPI apps such as Paytm and Amazon Pay. The National Payments Corporation of India (NPCI) oversees UPI transactions. It has been criticised that the restrictions will hamstring the growth of the UPI market.

What are the market restrictions?
The principal players in the UPI app market are companies such as Google Pay, PhonePe, and Paytm. It was in 2020 that the NPCI decided to set up controls in the market. The decision was taken on the principle that no company should gain a monopoly in the market.

The stipulation is that no entity should have more than 30% share of the total number of transactions. The number of transactions carried out in the three months immediately prior would be taken into account for the assessment. A time-frame was also fixed for implementing them but was extended many times.

According to the rules of the NPCI, if the transactions cross 25%, the first warning will be issued to the company. After 27%, the second warning will be issued. Addition of new customers will be prohibited when the transactions cross 30%.

What the problem is
At present, 96% of the UPI transactions are through the three apps of PhonePe, Google Pay, and Paytm. Of this, 47% is through PhonePe and 34% through Google Pay. Paytm has only 15% of the share. Companies such as WhatsApp Pay and Amazon Pay have only a minuscule share of the market.

If the restrictions are implemented, PhonePe and Google Pay will have to limit themselves to 30%. Along with this, curbs on accepting new customers and limits on transactions will have to be put in place. The two companies had approached the NPCI many times in connection with the issue.

Paytm was of the opinion that market restrictions should be imposed. The stand of Paytm, which had 15% of the market, was influenced by the fact that it could gain more customers if restrictions are imposed.

PhonePe had come out in the open against the move for market control. The question posed by Samir Nigam, chief executive officer of PhonePe. was whether it could be advertised that prospective customers should not install PhonePe because of its dominance in the market.

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