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An Indian parliamentary panel has urged the government to support the growth of domestic fintech players that can offer alternatives to Walmart-backed PhonePe and Google Pay apps, which currently control more than 83% of the country’s fast-growing digital payments market.
The 58-page report, which includes a series of recommendations, comes at a time when Paytm, another leading payments company in the country, in shock of repression on its payment banking activities.
The Reserve Bank of India directive last week virtually asks Paytm to cease operations of Paytm Payments Bank, which processes most transactions for the financial services company. The disruption at Paytm will likely lead to a further decline in the payments app’s market share in UPI compared to rivals PhonePe and Google Pay, industry executives have warned.
PhonePe held 46.91% UPI market share by volume during the period October-November 2023, the Parliamentary Committee on Communications and IT wrote in its report. Google Pay had a market share of 36.39% during the same period, the report said.
The volume market share of indigenous BHIM UPI was only 0.22%, the report said. PhonePe and Google Pay likely have a significant UPI market share in terms of transaction value.
The National Payments Corporation of India, a special unit of the Indian central bank RBI, has already expressed similar concerns on the obvious duopoly of the mobile payments market in the South Asian market. It had earlier proposed imposing market share controls on players, ensuring that no single player will process more than 30% of UPI transactions in a month.
The NPCI, which oversees the UPI payments network, by the end of 2022 extended the deadline for the new check until the end of 2024. Google Pay and PhonePe had less than 80% market share when the NPCI initially proposed a check in 2020.
“As India focuses on ‘Make in India’ in other sectors, the Committee is of the view that local entities need to be encouraged in the fintech sector,” the report added.
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