NPCI extends 30% UPI market share cap deadline on 3rd party apps to December 2026

The National Payments Corporation of India (NPCI) has decided to extend the deadline for UPI providers to adhere to the 30% market share limit by two more years, now set for December 31, 2026.

This extension provides temporary relief for PhonePe and Google Pay, who currently hold over 85% of the UPI payments market. It offers them additional time to adjust to the limit. PhonePe faces a particularly challenging task as they currently hold close to 50% of the UPI market share.

NPCI introduced a regulation in November 2020 to restrict any individual third-party app provider's dominance in total UPI transaction volumes to a maximum of 30%. Providers such as Google Pay or PhonePe were expected to adhere to this cap by December 31, 2024.

The guidelines, initially planned for implementation in 2021, were postponed to this year due to pushback from service providers. These rules now require third-party UPI apps (TPAPs) to adhere to a 30% volume cap, with exceptions granted to UPI apps offered by banks. The new deadline was set to expire on Tuesday.

In a statement, NPCI announced that the deadline for existing TPAPs exceeding the volume cap has been extended by two years, until December 31, 2026, to allow for compliance with the regulations.

"Considering various factors, the timeline for compliance of existing TPAPs who are exceeding the volume cap, is extended by two years i.e. till December 31, 2026," NPCI said in a statement.

"The continual growth, progress and penetration of UPI to the next 300 million Indians should be the only aim and goal for all of us. Growth is life. Growth is paramount for the success of Digital India as well as RBI’s vision of Har Payment Digital. We welcome the extension of the market cap of UPI apps by NPCI as we strongly believe that the Indian people themselves will choose from dozens of new UPI apps available. Paytm is getting back to capture its lost market share, Naavi, Cred, Bhim, WhatsApp Pay and so many new apps are growing strongly. Banks are also getting their UPI app strategy in place. I strongly believe that in the next two years, the market itself will resolve this market cap issue. Blocking growth of incumbents is not the right strategy and would have surely slowed UPI’s growth," said Vishwas Patel, Chairman, Payment Council of India (PCI).

The implementation of this strategy is advantageous for prominent players such as PhonePe and Google Pay, who collectively dominate the UPI landscape, accounting for over 85% of transactions by both volume and value. Out of a pool of 75 UPI apps, these two companies are the only ones holding a significant market share.

In 2024, 17 new Third Party Application Providers (TPAPs), including Aditya Birla Capital Digital and Flipkart, have entered the UPI market with their offerings. These newcomers are targeting specific niches rather than engaging in mass-market competition. NPCI, the governing body for retail payments in the country, is backed by the Reserve Bank of India and the Indian Banks' Association.