UPI, Digital Transactions: Government Extends Deadline for 30 Percent Cap

In November 2020, NPCI stated that a single third-party app will be limited to processing no more than 30% of all UPI transaction volumes. A National Payments Corporation of India (NPCI) of Friday extended by two years, until the end of December 2024, the deadline for third-party UPI players to reach their 30 percent volume threshold in digital payment transactions.

Third-party app providers (TPAPs), which account for the majority of UPI-based transactions and include Walmart’s PhonePe and Google Pay, may find respite from the judgment.

A Unified Payments Interface (UPI) is operated by NPCI and is utilized in real-time payments between peers and at the point of sale by businesses.

One third-party app will now be limited to handling no more than 30% of the total volume of UPI transactions, according to NPCI’s announcement from November 2020. The cap was scheduled to go into effect on January 1, 2021.

A TPAPs (live on November 5, 2020) that were above the cap, however, was granted two years to gradually comply with the standards.

The deadline for compliance for existing TPAPs who are exceeding a volume cap is extended by two (2) years, or until December 31, 2024, to comply the with volume cap, according to a circular from NPCI. “Taking into account a present usage or future potential of UPI, or other relevant factors,” the circular stated.

In addition, NPCI stated that some existing and new players (banks and non-banks) must step up their customer outreach in order for UPI to grow or the market to reach overall equilibrium. This is due to the significant potential for digital payments and the requirement for multi-fold penetration from its current state.

TPAPs often collaborate with banks in order to attract users and handle their payments at the back end. According to a source from last month, the NPCI intends to urge its Reserve Bank to adopt the earlier start of December 31, 2023, for setting a 30 percent volume ceiling on players. It should be emphasized that there is now no volume cap, which results in Google Pay or PhonePe making up about 80% of the total market share.