UPI mkt share cap not a good idea: PhonePe

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Digbijay Mishra | TNN
Bengaluru: Regulators eventually just have to reverse the proposal of capping market share on the Unified Payments Interface (UPI) in its current form by individual third-party payments apps. That is because it would not make sense for companies to invest further if they get penalised for having more customers, especially when it doesn’t happen with any other banking products, said PhonePe’s co-founder and CEO Sameer Nigam.
Walmart-owned PhonePe is the second-largest UPI app with a 35% market share after Google Pay. Nigam’s comments, during an exclusive interview to TOI, come at a time when the National Payments Corporation of India (NPCI) is working on the proposal to limit the market share an individual app can have.
The first-year limit for the maximum share would be 50% as of March 2021. None of the leading UPI apps are near the mark yet, but it has been a pressing issue with the steady rise in UPI payments accelerated by the pandemic.
In August, UPI saw 1.6 billion payments and it’s expected to grow further this year.
The long-pending entry of WhatsApp Pay could accelerate that.
“With zero merchant discount rate, or MDR, a lot of smaller players are walking away to Visa, Mastercard or e-wallets. The only people left behind here, ironically, are those who have an appetite to play the long game. Why would anyone play in a game when you know that leadership of the category is going to get you punished? I have never seen this in my life. RuPay, Visa, Mastercard, e-wallets, IMPS, banking or banks on UPI don’t have it (market share caps),” said Nigam.
According to him, PhonePe is already bound by multiple local regulations, including localisation and audits.
“If you are fully compliant, why are the rules different just because you are the application player? The whole idea of UPI was an open application programming interface (API) architecture,” Nigam added.
NPCI, which manages UPI, hasn’t yet told the top players what the criteria would be for triggering a limit on market share and what further steps will be followed, in case an app surpasses the limit.
According to early proposals, the market share limit would gradually be lowered to 30% from 2023 onwards.
“They will have to figure out an ingenious way to implement it. Should I be worried about my IPL campaign taking off and I can get punished with no new customer acquisition? I don’t think that’s a good way to think about it,” he added.
Meanwhile, the ongoing pandemic has also accelerated its break-even timeline by one year to 2022-23 as digital payments continue to soar. PhonePe has started seeing revenues from its financial services business (mutual funds, insurance, gold) and super-app platform — which hosts 220 apps across shopping, food, travel and other sectors. The company clocked 660 million transactions last month with a current run-rate of around 700 million transactions for September, with 70% payments from non-tier I cities.
“Hopefully, the timeline for break-even gets accelerated by a year. Whether we become profitable or keep investing for further growth or expand in new dimension, that’s still a discussion with the board,” Nigam said. He added the overall climate in payments business has improved with PhonePe’s monthly burn going down, while it has a steady line of capital coming in from parent Flipkart, owned by US-based Walmart.



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