NPCI to cap transaction volumes of UPI players

November 5, 2020

BENGALURU : Retail payments organisation, National Payments Corporation of India (NPCI), which operates the Unified Payments Infrastructure (UPI), in the country, on Thursday said that it will issue a cap of 30% on transaction volume clocked by a player starting 2021.
The cap of 30% will be calculated on the total volume of transactions processed in UPI during the preceding three months.
The existing player or third party app providers (TPAPs) exceeding the specified cap, will have a period of two years from January 2021, to comply with the same in a phased manner.

According to NPCI, the decision has been taken in line to address the risks and protect the UPI ecosystem from frauds as it scales further.

NPCI first proposed the plan to limit the number or value of transactions in August 2019. It then said that payment apps will hit the limit if they exceed 50% of all UPI transactions in the first year of the implementation of the rules, 40% in the second year and 33% from third year onwards.

NPCI will trigger warnings to payment apps and sponsor banks if they are near the threshold.
In case of a breach of the mandated threshold, NPCI will start penalizing payment firms and banks, and ask them to stop onboarding new customers with immediate effect, Mint had reported earlier.
However, individuals aware of the discussions, said that NPCI is expected to issue new guidelines on market capping in the coming weeks, outlining on the workings of this decision.

The move is expected to hurt payment firms including search behemoth Google’s, GPay (41%) payments app, Flipkart-owned PhonePe (42%) which command a total of 83% market share as per October-figures, forcing them to limit their dominance in the UPI-payments segment.