Paytm Remains Unaffected by Payments Body’s UPI Market Cap Move: Report

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Recently, Paytm Payments Bank said it supports market capping in UPI. (File)

New Delhi:

The National Payments Council of India (NPCI) is in talks with the Reserve Bank of India (RBI) to decide the fate of the proposed December 31, 2022 TUSEN for Unified Payments Interface (UPI) market cap hedging any third-party app provider up to 30 percent, according to multiple reports.

While the implementation of the proposed move would significantly reduce the market cap of some third-party online payment apps, it would not affect leading fintech company Paytm. This is because Paytm UPI is owned by Paytm Payments Bank Limited, an NPCI certified payment service provider and issuing bank for UPI transactions, and not a third party.

Paytm Payments Bank is an issuer and payment service provider in its own right along with an acquirer of UPI transactions on its own platform, making it the source and destination for all of its transactions. So it effectively serves the customer end-to-end in a transaction.

Recently, Paytm Payments Bank said it supports market cap in UPI.

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“We believe that the proposed implementation of UPI market capping will be immensely beneficial to the UPI ecosystem. This move by the NPCI will strengthen and democratize the growth of digital payments for the citizens, ending market concentration risk. This will make UPI evenly more accessible and enable further digital adoption,” a Paytm Payments Bank spokesperson said in a statement.

If the proposed UPI market cap goes into effect from December 31, 2022, it will be hugely beneficial to Paytm, which is currently third by UPI market cap. While UPI transactions incur no cost to the end user, it can help Paytm ramp up its customer acquisition, which is a critical aspect of its business model and revenue generation.

“Early and adopters and late majority users of any app are the most important user group as they ultimately aid in monetization. Third party UPI app providers are almost entering the flickering ends of lagging users. Assuming the final stage starts in another year, changes suggested by NPCI may not be relevant. PayTM will pass this change as their TPAP is exempt as it is managed by Paytm Payments Bank,” said Pooja Sondhi, director and chief operating officer (COO) at supplier of supply chain finance solutions Livfin.

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Paytm Payments Bank maintains its position as the largest UPI beneficiary bank in the country, with 1,614.03 million transactions recorded as of October 2022. It is also among the top 10 leading remitter banks in the country, according to the latest UPI statistics on the NPC website.

Currently, the UPI market is dominated by players such as Google Pay and PhonePe, with a combined market share of more than 80 percent. To avoid such concentration in the UPI market, the NPCI issued a guideline in 2020 to limit the share of transactions to 30 percent of the total volume of UPI transactions.

“Limiting the market share of individual UPI players to 30 percent could shake the duopoly of Google Pay and PhonePe and could lead to publicly traded fintech company Paytm gaining market share from its competitors thanks to the volume cap standard,” said Mohit Nigam. , Head – PMS of Hem Securities.

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“The statistics of the UPI ecosystem show that other players such as BHIM, Cred and Amazon Pay have very meager market share and therefore the network effect of Paytm could play to take an additional slice of the pie from the top two players ,” Nigam added. .

NPCI had given existing third-party app providers that exceed the limit two years to comply with the guideline. However, the big ones have failed to shrink their individual UPI market share and continue to exceed the 30 percent limit by a huge margin.

According to multiple reports, the NPCI is currently evaluating all options and no final decision has been made to further extend the TUSEN.

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