By Manas Kumar Chaudhuri & Pranjal Prateek
The Unified Payments Interface (UPI) has transformed how day-to-day money transactions take place in India, primarily driven by the enabling digital payments ecosystem that has allowed private players/ enterprises to invest, innovate, and thrive by utilizing the digital infrastructure built on the UPI rails. UPI’s open architecture has propelled the rise of Fintech startups, driving the use of mobile wallets, and peer-to-peer (P2P) payments, and getting millions of merchants onboarded for accepting digital payments.
Digital payments have penetrated and reached every nook and corner of India. This comes at a significant cost of capital deployed with the majority being Foreign Direct Investment (FDI). With significant investment in this space, India has leapfrogged the traditional stages of development in digital payments, and in less than a decade achieved what would have easily taken a few decades for a large country like ours.
There is no doubt that UPI has simplified e-payments and positively impacted and speeded up the financial inclusion program. The testament to such an enabling environment has been the meteoric rise in adoption of UPI-based payments in about 7 years, where the monthly volume of transactions has grown multiple-fold to over 5 (five) billion transactions, with monthly value breaching INR 20 lakh crore in August 2024.
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For the UPI regime to remain on course, players must be allowed to invest capital and constantly innovate without any risk of such investments being junked by the introduction of any restrictive policy. This is where the role of the National Payments Corporation of India (NPCI) comes into play. NPCI must truly understand its role as envisioned, which is to ensure that the network remains resilient, robust, and open for new entrants and that it allows innovation to thrive by leveraging the public-private partnership.
A market share cap is the antithesis to innovation and fair competition, and the usefulness of caps as a measure to keep markets contestable has been long debunked. Not in the least, NPCI is likely to face questions on its legal competence to intervene with 30% market cap since it is a not-for-profit organization or a quasi-regulator with questionable statutory backing for such an action.
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