The case for New Umbrella Entities to counter UPI’s foreign-owned duopoly


Dr Srinath Sridharan

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Dr Srinath Sridharan

10 reads

While the RBI has hit the brakes on its push for new umbrella entities, or NUEs, that would compete with the NPCI, the foreign stranglehold over the latter’s wildly popular UPI payments space could force it to reconsider its stance.

May 06, 2024


Key Takeaways

  • In 2019, the RBI pushed the idea of New Umbrella Entities to diversify the payment ecosystem and reduce reliance on UPI
  • However, despite applications from various consortiums, no NUE licenses have been granted
  • Now, with fears about a foreign-owned duopoly in UPI growing, the RBI may need to revisit the need for NUEs once more. NUEs could enhance competition, foster innovation, and mitigate concentration risks in the payment sector.
  • However, regulatory oversight and systemic stability remain key considerations in entrusting critical payment systems to private entities

It’s no overstatement to say that the Unified Payments Interface (UPI)—India’s real-time payments system—is arguably the biggest and most impactful disruption in the global field of digital payments in decades. Indeed, since its advent, UPI’s ability to scale and appeal to the diverse and varied cohorts that make up the Indian market has made it synonymous with payments and a vital component of the country’s financial ecosystem.

For all its success, however, concerns around the UPI ecosystem are starting to bubble over. Even before the Reserve Bank of India’s (RBI) recent supervisory action against Paytm Payments Bank for non-compliance, the dominance of two US-owned players—Walmart’s PhonePe and Google Pay—in the Indian digital payment landscape has become harder to ignore.

On average, these two entities control a staggering 80-85% of UPI volumes each month. Data from the National Payments Corporation of India—the umbrella organisation that developed and oversees UPI—shows that PhonePe held a substantial 46% share in UPI volumes, followed closely by Google Pay at 36%, with Paytm Payments Bank trailing at 13%.

This concentration of market power among a few foreign brands raises fears of a duopoly or even a triopoly scenario emerging within the Indian payment space, prompting worries about potential monopolistic practices and India's digital sovereignty.

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