The National Payments Corporation of India (NPCI), the governing body overseeing the country’s widely used Unified Payments Interface (UPI) mobile payment system, is set to engage with various fintech startups this month to develop a strategy to address the growing market dominance of PhonePe and Google Pay in the UPI ecosystem.

NPCI executives plan to meet with representatives from CRED, Flipkart, Fampay and Amazon among other players to discuss their key initiatives aimed at boosting UPI transactions on their respective apps and to understand the assistance they require, people familiar with the matter told TechCrunch.

UPI, built by a coalition of Indian banks, has become the most popular way Indians transact online, processing over 10 billion transactions monthly.

The new meetings are part of an increasing effort to address concerns raised by lawmakers and industry players regarding the market share concentration of Google Pay and PhonePe, which together account for nearly 86% of UPI transactions by volume, up from 82.5% at the end of December. Walmart owns more than three-fourths of PhonePe.

Paytm, the third-largest UPI player, has seen its market share decline to 9.1% by the end of March, down from 13% at the end of 2023, following a clampdown by the Reserve Bank of India (RBI).

An overview of India’s UPI ecosystem. (Image: Macquarie)

The conversation follows the central bank expressing “displeasure” to the NPCI over the growing duopoly in the payments space, a person familiar with the matter said. An NPCI spokesperson declined to comment.

In February, a parliamentary panel in India urged the government to support the growth of domestic fintech players that can offer alternatives to the Walmart-backed PhonePe and Google Pay apps.

The NPCI has long advocated for limiting the market share of individual companies participating in the UPI ecosystem to 30%. However, it has extended the deadline for firms to comply with this directive to the end of December 2024. The organization faces a unique challenge in enforcing this directive: It believes that it currently lacks a technical mechanism to do so, TechCrunch previously reported.

The RBI is also weighing an incentive plan to create a more favorable competitive field for emerging UPI players, another person familiar with the matter said. Indian daily Economic Times separately reported Wednesday that the NPCI is encouraging fintech companies to offer incentives to their users, promoting the use of their respective apps for making UPI transactions.