India Raises Concerns Over Foreign Control of Payments System as Two Entities Dominate

India's digital payments face risks as 82% of UPI transactions are dominated by foreign-owned PhonePe and GPay, raising concerns over data sovereignty and national security. Experts call for a more diverse and competitive payments ecosystem.

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Rafia Tasleem
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India Raises Concerns Over Foreign Control of Payments System as Two Entities Dominate

India Raises Concerns Over Foreign Control of Payments System as Two Entities Dominate

India's digital payments landscape has undergone a significant transformation with the introduction of the Unified Payments Interface (UPI), enabling seamless transactions and access to public and private services through the Digital Public Infrastructure (DPI). However, the concentration of UPI transactions being dominated by two foreign-owned entities, Walmart's PhonePe and Google's GPay, has raised concerns among Indian authorities.

Together, PhonePe and GPay account for a staggering 82% of UPI transactions by volume and 88% by total value. This dominance poses risks of a single point of failure and systemic vulnerabilities, as previously flagged by the Reserve Bank of India (RBI) regarding the dangers of concentration in the retail payment system.

The National Payments Corporation of India (NPCI) has attempted to address this issue by introducing a volume cap on Third Party Application Providers (TPAPs) with more than 30% market share. However, the deadline for compliance has been extended, allowing the two largest players to further increase their dominance in the meantime.

Why this matters:

Experts argue that India cannot allow its crucial payments system to be controlled by foreign entities. The concentration of power in the hands of two foreign-owned apps exposes the country to potential risks and vulnerabilities. It is essential for India to ensure a more diverse and competitive landscape in its digital payments ecosystem.

The RBI has previously highlighted the need to address the concentration risks in the retail payment system. The central bank has emphasized the importance of promoting competition and innovation in the sector while ensuring the safety and security of transactions.

As India continues to embrace digital payments and financial inclusion, the government and regulatory bodies must take proactive measures to mitigate the risks associated with foreign control of its payments system. Striking a balance between fostering innovation and maintaining national interests will be crucial in shaping the future of India's digital economy.

The dominance of PhonePe and GPay in India's UPI transactions has raised significant concerns among experts and authorities. With 82% of transactions by volume and 88% by value controlled by these two foreign-owned entities, the risks of concentration and foreign control cannot be ignored. As India navigates the challenges of its digital payments landscape, ensuring a diverse, competitive, and secure ecosystem will be paramount for the country's financial stability and sovereignty.

Key Takeaways

  • UPI transactions dominated by 2 foreign-owned entities: PhonePe (82%) and GPay (88%)
  • Concentration risks and single point of failure concerns raised by RBI and authorities
  • NPCI introduced 30% volume cap on TPAPs, but deadline extended, allowing further dominance
  • Foreign control of India's payments system raises issues of data sovereignty, security, resilience
  • Need for diverse, competitive digital payments ecosystem to ensure financial stability and sovereignty