Google and Walmart have a new challenge ahead of them as they race to expand the reach of their payment apps in India - they can't grow beyond a limit.
The National Payments Corporation of India (NPCI), the entity that operates the popular UPI payment infrastructure, said Thursday evening that it will apply a cap to ensure that no single payment app processes more than 30% of UPI transactions in a month.
The paying agency said the move is aimed at addressing "risks" and "protecting the UPI ecosystem as it expands." The change will take effect in January 2021.
UPI is a payment infrastructure built by large banks in India and backed by the Indian government. In recent years, it has become the most popular digital payment method in the country.
The 30% limit will be calculated based on the total volume of UPI transactions processed in the previous three months, he added.
The move, described by an industry executive as the craziest thing they've heard in India in months, will have a serious impact on Google and Walmart. whose respective apps already process over 35% of UPI transactions each.
In fact, Walmart's PhonePe processed more than 40% of roughly 2 billion transactions on the UPI network last month.
It's unclear how any payment app will respect this limit. Let's assume PhonePe or Google Pay have already processed around 650 million transactions in three weeks. Would it just turn off UPI payments on their app for the rest of the month?
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