To get a share of India’s fast-growing online payments ecosystem some of the largest companies in the world are teaming up with local conglomerates. For National Umbrella Entity licenses which allow firms to build a real-time payment platform for India for which till now four consortiums have submitted their applications.
Silicon Valley giants Facebook and Google, and India’s largest businesses like Reliance Industries, Tata Group, HDFC Bank, and ICIC Bank are the companies that are involved in consortiums.
National Umbrella Entity licenses applications were invited in August 2020 by the Reserve Bank of India. The countries only with instant digital retail payment network will work with the new platforms, the United Payments Interface
UPI, is a payment model used by many Indians, from paying for groceries to applying for shares in an IPO, which is owned by a group of Indian banks. Because of the convenience of UPI, the value of transaction done using this mode was Rs 6,950 in the financial year 2017 to Rs 41 lakh crore in the financial year 2021. The factors responsible for the growth of UPI transactions are the penetration of smartphones, cheap internet data, and the easy method of transaction that UPI payments are providing. In 2016 the demonetization of Rs500 and Rs 1000 notes gave a massive push to online payment, which further continued with the spread of Covid-19.
Shivani Gupta, senior analyst –banking and payments at the data analytics and consulting firm Global Data said because of the rising digital payments, granting National Umbrella Entity license to private players will ease the payment settlement burden on UPI and stimulate competition. By building payment apps that facilitate transactions via UPI has benefitted several global companies from the popularity of UPI. Google launched the Google Pay app in September 2017, Walmart acquired Phone pay in May 2018 and WhatsApp entered into digital payment space in February 2018.
According to the guidelines of the National Payment Corporation of India, the promoter of UPI each fintech player is restricted to have only 30% of the market share on the UPI platform. The company is not allowed to add new users if a company crosses that threshold for three consecutive months.
Though the guidelines have been put to discourage the monopolization of the UPI platform, it also restricts the growth of companies mainly like Phone Pe and Google Pay, which dominate the space.
According to Aarushi Chawla, the research analyst at Counterpoint Research ‘’Players like Jio, Amazon who is already in e-commerce would require their unique digital payment system’’ she also said that the players will be allowed to charge fees for online transaction, and this growth opportunity will also act as a guiding light for the foreign players along with the domestic players.
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