parliamentary panel foreign upi apps: Parliamentary panel flags dominance of foreign-owned UPI apps, urges promotion of local fintechs

Flagging the high market share of foreign-owned fintech apps in unified payments interface (UPI) such as Walmart-owned PhonePe and Google Pay, the parliamentary standing committee on communications and information technology has recommended the promotion of local fintech apps.

The issue of concentration of UPI market share has been taken up by the National Payments Corporation of India (NPCI), which proposed imposing a ceiling of 30% share in UPI volumes after December 31, 2024.

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ET reported on February 5 that following the Reserve Bank of India’s action against Paytm Payments Bank, the debate on the proposal for a ceiling of 30% market share by volume for UPI apps was reignited.

“The committee notes that fintech companies, apps and platforms such as PhonePe and Google Pay owned by foreign entities dominate the Indian fintech sector. The market share in terms of volume of key players of UPI Google pay and PhonePe was 36.39% and 46.91% respectively in October-November 2023,” the house panel said in its report tabled in Parliament on Thursday.

UPI market share by volumeETtech

On February 6, ET reported that PhonePe witnessed an increase of at least 15-20% in its user base over the preceding few days on the back of the ongoing crisis at rival Paytm and panic among consumers about the fate of Paytm Payment Bank-issued UPI accounts.

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The parliamentary committee also noted that “regulation of Indian fintech apps would be more feasible” for RBI and NPCI compared to foreign entities that are present in multiple jurisdictions.

Several fintech companies are also being used for money laundering, it noted.

“In this context, the Committee recommends that there should be focus on promotion of local Indian players in the fintech universe. Indigenously-developed BHIM UPI is a good example of it. However, its share in the UPI market is very low,” it noted.

“The Committee opines that regulation of Indian fintech apps would be more feasible for the regulatory bodies such as RBI and NPCI in comparison to foreign entities which have multiple jurisdictions. As India, focusing on ‘Make in India’ in other sectors, the Committee is of the opinion that local entities are to be promoted in the fintech sector,” it added.