Google, Walmart unhappy with India’s move to limit digital payment players

By Rahul Vaimal, Associate Editor
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Google, the US-based global tech giant, criticized India’s decision to cap the share of transactions that can be accounted for by some companies within the country’s digital payments space, saying it would inhibit the flourishing digital payments economy of the nation.

Google’s criticism came after the National Payments Corp of India (NPCI) recently said that third-party payment apps would not be permitted to process more than 30 percent of the total volume of transactions on the state-backed United Payments Interface (UPI) framework, which facilitates seamless peer-to-peer money transfers from, 1 January.

The move is likely to halt the growth of Facebook (Facebook Pay), Google (Google Pay) and Walmart (PhonePe) payment services, while boosting the likes of Ambani-owned Reliance’s Jio Payments Bank and SoftBank-backed Paytm, which are armed with bank permits.

According to NPCI, in October alone more than 2.07 billion UPI transactions were processed, with Walmart’s PhonePe accounting for just over 40 percent of those transactions. Google Pay was a near second with competitors including Paytm and dozens of others sharing the remaining 20 percent share.

Companies like PhonePe and Google, which already exceed the specified cap of NPCI, will get two years to comply with the new rules.

Indian Vs. foreign companies?

“This announcement has come as a surprise and has implications for hundreds of millions of users who use UPI for their daily payments and could impact the further adoption of UPI and the end goal of financial inclusion,” Sajith Sivanandan, Business Head at Google Pay, India, said in a statement.

The new caps do not apply to Reliance’s Jio Payments Bank, or to Paytm, which have niche banking licences and do not fall into the “third-party apps” category.

“This plays to the whole theory of foreign players versus Indian, at some level,” said a senior executive at a digital payments company. “Why could the NPCI not say the cap was for all players, why just the third-party app providers?”

A spokesman for Paytm said that the NPCI had taken the right efforts to enhance the UPI system. “The transaction volume cap put on various payments apps will make sure that NPCI has de-risked and diversified the UPI platform,” he said.

PhonePe is committed to ensuring that NPCI’s new rule does not disrupt services for its customers, founder and CEO Sameer Nigam said. NPCI and Reliance did not offer any comments.

The new rules came as NPCI finally gave Facebook approval to launch WhatsApp payments in India, clearing a small rollout of the service for 20 million people.

Although Facebook’s long-delayed approval is a relief, the restricted rollout thwarts WhatsApp’s expansion into payments with over 400 million users in its largest market.
Still, the US-based business welcomed the agreement stating that the combination of WhatsApp and UPI would improve the country’s rural involvement in the digital economy.

Healthy competition

The step by NPCI to cap transactions for each third-party payment provider would encourage healthy competition, said Ram Rastogi, a digital payments strategist and former NPCI executive.

“If just two technology service providers (PhonePe and Google Pay) are capturing about 80% of the market share then it poses systemic risks and NPCI’s move to put a limit is aimed at correcting that,” Mr. Rastogi said.

The decision to restrict certain players comes at a time when Google is already under intense scrutiny in India, where it faces at least four significant antitrust challenges.
It is also anticipated that the restrictions will help regulators limit any future risks to cybersecurity.

“It is important that there is more competition, which makes the field less vulnerable and leads to better controls,” said Abizer Diwanji, Head of Financial Services for Ernst & Young (EY), the professional services network, in India.