Walmart Inc. (NYSE:WMT) and Google (NASDAQ:GOOGL) are facing a new challenge in India in their race to enhance the reach of their payments apps. The companies face strict limits on their growth in the payment sector following measures imposed by the National payments Corporation of India (NPCI).
NPCI introduces a limit on UPI transactions
On Thursday, the NPCI that operates popular UPI payments infrastructure in India said it will limit payment apps. According to the NPCI, no single payment app will be allowed to process over 30% of UPI transactions. The organization controlled by the largest banks in India and backed by the government said that the limit seeks to address risks and protect the UPI ecosystem as it grows. The UPI payment system has become a popular online payment system in India in recent years.
The newly minted limit will pose a challenge to Walmart and Google’s growth who are top players in the payments sector in India. Currently, they handle 80%of UPI transactions in the country. The change will come into effect on January 2021, but PhonePe and Google Pay will have two years to conform to the change in a phased manner. Also, The NPCI has approved WhatsApp’s application to bring its payment service to the country.
Walmart and Google control 80% of UPI transactions
The NPCI will calculate the 30% cap based on the previous quarter’s total UPI transaction volume. Google and Walmart will be affected severely by the move that an industry executive has described as absurd. Their respective apps currently process around 35% of UPI transactions each in the country. For instance, last month, Walmart’s PhonePe processed over 40%, which is around 2 billion transactions on the UPI network, while Google completed 38% of the UPI transactions.
Google Pay’s business head and managing director Sajith Sivandan said that the announcement was surprising. He said that digital payments in the country are still in the infancy stage, and any form of intervention at this stage should be made to accelerate innovation and consumer choice.