As WhatsApp Pay goes live, India brings new rule to limit use of Google Pay, PhonePe and other UPI apps

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A day before the National Payments Corporation of India (NPCI) approved WhatsApp Pay in a limited way, for now it is only allowed to have 20 million UPI users in India the nodal agency for retail payment systems issued a rule that would have an impact on large payment apps like Google Pay and PhonePe. In a press release, NPCI said the third-party app-free portion of the UPI payment system would be allowed to execute more than 30% of all UPI transactions. The transaction volume will be measured for the previous three months on an ongoing basis and the rule will come into effect from 1 January 2021.

The new rule comes the day the market sees a new competitor, WhatsApp Pay. What kind of impact the new rule will have on the market in the long term cannot be ascertained right now, but in the short term it is likely to affect Google Pay and PhonePe, which are popular and reportedly carry up to 80 percent of all. UPI transactions.

“With UPI reaching 2 billion transactions per month and with potential for future growth, (NPCI) has issued a limit of 30% of the total volume of transactions processed in UPI, applicable to all third-party app providers ( TPAP) “, said NPCI. “This will take effect from January 1, 2021. It will help address risks and protect the UPI ecosystem as it expands further.”

While NPCI says limit transactions for third-party apps will create a more competitive market, there appear to be some nuances involved. The rule will only affect apps like Google Pay that are not part of the banking network. Apps like Paytm, since they have a banking license, are not considered TPAP so they won’t be covered by it, although they too can carry out UPI transactions.

Google said the announcement came as a surprise. “Digital payments in India are still in their infancy and any action at this point should be done in order to accelerate consumer choice and innovation,” said Sajith Sivanandan, Head of Business, Google Pay and Next Billion User Initiatives. India. “This announcement came as a surprise and has implications for hundreds of millions of users who use UPI for their daily payments and could have an impact on the further adoption of UPI and the ultimate goal of financial inclusion.”

Incidentally, the announcement from the NPCI came a day before WhatsApp got permission to start its payment service in India. The authorization for WhatsApp Payment, which has been blocked for about three years, comes a few months later Facebook, which owns WhatsApp, has invested $ 5.7 billion in Jio Platforms.

Announcing the investment on April 21, Facebook had hinted that the collaboration would help her bring WhatsApp Payment to India. “By combining JioMart, Jio’s small business initiative, with the power of WhatsApp, we can enable people to connect with businesses, shop and ultimately purchase products in a seamless mobile experience.” Facebook he had noted in a statement.

WhatsApp will also use UPI to offer its payment services to users and to use the payment gateway which is working with five banks in India, including ICICI Bank, HDFC Bank, Axis Bank, State Bank of India and Jio Payments Bank.

NPCI, the nodal agency for India’s retail payment system, said no third party will be allowed to execute more than 30% of all UPI transactions. The move is likely to hit Google Pay and Phone Pe.

News Underline:

  • NPCI says third-party payment apps cannot perform more than 30% of all UPI transactions.
  • The move will help keep the market competitive, NPCI says.
  • The 30% limit is likely to hit Google Pay and PhonePe.

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