NPCI extends UPI market cap deadline, lifts WhatsApp Pay limits

The National Payments Corporation of India (NPCI) has decided to extend the market cap deadline for third-party application providers (TPAPs) operating on the UPI platform, offering a two-year reprieve. This move comes as a significant relief for dominant apps like PhonePe and Google Pay, which together control more than 80% of the market share for UPI transactions. The extension, which pushes the compliance deadline to December 31, 2026, was announced on December 31, 2024, in a circular issued by the Reserve Bank of India (RBI).

This development marks the second time NPCI has extended the timeline for TPAPs exceeding the 30% transaction volume cap that was originally set in November 2020. The cap was introduced to ensure a level playing field, avoid market concentration, and maintain the security of the UPI system as the digital payments sector continues to grow at a rapid pace. In 2024 alone, UPI transactions crossed 171 billion, marking a 45% growth compared to the previous year.

Under the new rules, WhatsApp Pay also sees a major boost, as the NPCI has lifted the user onboarding limit of 100 million users. WhatsApp Pay had previously faced restrictions on expanding its user base, but the removal of this cap opens the doors for wider adoption of its UPI-based payment services.

The extension of the compliance deadline reflects the difficulty in balancing the market, with PhonePe and Google Pay maintaining their dominance despite the entrance of new players. In 2024, new players like Navi, Super.money, and Fampay entered the top 10 UPI apps, yet their combined market share remains under 2%. PhonePe, with a 48% share, and Google Pay, with 37%, continue to dominate the market, making it challenging for smaller players to break into the space.

While the new deadline gives existing players more time to comply with the cap, NPCI remains optimistic about the future of competition in the UPI space. In recent months, several new entrants have received third-party application provider (TPAP) approval, with 20 companies being approved in 2024 alone, bringing the total to 40 since 2016.

Importantly, the market cap does not apply to bank apps, which continue to play a smaller role in UPI transactions. These apps partner with third-party platforms to facilitate UPI-based payments, with banks playing a key role in the underlying infrastructure of the system.

The extension of the market cap deadline signals that NPCI is working to ensure the continued stability and growth of India’s digital payments ecosystem, even as it fosters new competition. This strategic move is designed to give smaller players the time they need to gain traction while maintaining the dominance of the leading UPI platforms. NPCI's approach aligns with the broader goal of promoting digital financial inclusion and making India a global leader in digital payments.