In a recent development, the parliamentary standing committee on communications and information technology has recommended the government to prioritize the promotion of local Indian players in the fintech sector. This suggestion comes after the Ministry of Electronics and Information Technology (MeitY) revealed that major foreign-owned entities, including Walmart-owned PhonePe and Google Pay, dominate a significant portion, accounting for 83.3% of the UPI market in India.
The committee’s report, titled ‘Digital Payment and Online Security Measures for Data Protection’, emphasizes the need to bolster indigenous fintech solutions, citing the success of BHIM UPI as an example. Despite its capabilities, BHIM UPI’s market share remains relatively low. The committee asserts that regulating Indian fintech apps would be more manageable for regulatory bodies like the RBI and NPCI compared to dealing with foreign entities operating across multiple jurisdictions. Echoing the ‘Make in India’ initiative, the committee emphasizes the importance of promoting local entities within the fintech sector.
MeitY’s data reveals PhonePe’s dominance with 46.91% of UPI transactions by volume, closely followed by Google Pay at 36.39%. Notably, the once-prominent Indian player, Paytm, accounts for 12.32% of transactions, indicating a declining market share. Other homegrown players like Cred, Amazon Pay, BHIM, and WhatsApp Pay lag significantly behind in terms of transaction volume.
Despite UPI transactions comprising 73.5% of all digital payments by volume in FY23, they only account for 6.668% of the total transaction value. This figure has steadily risen from 0.536% in FY19. In contrast, RTGS and NEFT transactions, though less in volume, contribute significantly to the transaction value, with RTGS leading at 69.47% followed by NEFT at 16.16%.
Regarding fraud via UPI, the Ministry of Home Affairs (MHA) reports a consistent fraud-to-sales ratio of 0.0016% between FY22 and FY24 (until September 2023). However, the absolute number of UPI frauds has increased, with 70,056 frauds worth ₹142.52 crore reported in FY24 compared to 108,509 frauds worth ₹130.95 crore in FY22.
This push to promote local fintech players aligns with the government’s focus on self-reliance and indigenous innovation. By nurturing homegrown talent and solutions, India aims to assert its sovereignty in the rapidly evolving digital financial landscape.
