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[Shikhar is a 3rd Year B.A., LL.B. (Hons.) student at the National Law School of India University, Bangalore.]


The United Payments Interface (‘UPI’) was introduced to the Indian market in April 2016 with the objective of amalgamating various banking functions into a single mobile application offered by banks. The application would be the one-stop destination for sending/receiving money/payments, tracking transaction history, and checking account balances. Eventually, this facility was extended by Third Party Application Providers (TPAPs) such as Google Pay (GPay), PhonePe, and Paytm which resulted in bank-offered UPI services losing popularity. TPAPs amassed popularity at an alarming rate through their ability to reduce consumer pain-points by allowing convenient, cashless payments with a simple scan – similar to what PayPal achieved in the US by doing away with inputting personal information for transactions.

However, the burgeoning growth of TPAPs evidenced by the exponential uptrend in volume and value of transactions has raised serious antitrust concerns with PhonePe, GPay and Paytm dominating approximately 90% of the UPI market (‘dominant players’). The National Payments Corporation of India (NPCI) responded by requiring TPAPs to comply with a 30% market share limit/volume cap within 2 years. However, while nearing the deadline in late-2022, an extension was granted until 2024 – an indication of NPCI’s inability to break the market consolidation of the big players. China is facing a similar market concentration problem in relation to its non-bank service providers wherein AliPay commands 55.4% of the mobile payments market followed by WeChat Pay at 38.5%. The regulators in China are approaching the situation with an iron hand by considering corrective action through suspension of services and breaking up services offered according to business types.

Drawbacks of the Current De-Boarding Approach

The NPCI’s mandate of the 30% market cap would require that once the deadline exhausts, the immediate reflex to dilute market concentration would be to deny UPI services offered by dominant players to a chunk of customers through de-boarding. However, de-boarding of customers would result in inconveniencing a large number of the UPI-utilising public and slowing down the digital economy, which heavily relies on quick and convenient transfer of funds. It has also been recommended that smaller players should be given a considerable push to increase their market shares. This proposition hasn’t been supplied with any indication of incentives or policies that the NPCI would introduce to encourage smaller players to clutch a larger market share.

The inability of NPCI to dent the market share of the dominant players is a testament to the chokehold that they have on the UPI market and by extension, the Indian digital economy. This is, in some regards, reminiscent of AT&T in the US which in the early 1980s was a telecommunications empire. When confronted with an antitrust charge, they took the defence of national security with no lesser than the Department of Defence supplying probative value to the claim. However, the proposition that military lines of communication would be jeopardized if AT&T were subject to a break-up into smaller components was not compelling enough to convince the courtroom to refrain from initiating antitrust action. In a relatively recent instance, the slew of antitrust action against Big Tech in the US compelled Facebook CEO, Mark Zuckerberg to testify before the US Congress. There he argued that the dominance of Facebook was required as it was the only means to combat China’s global market dominance – that Facebook is essential to retaining “American financial leadership” in the global market.

Having established a narrative of dependency, PhonePe CEO’s statement bears some resemblance to the aforementioned scenarios - “At PhonePe’s scale, to reduce our UPI market share to 30 percent, we would be forced to deny UPI payment services to crores of Indians, and that would be totally detrimental to the incredible Indian digital payments growth story over recent years”.

The NPCI, unlike in the aforementioned scenarios, is constrained from taking major corrective action (like that of de-boarding) owing to the risk of a chilling effect on the digital payments ecosystem and the Indian digital economy as a whole. In addition, the CEO also shifted the burden, to wit: “NPCI has to tell us what we have to change” – thereby placing the onus on NPCI for the way forward towards dilution. Seeing as the current approaches fall short, this article will put forth 2 alternative proposals to level-down market dominance – the service break-up approach and antitrust investigations against bias creation.

Service Break-Up Approach

Taking a look at the dominant players in the market, a few commonalities become apparent – they behave as ‘super-apps’ by becoming the one-stop destination for many e-commerce functions. The PhonePe app extends facilities to customers such as recharge (phone, DTH), utilities (rent payment, piped gas, water), purchases of subscriptions/brand vouchers, and other financial services (loan repayment, insurance, credit card payments). GPay and Paytm extend many of the same facilities. Paytm also provides facilities such as equity and options trading (Paytm Money), and also has a platform for games (rummy, poker) – all in one app. These show a derogation from the envisaged fundamental purpose of TPAPs i.e., digital payments through UPI.

The approach that these TPAPs are adopting is that of bundling - Google is a popular example of the same, with much of the thirty different business activities they undertake not being related to search (their primary product). Bundling is when a seller offers a second product without charge in addition to their primary product. While the bundling of products creates a tight interaction of products and services thereby making it convenient for consumers, it becomes an antitrust concern when it is used to create or cement a monopoly position. Drawing from this rationale, corrective action is being taken in response to the creation of super-app platforms by the dominant players in China.

With a barrage of antitrust action ranging from suspension of mergers to levying of fines close to $3.7bn, the State Administration for Market Regulation (SAMR) in China, has been coming down heavily on companies abusing market dominance. Digital payments giants AliPay (Alibaba) and WeChat Pay (Tencent) who extend facilities such as payment of utility bills, taxi booking, and shopping thereby serving as super-apps, have particularly been subjected to the antitrust crackdown. The SAMR has required the payments duopoly of AliPay and WeChat Pay to dispense with the model where shopping and payments are exclusive to a single platform.

In the US context, Elizabeth Warren’s proposal to effectively regulate Big Tech was through the break-up approach. Some of the antitrust solutions proposed included the separation of Amazon’s ‘Basics’ business (Amazon’s private label brand) from the rest of Amazon, and splitting up Google’s advertising business from its search function business.

These break-up approaches on the basis of business type could be imported into the Indian antitrust environment, albeit with context-specific modifications. In the Indian UPI market, the dominant players bundling a large number of facilities pose entry barriers and/or prevent smaller players from capturing larger market shares, as hosting these facilities on a single platform could come at a cost to smaller players, making it unfeasible. This situation is tantamount to the entry barriers posed by Big Tech such as Google in the ad-tech space owing to the scale and scope of free services provided by them. Therefore, the NPCI could consider the break-up approach to level-down the market shares captured by the dominant players.

Antitrust Action against Bias Creation

Most e-commerce applications in India offer digital payments as a mode of payment, and often as the preferred mode of payment. Within the broad products offered under the digital payments umbrella including Net-Banking and Credit/Debit cards, UPI features as the preferred mode of payment. However, a concerning trend is noticeable, in that the dominant TPAPs are featured at the top of the payment method list. For instance, when adding a payment method for the recharge of Uber wallet, GPay and Amazon Pay (offered with cashback) feature prominently with another option for ‘UPI’ available with these options. When selecting the ‘UPI’ option, PhonePe, GPay Paytm, Amazon Pay, and BHIM feature prominently. ‘More UPI Apps’ is only the residuary option provided at the bottom of the list which would provide access to other UPI applications. This, as the article argues, is creating consumer bias.

Germany’s Federal Cartel Office, the Bundeskartellamt had recently initiated antitrust proceedings against PayPal (the most popular payment method in Germany) investigating their terms and conditions. One such term requires sellers to either not express preference for payment methods other than PayPal or to make its use more convenient for customers. A similar situation is noticed within the Indian UPI ecosystem where the dominant players are afforded the facility of being convenient to customers within e-commerce applications. Behavioural Economics (satisficing, in particular) would suggest that simplification strategies that reduce cognitive overload and facilitate decision-making so as to make it easier, quicker, and more convenient, could gather considerable purchase in the digital payments ecosystem. The facility of convenience being extended every time a customer makes a transaction can create long-term biases.

Therefore, the NPCI should consider the implications that satisficing has on the consolidation of market dominance. By placing an onus on e-commerce apps to actively avoid extensions of preferential facilities, dilution could be achieved. However, the extent of dilution cannot be forecasted and it could be argued that it is too late in the day to rein in the creation of bias in consumers. Nonetheless, regardless of the approach that the NPCI would consider deploying, the preferential facilities extended should raise serious antitrust concerns and prompt investigations accordingly.


In sum, this article dealt with the issue of UPI market consolidation through the service break-up approach and the proposal for antitrust action against bias creation. This article is limited in that it cannot forecast the extent of dilution that these proposals could have, thereby offering no guarantee as to their effectiveness. However, the proposed approaches have been supplied with international precedents of antitrust action against similar market consolidation. Therefore, the NPCI should study the way international antitrust regulators (particularly China) have deployed the service break-up approach, and also approach preference facilities extended to dominant players in much the same way Germany has – with appropriate antitrust action and investigations.

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2 comentários

Advaith Anand
Advaith Anand
01 de set. de 2023

Good job Chikoo!! Keep it up!!😀


Karthik Lal
Karthik Lal
01 de set. de 2023

Awesome work. Totally read and understood it.

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