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The new market share cap for digital payment companies offering unified payments interface (UPI) services may impact the adoption of UPI, a top executive at Google Pay said. On Thursday, the National Payments Corp. of India (NPCI) had capped the share at 30% for all UPI operators, while allowing the entry of WhatsApp Pay.

Google Pay, through a statement, hinted that the market cap intervention should be reconsidered as Indian consumers need to have a choice for making digital payments.

“Digital payments in India is still in its infancy, and any interventions at this point should be made with a view to accelerating consumer choice and innovation. A choice-based and open model is key to drive this momentum. This announcement has come as a surprise and has implications for millions who use UPI for their daily payments and could impact the further adoption of UPI and the end goal of financial inclusion," said Sajith Sivanandan, business head, Google Pay and Next Billion User initiatives, India.

WhatsApp Pay is expected to expand the adoption of UPI by both individual users and small and medium businesses (SMBs), who use the WhatsApp Business app. It will also now allow businesses to complete digital transactions on its platform. However, this may be at the cost of rivals, who may lose customers to the new entrant. Google Pay and Flipkart-owned PhonePe now lead the UPI market, with each holding over a 40% share.

WhatsApp will enable the service in 10 regional languages and has tied up with ICICI Bank, HDFC Bank, Axis Bank, SBI and Jio Payments Bank.

Meanwhile, the NPCI decision on market cap has left payment firms confused.

“WhatsApp entering payments may tilt the market and help all other players get under the required market cap of 30%. With no cap on the value of transactions, players might start focusing on larger ticket sizes of payments. But the transition will be seamless. The challenge, however, will remain on how players reduce market share now, without affecting the experience of UPI payments," said Bhavik Hathi, MD of Alvarez & Marsal.

PhonePe founder Sameer Nigam said, “We want to assure all our customers and merchants that there is absolutely no risk of any UPI transactions on PhonePe failing."

Two executives at payment firms said the market share cap can give a certain edge to WhatsApp, which is the ‘default’ messaging app for over 400 million Indians.

“In case a UPI payment fails because a service provider has reached the threshold, rather than downloading another app, users will be keen to switch to WhatsApp, which is already installed on their phone," said an executive, asking not to be named.

Spokespersons for Paytm and Amazon Pay did not respond to Mint’s queries.

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