The recent report on local fintech players
- Recently, the Standing Committee on Communications and Information Technology released a report highlighting the dominance of fintech apps owned by foreign entities in the Indian ecosystem.
Need for Effective Regulation
- With the increasing use of digital platforms for payments in India, the committee emphasises the importance of effective regulation.
- It suggests that regulatory bodies like the RBI and NPCI would find it more feasible to regulate local apps compared to foreign ones, which operate in multiple jurisdictions.
Market Share and Transactions
- Apps like PhonePe and Google Pay, backed by global corporations, lead the market in terms of volume, while BHIM UPI, owned by NPCI, lags behind significantly.
- PhonePe commands the leading market share in volume terms, followed by Google Pay, at 46.91% and 36.39% respectively.
- NCPI’s BHIM UPI’s market share (in terms of volume) stands at a mere 0.22%.
- The report indicates the dominance of foreign-owned apps in facilitating digital transactions in India.
Regulatory Measures
- The report aligns with the NPCI's directive to cap the volume of transactions (30%) facilitated by third-party apps using UPI.
- This measure aims to protect the UPI ecosystem and promote market equilibrium by limiting the dominance of individual players.
Concerns about Fraud
- The Committee has noted instances of fintech platforms being used for money laundering and scams.
- The fraud to sales ratio has largely remained around 0.0015%.
- The percentage of users affected by UPI frauds stood at 0.0189%.
Future Outlook
- Experts suggest that a balanced mix of local and foreign fintech players is necessary for the Indian ecosystem.
- While local players have an advantage in understanding the market and regulatory landscape, foreign players bring in new technologies and global connectivity.
Revenue Growth and Consumer Behaviour
- The McKinsey Global Payments Report indicates that instant payments, such as UPI, may contribute less than 10% of future revenue growth as no fees are charged for transactions.
- However, the report acknowledges the benefits of digital payments, including enhanced security, increased access to digital commerce channels, and reduced costs associated with managing cash transactions.