PhonePe's and Google Pay's success ride on the back of UPI will soon hit a road
block as the National Payments Corporation of India (NPCI) is all set to introduce new guidelines for digital payment companies to minimise concentration and systemic risks in UPI.

One of the important provisions initiated by NPCI is to put a cap on the UPI market share of digital payment companies. This move directly impacts UPI-only players such as Walmart's Phonepe, Google Pay and to be launched Whatsapp Pay. Interestingly, Paytm is the only major player which is still backing its wallet success and cards besides UPI.

Starting April 2020, PhonePe and Google Pay will have to limit their marketshare to 33 per cent which eventually blocks their growth plans. Till now, they have been burning a lot of cash to gain the highest market share and this move comes as a major setback.

Interestingly, Morgan Stanley had recently referred Phonepe emerging as a major factor for a handsome upstick in Walmart share-prices. However, this new capping may affect the company's valuation jump and fundraising plans as it seeks $1 billion from Tiger Global, Tencent, DST Global, Softbank and others.

A senior banker said on anonymity, "This exhibits NPCI's raising concerns over the increasing security threats by non-banking payment companies. Phonepe will have to re-visit its business strategy for a possible fundraise at this stage."

Other industry veterans and experts have applauded NPCI's move and are of the opinion that this will secure the digital payments infrastructure in India.