In a significant development for India’s digital payment ecosystem, the National Payments Corporation of India (NPCI) approved 20 new third-party Unified Payments Interface (UPI) applications in 2024. This marks the highest number of approvals in a single year since UPI’s inception in 2016. The surge in approvals underscores a robust interest from financial technology (fintech) firms, as the payments landscape evolves to integrate innovative credit-linked solutions.

Record Approvals Reflect Fintech Boom

The number of third-party application provider (TPAP) approvals has seen a notable uptick compared to previous years. In 2022 and 2023, NPCI granted only three and four approvals, respectively. The leap to 20 approvals in 2024 highlights a renewed push to expand the UPI ecosystem and cater to diverse user demands. This growth aligns with broader trends in fintech, such as the introduction of UPI-linked credit cards and pre-approved credit lines, which have made UPI a more versatile platform.

Sustained Interest Despite Challenges

Despite the zero merchant discount rate (MDR) regime on UPI transactions, which poses a challenge to profitability, interest in becoming a TPAP remains high. NPCI Managing Director and CEO Dilip Asbe revealed in October that approximately 50 entities had expressed a desire to obtain TPAP approvals. This enthusiasm reflects confidence in the long-term potential of UPI as a cornerstone of India’s digital economy.

Market Concentration Continues

While the growing number of UPI apps signals increased competition, the market remains dominated by two major players—Google Pay and PhonePe. These apps command the lion’s share of UPI transactions, benefiting from early adoption, brand trust, and extensive user bases. The entry of new players may lead to innovative offerings, but breaking the stronghold of the top two apps will likely be an uphill battle.

Outlook for UPI in 2024 and Beyond

The rapid expansion of TPAPs in 2024 could pave the way for a more competitive and innovative UPI ecosystem. As fintech companies experiment with credit integrations and other value-added services, the landscape is set to become more dynamic. However, the success of these initiatives will hinge on regulatory support, user adoption, and the ability to differentiate in a crowded market.

With UPI continuing to redefine digital payments in India, the developments in 2024 highlight both opportunities and challenges in sustaining growth and fostering innovation in this critical sector.

Input: ( Digital News )