India’s Unified Payments Interface (UPI) has often been hailed as one of the greatest fintech success stories in the world. It transformed how Indians pay, from street vendors to luxury stores, by making digital transactions instant, seamless, and free. But beneath the celebration lies a worrying reality—UPI’s extraordinary success is now concentrated in the hands of just two third-party apps that control over 80% of all transactions. This overwhelming dominance is not merely a matter of market share; it poses a “systemic concentration risk” that could shake the very foundations of India’s digital payment infrastructure.
The beauty of UPI was always in its openness—a government-backed, interoperable system that democratized digital payments and fostered competition. When it began, the idea was to allow banks and fintechs to innovate freely, offering users multiple platforms to transact effortlessly. But over time, this open field has turned into a near-monopoly, where two major players—PhonePe and Google Pay—account for the lion’s share of the market. Smaller players, including Paytm, Amazon Pay, and several bank-led apps, have struggled to retain relevance. What was once a diverse, competitive space is now dominated by a duopoly.
The problem with this concentration is not just about fairness; it’s about stability. When 80% of transactions are routed through two platforms, any technical failure, cyberattack, or regulatory disruption could paralyze India’s payment ecosystem overnight. This is no longer hypothetical—past outages have shown how dependent users and merchants have become on a handful of apps. A systemic failure at one end could ripple through the economy, affecting millions of daily transactions, from grocery payments to business transfers. In essence, India’s most successful financial innovation risks becoming its most vulnerable.
The duopoly also stifles innovation and competition. Smaller fintechs, no matter how promising, find it almost impossible to scale when user habits, merchant networks, and marketing budgets are monopolized by two giants. The entry barrier is too high, as these dominant players use their deep pockets to incentivize users and merchants, locking them into their ecosystems. As a result, new entrants—who could have brought better services, improved security, or niche innovations—are driven out before they can compete. In the long run, this weakens the overall fintech landscape, making it less resilient and less dynamic.
Regulators, including the Reserve Bank of India (RBI) and the National Payments Corporation of India (NPCI), have previously recognized this risk. NPCI had proposed a 30% cap on the market share of any single player in the UPI ecosystem, but implementation has been repeatedly delayed. Meanwhile, concentration has only deepened. The fintech industry’s recent warning to the Finance Ministry and the RBI should serve as a wake-up call. Without decisive action, India’s payment system could face the same risks that traditional banking regulators try to avoid—too big to fail institutions.
What India needs is a recalibration of its UPI ecosystem. Regulators must create incentives for diversification—whether through enforcing market share caps, promoting regional or sectoral payment apps, or offering a level playing field for banks and smaller fintechs. Additionally, public digital infrastructure like UPI Lite and the upcoming Digital Payments Intelligence Platform should be leveraged to ensure transparency, prevent monopolistic practices, and protect consumer data.
India’s fintech journey has been remarkable, but sustainability must now take precedence over speed. A duopoly in a system as critical as UPI is not just an economic concern; it is a national risk. The vision of UPI was to make digital payments inclusive and competitive, not concentrated and fragile. If regulators fail to act swiftly, India could find that its proudest fintech innovation has become its Achilles’ heel—a system too dependent on too few.
UDAY INDIA BUREAU
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