India Delays Limits on Payment App Dominance, Giving PhonePe and Google Pay More Time

India's National Payments Corporation (NPCI) has pushed back a deadline for curbing the market power of its two largest payment apps by up to two years. PhonePe and Google Pay, which together handle roughly 85 percent of all digital payments in India, were supposed to scale back their operations by the end of 2024. That deadline no longer applies.

PhonePe held 47.8% market share in November 2024, while Google Pay commanded 37% of the market, both well above the 30% ceiling that regulators proposed in 2020. This is the second time India has postponed these rules.

A Deadline That Keeps Moving

The NPCI first set a 30% market share limit in 2020, expecting enforcement by December 2022. When neither app could reduce their share by that date, regulators gave them two extra years. Now, facing the same problem, the NPCI has granted another extension of up to two years.

This pattern reveals the real difficulty of shrinking two companies that have already locked in most users. It also exposes a tension at the heart of regulation: how do you make a market more competitive without breaking the payment system itself. UPI, India's unified digital payment platform, launched in 2016 to move India away from cash. The government charged no fees for these transactions to encourage adoption. Over the years, two apps—PhonePe and Google Pay—became the obvious choice for most users.

Why These Two Apps Won

PhonePe and Google Pay's dominance comes down to network effects—the same reason everyone uses the same social media platform or the same messaging app. Users pick the app where their friends and merchants already are. Merchants choose the app with the most customers.

PhonePe, owned by Walmart through its Flipkart e-commerce purchase, built its advantage by offering cashback rewards and tight integration with shopping. Google Pay won through its connection to the already-dominant Android smartphone operating system and Google's existing services.

Both apps technically function as intermediaries, linking customers to their banks through a common protocol that NPCI controls. Where they compete is in user experience, merchant relationships, and the extras they offer—not in the underlying payment system itself.

Enforcing market share caps on payment apps is harder than it sounds. With telecom companies or banks, regulators can directly control who gets a license and how much capacity they have. With payment apps, the cap depends on millions of individual user choices every single day. You cannot force people to switch apps the way you can force a company to restructure.

A Global Angle

India has begun rolling out UPI internationally—in Paris, Singapore, and the UAE—positioning it as a global alternative to card networks like Visa and Mastercard. This global expansion complicates domestic policy. India wants a world-class payments system, but it also wants multiple players at home.

UPI's structure has a real advantage here: it is built on an open, shared standard where different banks and apps can interoperate. Visa and Mastercard, by contrast, control proprietary networks where they profit from every transaction. UPI's open design is part of what makes it interesting to other countries.

The regulatory pattern here is not entirely new. Over 30 years covering technology, I have watched governments struggle to apply traditional competition rules to network businesses that naturally gather users around one or two winners—first with early ISPs, then with e-commerce platforms, now with payments. The rules that work for factories or airlines do not always fit.

The deeper point is that the NPCI seems to be accepting a practical reality: forcing market share limits could slow growth and destabilize a system that now processes over 10 billion transactions monthly. New competitors like Amazon Pay, Paytm, and bank-run apps are still competing for share, even if none have achieved breakthrough scale.

The extended timeline also reflects how UPI's zero-fee structure shapes competition differently than traditional markets. Because platforms cannot charge users per transaction, they do not have the pricing power that typically maintains dominance in payments. Instead, they compete on service quality, merchant solutions, and adjacent offerings like lending and insurance. This may naturally limit how entrenched either player can become.

What Comes Next

Breathing room allows India's digital payment system to keep growing without regulatory turbulence. UPI transaction volumes continue rising sharply, with merchant adoption spreading into smaller towns and rural areas where digital payments barely existed a few years ago.

For PhonePe and Google Pay, the stability enables them to invest in financial products, merchant tools, and international expansion without the distraction of forced retrenchment. It also lets them deepen integration with India's broader digital infrastructure—identity systems, tax filing, and government services.

The pragmatic approach may serve India's actual goal better than rigid market share limits would. The aim is not necessarily to limit these two companies, but to build a reliable, growing, and innovation-friendly payments ecosystem. By that measure, the approach has room to work.