UPI Duopoly Concern: Fintech Body Warns Government of Systemic Risk
New Delhi, October 30, 2025: India’s digital payments revolution — powered by the Unified Payments Interface (UPI) — may now be facing a new kind of challenge. The India Fintech Foundation (IFF), an industry body representing fintech companies, has raised red flags over what it describes as a growing “duopoly” within the UPI ecosystem.
In a letter sent to the Ministry of Finance and the Reserve Bank of India (RBI) on October 29, the IFF warned that more than 80 percent of UPI transaction volumes are handled by just two third-party app providers (TPAPs). The body cautioned that such heavy concentration of activity in a few players poses a “systemic concentration risk” for the country’s most critical payment infrastructure.
According to official data from the National Payments Corporation of India (NPCI), UPI processed 19.63 billion transactions worth ₹24.90 lakh crore in September 2025. Although slightly lower in volume than August’s record 20 billion transactions, the value of payments remained nearly the same, indicating the platform’s massive scale and indispensability in India’s daily financial activity.
Fintechs Caution Against Concentration Risk
The IFF’s letter, argues that the government and regulators must step in to address this emerging imbalance. It notes that when over four-fifths of all UPI payments are routed through two applications, the ecosystem becomes vulnerable not only to operational or technical failures but also to market distortion and reduced innovation.
The letter describes this trend as a potential “systemic fragility”, warning that a disruption or security issue affecting even one of the dominant apps could impact millions of users and merchants across India. Moreover, it could stifle smaller competitors and slow down innovation in one of India’s most dynamic technology sectors.
IFF also emphasized that such dominance should be viewed through a strategic and geopolitical lens, given the importance of UPI as a national payments backbone. “State policies should ensure that UPI remains resilient against any risks. Seen from a strategic or geopolitical lens, issues of ownership of TPAPs become a critical factor,” the letter noted. Source : Moneycontrol
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Call for Policy Reforms and Incentive Overhaul
The industry body has proposed several policy adjustments aimed at rebalancing the ecosystem. Chief among these is a reform of the government’s UPI incentive scheme, which currently rewards banks and payment providers based on transaction performance.
IFF suggested that the incentive flow to banks supporting each TPAP should be capped at 10 percent, a move it believes will encourage banks to partner with more fintech players instead of relying heavily on just two. Such diversification, it argues, would “directly benefit smaller TPAP challengers” and foster a healthier level of competition.
By redesigning the incentive structure, IFF contends, regulators can “rewire” the system to promote inclusivity, resilience, and innovation across a wider pool of app providers.
The Broader Implications for India’s Payments Ecosystem
The concerns over concentration risk come at a time when UPI continues to set global records in adoption and scale. With nearly 20 billion transactions per month, the platform has become a symbol of India’s fintech prowess. However, experts warn that unchecked dominance by a few players could mirror global patterns where a handful of big tech firms control large swathes of digital financial infrastructure.
The RBI and NPCI have previously proposed measures to limit any single app’s share of UPI transactions to 30 percent, though the implementation of that cap has been repeatedly deferred. If enforced, such limits could help level the playing field, but regulators have been cautious about disrupting user experience and transaction continuity.
For policymakers, the IFF’s letter adds urgency to the debate. Balancing innovation with systemic stability will require careful coordination among the Finance Ministry, RBI, NPCI, and the fintech community.
Looking Ahead
While the letter does not name the dominant players, the market is widely understood to be led by PhonePe and Google Pay, which together account for the overwhelming majority of UPI transactions. Their scale has undoubtedly driven adoption but also raised questions about market concentration.
As India seeks to expand digital inclusion through platforms like UPI, the focus now shifts to building resilience and competition within the ecosystem. Industry observers say that encouraging smaller fintech players, improving interoperability, and diversifying partnerships between banks and TPAPs will be crucial in sustaining UPI’s long-term growth.
