In a report tabled in the Parliament, the Parliamentary Standing Committee on Communications and Information Technology brought up the issue of concentration of UPI market share by volume of transactions processed, which the NPCI has proposed to cap at 30 percent.
The Committee flagged concerns around the high market share of foreign-owned fintech platforms in India, including Google Pay and Walmart-backed PhonePe.
It highlighted that both the said apps held 83.3 percent share in October-November 2023 while the market share of indigenous BHIM UPI was only 0.22 percent.
“The committee note that fintech companies, apps and platforms such as PhonePe and Google Pay owned by foreign entities dominate the Indian fintech sector,” the report read.
It further stated that some fintech companies were being used for money laundering.
“In this context, the Committee recommend that there should be a focus on the promotion of local Indian players in the fintech universe. Indigenously developed BHIM UPI is a good example of it, however, its share in the UPI market is very low. As India, focusing on ‘Make in India’ in other.”
It was also claimed that virtual cards provided by international fintech companies serving as virtual accounts have been used to egress money out of India using VISA and MasterCard networks.
“While virtual accounts provide convenience in making fund payments and reconciliation, it has come to notice that virtual accounts are used to mask the funds trail while making payments. Virtual accounts are not monitored at present and may evade the AML/CTF mechanism,” the committee said in its report.
The committee further added that fintech firms must be asked to generate awareness around safe transaction methods and bogus methods used by fraudsters to dupe people, through their app’s interface in the form of creatives, pop-ups etc.
“These apps/platforms or companies operating them run commercial ads to attract attention of citizens towards convenience of using them for financial transactions. They also contain details of bank accounts and other personal information of individual users linked to them,” it said.
Parliament’s Standing Committee also expressed deep concern on the “trust deficit” in India’s digital payment system, citing a loss of Rs 5,574 crore to cyber frauds in just six months between April and September of 2023.
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