India’s central bank is leaving the UPI competition project

by Ana Lopez

India’s central bank has halted plans for a high-profile project intended to rival the country’s dominant payment system, Unified Payments Interface. The project had attracted a lot of interest from several major conglomerates, tech giants and financial institutions, including Amazon, Reliance, Facebook, Tata Group, Google, HDFC and ICICI.

The Reserve Bank of India had initially launched bids in 2021 for licenses to operate new retail payment and settlement systems across India. The project was called New Umbrella Entity or NUE.

However, according to RBI deputy governor T Rabi Sankar, the project’s potential participants have not proposed “innovative or infrastructural solutions”. Sankar emphasized the central bank’s interest in exploring ideas beyond incremental improvements or replacements for existing technologies.

UPI, which now processes more than 8 billion transactions per month, moved closer to the 1 billion mark in 2021. The central bank sought to mitigate concentration risk as UPI’s importance in the economy continued to grow, aiming to develop an alternative protocol. develop that load on the existing system.

Market parties had formed four consortia and were planning to bid for the NUE license. Image: Bernstein

PhonePe and Google Pay held the most market share in UPI in 2021 – not much has changed – and many industry participants saw NUE as a way to get early and aggressive with a new payment system.

In an earlier proposal, RBI aimed for NUEs to be interoperable with each other.

“So NUEs don’t have their own access. However, NUEs can adapt the networks to their business model and distribution capabilities. If a conglomerate is strong in e-commerce, the NUE can be tailored to the specific needs of that use case. UPI has market share caps/calibrated growth for new players (e.g. WhatsApp). NUEs would have no such limitations and could help accelerate network effects for private players. Thus, NUE’s custom design and self-government could provide stronger capabilities. Unlike UPI’s generic payment network, NUEs will have custom networks based on use cases,” Bernstein wrote in a 2021 report.

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