The recent report on local fintech players

  • February 20, 2024
  • Posted by: OptimizeIAS Team
  • Category: DPN Topics
No Comments

 

 

The recent report on local fintech players

Subject: Economy

Section: Monetary Policy

Context:

  • In its recent report, the Standing Committee on Communications and Information Technology expressed worries about foreign-owned fintech apps having too much control in India.

More About News

  • The committee suggested that Indian-owned apps should be encouraged more.
  • It pointed out that while the Unified Payments Interface (UPI) made up a large portion (73.5%) of all digital payments in terms of volume in the fiscal year 2022-23.
  • However, its share of the total payment value was much smaller, at only 6.67%.

Usage Statistics

  • NPCI’s data from December last year revealed:
    • Customers initiated a total of 5,642.66 million transactions using PhonePe.
    • Another 4,375 million transactions were made using Google Pay.
    • Only about 24.30 million transactions were made using BHIM.

National Payments Corporation of India (NPCI)

  • NPCI is an umbrella organisation for operating retail payments and settlement systems in India.
  • It is an initiative of RBI and Indian Banks’ Association (IBA) under the provisions of the Payment and Settlement Systems Act, 2007.
  • The objective of NPCI is to create a robust Payment & Settlement Infrastructure in India.
  • For this, NPCI was incorporated as a “Not for Profit” Company under the provisions of Section 25 of Companies Act 1956 (now Section 8 of Companies Act 2013).

UPI

  • It was launched by NPCI.
  • UPI is a system that powers multiple bank accounts into a single mobile application (of any participating bank), merging several banking features, seamless fund routing & merchant payments into one hood.
  • It also caters to the “Peer to Peer” collect request which can be scheduled and paid as per requirement and convenience.

What does the report infer about the existing ecosystem?

  • Regulation of Digital Payment Apps
    • The Committee underscored the importance of regulating digital payment apps due to their increasing usage in India.
    • It highlighted that regulating local apps, compared to foreign ones, would be more practical for entities like the Reserve Bank of India (RBI) and the National Payments Corporation of India (NPCI).
  • Domination of Foreign-Owned Fintech Apps
    • The Committee noted the dominance of fintech apps owned by foreign entities, such as PhonePe backed by Walmart and Google Pay, in the Indian fintech sector.
    • PhonePe holds the largest market share in terms of transaction volume, followed by Google Pay.
  • Fintech Companies and Money Laundering Concerns
    • The Committee highlighted that fintech companies were being exploited by scamsters for money laundering purposes.
    • An example cited was the Abu Dhabi-based app called Pyppl, which was reportedly administered by Chinese investment scamsters.
    • This situation posed challenges for Indian law enforcement agencies in tracking the flow of illicit funds gathered through scams on the platform.
economy The recent report on local fintech players