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Google Pay and PhonePe Hit Back Against New Government Regulation Regarding UPI Payments

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India’s move to cap digital payments within the nation has drawn flak from all quarters. Global tech mogul Google on Friday expressed its discontent regarding the new rule, which will make things difficult for its payment portal- Google Pay. India recently decided to put a cap on the amount or share of financial transactions facilitated by payment platforms. Google stated that curtailing the freedom of such platforms would hinder India’s growing digital payments economy. In this article, we will take a look at the new rule brought out by India, and how it can impact digital payments.

Google Pay and PhonePe Hit by India’s New Rule

Google’s criticism came as a result of a new rule passed by the Indian government. The National Payments Corp of India released a notice on Thursday regarding how third-party payment platforms will process only 30% of all UPI transactions from January 1, 2021. The NCPI is India’s flagship UPI payment-processing platform. The UPI framework has grown in popularity in India over the last few years due to its ability to facilitate easy and seamless transactions. The new rule will prevent third-party apps from cornering the market as it puts a threshold based on the total volume of financial transactions occurring within India.

Prevents Growth of Other Apps

Such a move will restrict the growth of other payment services, such as the ones offered by Google, Walmart, and Facebook. However, it will help accelerate the development of portals hosted by Reliance Jio and SoftBank’s Paytm, both of which have bank permits. As per NPCI records, over 2.07 billion UPI transactions were made in October. Walmart-owned PhonePe processed over 40% of such transactions, whereas Google Pay came in a close second. PhonePe processed over 83.5 crore transactions in October while, Google Pay facilitated around 82 crore transactions. They were followed by a dozen other platforms splitting the rest of the market share. Both GPay and PhonePe exceed the cap set by the NPCI and will receive two years to maintain compliance with the new laws.

Google Pay UPI
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Reaction from the platforms

Sajith Sivanandan, who serves as the Business Head of GPay, said that such a move was very unexpected. He went on to say that it would have an impact on hundreds of millions of users, leading to a drop in the adoption of UPI payments in the country. However, the new laws will not have an impact on Jio Payments Bank and Paytm as they do not come under the category of third-party apps. Certain experts said that such a move gives stimulus to the theory that the government is pitting foreign players against Indians. They questioned the NPCI’s move to place a cap on third-party platforms and not all platforms on the whole. 

However, as expected, the spokesman for Paytm said that such a move would help grow the UPI infrastructure in India. They went on to say that the new rules would help de-risk and diversify the UPI transactions market in the country. PhonePe CEO, Sameer Nigam said that the company would try its best to ensure that the new rule does not disrupt UPI services for its customers. 

Facebook left behind 

The new rule came out right after NPCI finally permitted Facebook-owned WhatsApp to begin a payment service in India. The authority had cleared the roll-out of such a service in a limited capacity to over 20 million users. While the long-awaited approval came as a sigh of relief for the company, the new rule will inhibit their growth prospects. While WhatsApp has a customer base of over 400 million users, this new rule will create problems for the company. However, the company welcomed the approval by stating that the combination of WhatsApp and UPI would help India’s rural population participate more freely in the digital economy. 

Such a move has been in the works since 2019, wherein the cap was supposed to be at 50% in the first year, and reduced to 40% in the second year. However, the NPCI has gone ahead with a flat rate for the cap but giving companies two years to comply with the regulations.  Ram Rastogi, who is a former NPCI executive, stated that the new move would help foster healthy competition. He ventured to say that since PhonePe and GPay together accounted for almost 80% of the market, bringing in such a cap would help diversify the market. Furthermore, experts believe that such a move would also help the government prevent cybersecurity threats. Also, more competition would help make the market less vulnerable, while also allowing the authorities better controls over the market.

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Mandar Agashe : The Man Who Brought a Revolution in the Indian Digital Payment System

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Receiving rewards for paying your bills is like the smartest scheme ever to digitalize the payment system of our nation. Most of us make payments through UPI apps like Tez to earn digital scratch cards and cash backs. The growth of UPI has been unbelievable from only 92,000 transactions in August 2016 to 105 million transactions in November 2017. Today, almost everyone with a smartphone uses these UPI apps for the transaction. And, the biggest advantage of UPI is you don’t have to walk to your bank to deposit money into someone’s bank account. From transferring money to bank accounts to paying for movie tickets, UPI has become the most convenient and the most successful initiative in terms of online banking.

But, who is the person behind this massive success that turned the entire scenario of digital payment in no time?

Mandar Agashe, the founder of Sarvatra Technologies, a company that provides financial and payment solutions to the Indian banking sector, came up with the idea of Unified Payments Interface (UPI) and launched it in 2016.

Early Life of Mandar Agashe

Mandar Agashe
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In 24th May 1969, Agashe was born into an influential family of Mumbai to an Indian businessman, cricketer and philanthropist, Dnyaneshwar Agashe, and Rekha Gogte. Agashe had two other siblings, Ashutosh Agashe and Sheetal Agashe.

When Agashe was pursuing his B.E. degree in Computers, he created Musicurry.com, an online radio website. After completing his college, Agashe joined his family business in 1994 and started working in the firms. By 2000, he established EBZ Online in association with Oracle, followed by establishing Brihans Natural Products Ltd., and finally, Sarvatra Technologies in 2000.

Sarvatra Technologies

Agashe established his startup in Pune. The startup was basically to provide payment solutions and promote online banking through UPI and IMPS (Immediate Payment Service). The main goal of the company was to get the rural and semi-urban population connected to banking as well as the system of digital payment and get every citizen of India accustomed to EFT (Electronic funds transfer).

Since Mandar Agashe belonged to a family full of successful business tycoons, he had a clear idea of how the corporate sectors function. He wanted to come up with a solution that can be affordable to every single person out there and can easily carry out online transactions with minimal knowledge.

Oracle was the first company to invest in the strategies of Agashe, and eventually, investors like Vallabh Bhanshali and ICICI Bank participated in the following funding rounds. By 2018, the company brought 450 co-operative banks on National Financial Switch.

Agashe realized that both, the banks and the customers, faced a lot of issues during online transactions because of the poor connectivity. So, he provided the banks with SaaS-based technologies to enhance better performance, and also, reducing the operating cost at the same time.

The success of UPI and other payment solutions

After UPI was launched in 11th April 2016, the transaction volume increased unexpectedly. Transactions through the leading UPI apps like Google Tez, PhonePe and BHIM increased exponentially. By 5th December 2017, two months since the launch of Tez, the transaction volume hit 140 million, and the amount processed through PhonePe summed up to 100 crores per day.

Another advantage of Tez which accounts for 70% of the total UPI transaction is that the money one pays through it directly gets credited in one’s bank account instead of getting dropped into the wallets. By 2017, the apps that use UPI reached 20 million downloads from Play Store.

In the financial year 2017-2018, Mandar Agashe announced that they had a gross transaction value of 27,000, and by the next financial year, they will be going to make it 40,000 crores.

Agashe’s Musical Career

Apart from being an entrepreneur, a philanthropist and a successful businessman, Agashe is also a renowned singer. Releasing Musicurry.com was his first step towards the musical world, which led to launching his very own music album. His first role in the world of music was as a co-director with Pandit Hridayanath. He sang his first playback song with Asha Bhosle, and in 1998, his album ‘Nazar Nazar’ was recorded and released in Hindi and English. In 2005, another album, Jaan Le was released followed by 82 in 2016.