Saturday, November 14, 2020

NPCI asking Google Pay/Phone Pay to reduce their transactions

NPCI has asked Google Pay and Phone Pay to reduce their number of transactions, since they are becoming monopoly in the UPI transactions. 

Google Pay and Phone Pay have share of almost 40% each, and NPCI asked them to reduce their share to 30% (Of course, they are given some time to reduce their share). 

It is one of the most stupid rulings by NPCI in the name of Monopoly. It is like going back to Pre-1991 days, where Nehru-Gandhi family dictated each organization how much they could produce. After producing their licensed quota, they need to stop the production, even if they are capable of producing more and have enough money and resources. 

In general, to break the monopoly, the concerned authority should not do anything except giving license to everyone liberally and making sure the organizations are following the rules set by them. 

In this case, NPCI has already given licenses to many organizations. So, there is nothing that it should do. How much business would the organization get depends on their quality of service and the customer satisfaction. NPCI should not put its finger in that. 

If NPCI wants to break the monopoly, it should go and ask more organizations to provide UPI services and give even more licenses liberally. However, it should never discourage anyone (like it is doing in Google Pay or Phone Pay case). 

The only other thing that NPCI should worry is, breaking the rules set by NPCI. For example, NPCI may say, the application should transfer to any UPI. If Google Pay or Phone Pay are intentionally failing transactions to UPIs of other providers, then that can be taken as non-compliance and can impose penalty for that. The penalty can be huge so that they follow the rules properly. But, they should not ask them to reduce their share in the market. 

Another mistake that few authorities are doing is, imposing monopoly restrictions because of the offers that big players are giving. 

The big organization (which is having a lot of money) gives very good offers to the public [The service is sold at less than their cost]. Everyone starts using the services of big organizations. The small organizations cannot sustain and in due process, those would be closed. Once most of the small organizations are closed, the prices are increased significantly and the big organization gets enormous profits. 

With this logic, authorities try to limit the offers given by the big organizations. But, authorities should never try to do that. They only need to make sure that a new organization can be started for providing that service without much hassle, and people have the option to switch the provider. 

Many years back, Foodpanda used to give a lot of offers and people used to buy food from that. Once they stopped giving offers, people stopped buying from that, and people simply switched to other providers. If any authority had asked them to reduce the offers, the public would have lost a lot.

When Paytm started, it gave a lot of offers. After demonetization, it reduced its offers and at the same time, Google Pay started with a lot of offers and people shifted to Google Pay. If a new provider starts giving offers, then people won't take any time to move to that new provider. 

The goal of the Union Government is to increase digital transactions. When Google Pay and Phone Pay are penetrating a lot to reach more people, the Government should not put any barriers on that. 

NPCI is not run by the government. But, why is NPCI given such power to reduce the business of the organizations?

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