The UPI-alternative project that had attracted interest from major tech and finance industry players, including Amazon, Reliance, Facebook, Tata Group, Google, HDFC, and ICICI, is winding up
The Reserve Bank of India (RBI) has abandoned its plans for a long-expected project New Umbrella Entity (NUE), which was supposed to rival the country’s dominant payment system, Unified Payments Interface (UPI).
In 2019, RBI first proposed the NUE to help enhance the reach of digital payments to a larger customer base and thereby reduce the dependency on cash.
The proposed alternative digital retail payment system also aimed to bring innovation and new ideas to the already developed national payments infrastructure. However, the global tech leaders teaming up with local financial entities failed to present any innovative solution that could rival the existing payment rails provided by the National Payments Corporation of India (NPCI).
India’s central bank stressed that it didn’t want “something which is either incremental or a substitute of existing ideas or technologies.” Apparently, the business proposals received from prospective applicants did not present any completely new ideas or bring enough added value.
The main point of the NUE was to mitigate data and money concentration risk as UPI’s importance in the economy continued to grow, now processing over 8 billion transactions a month. An alternative payment protocol could have alleviated the strain on the existing system.
In 2021, a total of six consortiums applied for the NUE license. The list included high-profile brands and institutions like Amazon, Facebook, Google, HDFC, Axis Bank and ICICI. This year, the regulator put the licensing process on hold before deciding to abandon the project altogether.
PhonePe and Google Pay have had the most market share in UPI since 2021. Therefore, many other industry participants perceived NUE as an opportunity to become early players in a new payment system. Besides, NUE would not have had UPI-like restrictions regarding market share caps/calibrated growth for new players. That could have helped with accelerated network effects for private players.