PayNearby, a fast‑growing fintech startup, has received formal approval from the National Payments Corporation of India (NPCI) to operate as a UPI third‑party application. The clearance, announced on CNBC-TV18, marks a pivotal step for the company as it prepares to tap into India’s massive digital payments market. With over 1 billion active UPI users and transaction volumes exceeding ₹ 30 trillion monthly, the regulatory green light positions PayNearby to compete with entrenched players such as PhonePe, Google Pay, and Paytm. This article examines the significance of the approval, its implications for the broader UPI ecosystem, and the challenges that lie ahead for the newcomer.
Regulatory green light
The NPCI’s endorsement follows a rigorous vetting process that assesses security protocols, interoperability standards, and consumer protection mechanisms. By granting PayNearby the status of a third‑party app provider (TPAP), the regulator enables the firm to directly access the UPI infrastructure without routing transactions through a bank’s native app. This model, first introduced in 2020, has accelerated fintech innovation by allowing agile players to launch lightweight, feature‑rich payment solutions.
What the approval means for PayNearby
With the NPCI nod, PayNearby can now offer:
- Instant money transfers across all UPI‑enabled banks.
- Bill payments for utilities, telecom, and DTH services.
- QR‑code based merchant checkout for small and medium enterprises.
- Integrated wallet functionality that can be topped up via UPI.
The company plans to roll out these features in a phased manner, starting with a beta launch in major metros before expanding to tier‑2 and tier‑3 cities. A dedicated UPI API will power the backend, ensuring real‑time settlement and compliance with the RBI’s security guidelines.
Impact on India’s UPI ecosystem
PayNearby’s entry adds another layer of competition, which could drive down transaction costs and spur innovation. Analysts project that each new TPAP can increase overall UPI transaction volume by 2‑3 % annually, given the network effects of additional user bases. The following table summarizes the major UPI third‑party apps operating as of today (24 December 2025) and their launch milestones:
| App | Parent company | Launch date | Active users (million) |
|---|---|---|---|
| Google Pay | Alphabet | July 2017 | 350 |
| PhonePe | Flipkart | December 2015 | 300 |
| Paytm | One97 Communications | August 2017 | 250 |
| BHIM | NPCI | December 2016 | 200 |
| PayNearby | PayNearby Ltd. | Pending – Q1 2026 | — |
While PayNearby’s user base is still nascent, its strategic focus on underserved regions could diversify the geographic distribution of UPI usage.
Challenges and competitive landscape
Entering a market dominated by well‑funded incumbents is not without hurdles. PayNearby must address:
- Customer acquisition costs – marketing spend to win users from entrenched apps.
- Trust and security perception – convincing users that a newer platform is safe for financial transactions.
- Regulatory compliance – continuous adherence to evolving NPCI and RBI norms.
Furthermore, the recent push by the Indian government to promote “Open Banking” may introduce additional third‑party entrants, intensifying competition.
Future outlook
Assuming a successful beta rollout, PayNearby could achieve a user base of 20 million within the first 18 months, tapping into the estimated 500 million unbanked or under‑banked individuals in rural India. Partnerships with local merchants, micro‑finance institutions, and regional telecom operators are likely to accelerate adoption. In the longer term, the company’s ability to innovate—such as integrating AI‑driven spend analytics or voice‑activated payments—will determine whether it remains a niche player or evolves into a mainstream UPI contender.
In summary, NPCI’s approval not only validates PayNearby’s technical and compliance readiness but also signals a broader shift toward a more diversified UPI landscape. As the fintech sector continues to mature, the addition of fresh players like PayNearby promises to enhance consumer choice, foster competitive pricing, and deepen financial inclusion across India.
Image by: Ivan S
https://www.pexels.com/@ivan-s
