Credit Card-UPI Linkage: Driving the Next Wave of Growth in Digital Payments

In October, RBI approved the usage of credit cards via UPI (Unified Payment Interface) to make payments. This move is going to see an increase in the issuance of credit cards and the number of transactions incurred. There are approximately 21 crore UPI QR terminals across the country. Acceptance of credit cards on these terminals will see a huge surge in the transactions happening. Experts hope to see another wave of growth with this development in place. This opportunity will enable a lot of people to execute transactions with ease. 

In October, RBI approved the usage of credit cards via UPI (Unified Payment Interface) to make payments. This move is going to see an increase in the issuance of credit cards and the number of transactions incurred. There are approximately 21 crore UPI QR terminals across the country. Acceptance of credit cards on these terminals will see a huge surge in the transactions happening. Experts hope to see another wave of growth with this development in place. This opportunity will enable a lot of people to execute transactions with ease. 

The transactions can be carried out using RuPay credit cards. Customers will have to link their RuPay credit cards to the BHIM application.

According to research conducted by Boston Consulting Group (BCG), India’s digital payment market will touch $10 trillion by 2026. This is a more than 200% incremental jump from $3 trillion as of today.

What are the experts saying?

Credit cards hold approximately 26% market share in the digital payment world and over 53% acceptance by merchants as well. 

National Payments Corporation of India (NCPI) has UPI, RuPay, and Bharat Bill under its belt and is expecting around $1 billion worth of transactions in the next two-three years.

RBI Governor Shaltikanta Das says linking credit cards with UPI is a step to provide customers with a wide range of payment options.

Dinesh Khara, Chairman of SBI says linking credit card linking with UPI will be very similar to the linking of debit cards and will provide the convenience of choosing payment options to customers.

Pranay Jhaveri, MD, Euronet Worldwide (India and South Asia) says the option will increase the credit utilization ratio for banks and hence boost the economy and the digital payment space.

Benefits of Linking Credit Cards with UPI for Consumers

• No need to carry credit cards – The linking of credit cards with UPI will enable customers to make payments without carrying their credit cards. Customers can simply scan the QR code and choose to make payments via their credit cards.

• Safer transactions – There are lesser chances of being duped with UPI. Since the actual credit card is never swiped, it is a much safer way to execute transactions. There is a lesser risk of losing the card also.

• Increased reward points – Since UPI is accepted as a payment mode at so many terminals across the country, you can gather more points on your credit card while you pay via UPI. You can redeem those points as per the credit card policy.

• Increased purchasing power – Credit cards provide users with an additional financial cushion. Hence, when they can use credit cards via UPI, they are likely to spend more and even spend on big-ticket items.

Benefits of Linking Credit Cards with UPI for Merchants

• Increased transactions – The number of transactions will increase for a lot of merchants since a lot of people prefer using their credit cards to pay for their purchases.

• Increased big-ticket transactions – Credit cards enable people to afford expensive purchases and hence with the linking of credit cards with UPI, the average value of a transaction will go up.

• Eliminates the hassle of cash transactions – Like with any other digital payment mode, the hassle of receiving and depositing cash is eliminated in this case too.

Limitations of Linking Credit Cards with UPI for Consumers

1. Credit cards via UPI can only be used for select transactions i.e., shopping. Credit cards can’t be used to transfer money to any other individual’s UPI ID. So, you cannot send money to family or friends.
2. The RuPay credit card can be used to make payments to only RuPay credit cards and UPI handles. Any other Credit card UPI handles will not accept the payment.
3. Also, small merchants who don’t have a QR code cannot accept payments via this method. As an example, street vendors or small vegetable shops will not be able to accept the payment.

What is UPI (Unified Payments Interface)?

UPI is one of the most preferred payment systems in India where customers can link their savings and current account with debit cards to make real-time transfers. The major advantage of UPI is its acceptability across India including small businesses and shops. The payment is made via the UPI-enabled mobile app. You can simply make the payment by scanning a QR code, choosing your bank account, and entering a unique PIN each time to approve the transaction and it’s done. It eliminates the need to carry your debit card or cash and hence only using a mobile phone you can pay for transactions across the country. 

UPI eliminates the need for the merchant to have a POS machine which comes at a cost. The machine also sometimes works and sometimes doesn’t. It also doesn’t accept all kinds of credit cards. Linking your credit card with UPI enables faster and easy cashless payments.

Some interesting facts about UPI – 

1. UPI enables real-time cashless money transfer via mobile phones at various big and small merchants 24 hours a day, 365 days a year.
2. It enables the use of your smartphone as a virtual debit card eliminating the need of carrying cash and cards.
3. You can access multiple bank accounts through a single application.
4. Payment is single-click via two-factor authentication.
5. Nearly 71% of the users prefer UPI apps such as Paytm, Google pay, PhonePe, etc. 
6. It allows sharing of bills with friends
7. It is a highly useful and functional alternative to using cash on delivery or having to go to the ATM for cash withdrawals.
8. UPI can be used to pay utility bills, and purchases, make online payments, and barcode payments.
9. The daily upper limit for UPI transactions is Rs. 2 lakhs. A person can make up to 20 UPI fund transfer transactions per day. This restriction excludes merchant transactions and bill payments.
10.  UPI transactions crossed Rs. 80 trillion in FY22. In March 2022, it processed 5.04 billion transactions, another milestone for UPI.

It will be interesting to see how the implementation of credit cards with UPI will take place and whether it will be beneficial in the long run for everyone.

Conclusion

Credit card linking with UPI is not only a beneficial option for consumers but for merchants too. It provides increased buying capacity for the consumers which in turn benefits the merchants and the economy. Payment by credit cards via UPI will surely see a surge in increased transactions across geographies across the country.