Currently, the UPI or Unified Payments Interface is only linked to our bank accounts and debit cards. With a new service, to be launched by the Government, we can further link UPI to Rupay credit cards. As the number of active credit cards is rising in the financial database of our country, UPI linking will further provide it with a significant boost with a touch of transaction convenience. In August 2022, in India, the number of credit cards being utilised rose 22 per cent on an annual basis. RBI has already announced the linking of credit cards on UPI platforms. As per experts, UPI-Credit Card Linking has the potential to disrupt the services of Mastercards, Visa and other same platform performers, in the long run.
Potential Of UPI-Credit Card Linking
UPI-Credit Card linking can further refine the shape and structure of the digital payments system in India in the long run, as both platforms are growing at a very fast pace.
As per RBI data, “The total number of outstanding credit cards in the system stood at about 7.80 crores at the end of August 2022, a significant 21.9 per cent jump as compared with 6.40 crore in August 2021”.
On other hand, UPI payments in terms of both value and volume are also growing at a tremendous pace, “In July, the platform crossed 6 billion transactions, the highest since 2016. It has more than 26 crore unique users and 5 crore merchants”.
As per a report from ICRA, “the UPI-based payment throughput more than doubled to Rs 84.16 lakh crore in FY2022 from Rs 41.04 lakh crore in FY2021.”
“Physical cards will see a reduction in issuance and usage. Customers will prefer using a credit card on UPI to swiping it. The physical layer of the card management industry will have an impact with a volume decrease. With RuPay cards being the first to be onboarded, this could mean a substantial shift of volumes in favour of RuPay”, info shared by Jaikrishnan G, from Grant Thornton Bharat.
He also added that in the future Credit Card-UPI linking can disrupt the business operations of other service providers including Mastercards, Visa etc. “We envisage that the cost of credit card payment may also come down as the UPI infrastructure is more optimised compared to other payment networks.”
“Just as we saw a significant increase in the use of digital payments as a result of UPI and the fintech industry’s adoption, bringing credit cards to UPI will have a similar effect. This may also increase demand for RuPay credit cards due to the standardisation of the customer experience,” shared Sachin Castelino, from ‘In-Solutions Global’ at the senior post.
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“Issuing banks will need to be cautious of risks and strengthen their infrastructure to handle the surge in volumes that will result from this welcome move for the Indian consumer”, he added.
