One of the surprising announcements at last week’s Monetary Policy Committee meeting was the decision by the Reserve Bank of India (RBI) to allow credit cards to be linked to a Unified Payments Interface (or UPI). According to the RBI, the central bank, for the time being, has allowed linking of all RuPay compatible credit cards with UPI. This is seen as a welcome step by experts as now credit card payment will become more accessible via QR codes without the need for a point-of-sale (PoS) machine.
UPI is a real-time instant payment system that powers multiple bank accounts in a single mobile application and facilitates interbank transactions using a mobile phone.
“Today, there are two types of merchants: organized merchants and unorganized merchants. Organized merchants are like ShoppersStop which accept card payments and UPI payments. There are a large number of unorganized merchants that accept UPI payments only as a P2P (Person to Person). For them, accepting UPI payments is free and they will be able to accept UPI payments from a credit card,” says Nitin Gupta, Founder and CEO of Uni, a fintech startup.
But will this give RuPay cards a head start?
“It’s not that RuPay will become popular, this facility will also be available on Visa and Mastercard soon. Although it starts with RuPay and the government may have a lot of influence on RuPay, it will be very profitable for the middle class or India’s lower middle class. But I don’t think RuPay will have a huge head start or advantage here, eventually Visa and Mastercard will also offer that.
Experts say the link could lead to an increase in acceptability as many merchants do not have credit card payment terminals, especially in semi-urban and rural areas, but most of them have acceptance based on UPI QR code. It will also help customers who want to use credit cards for its rewards advantage and UPI for its ease of use and security.
Mandar Agashe, Founder and Managing Director of Sarvatra Technologies, a lending solutions provider, believes that the link will further the notion of digital India, propelling it towards more adoption.
“It is an innovative and strategic step to link credit card with UPI as it will further the ultimate mission of digital India while promoting transactions through UPI. Now a consumer who wants to pay with his credit card can do it through UPI, credit card being a primary instrument. This will not only speed up digital transactions, but also affect the average ticket size of the transaction. At present, the average ticket size is Rs 1,600 per transaction while that of a credit card is around Rs 4,000. So now, with this development, the size of the UPI ticket is likely to increase to somewhere around Rs. 3,000 to 4,000.”
Similarly, Dewang Neralla, CEO of NTT DATA Payment Services India, adds, “Over time, UPI has become a transaction channel of choice for consumers for digital payments. With the linking of credit cards to UPI, this would add convenience for consumers, who would not need to use their physical card. Although this is being launched for Rupay credit cards, we hope it will be extended to other card schemes soon enough for a large portion of consumers to be included. It would also enhance security with card data safe in the hands of users and make QR code ubiquitous for debit/account cards as well as credit card payments in times to come.
Also read: Credit cards, starting with RuPay, can now be linked to UPI:RBI
Also Read: RBI Enables Linking RuPay Credit Cards to UPI: List of Banks That Will Provide This Facility