How UPI and Credit Card Linking Will Give Customers the Best of Both Worlds

By Muralidharan Srinivasan

The payments landscape in India is changing rapidly, especially since the pandemic and the massive adoption of digital across all industries. With UPI being the preferred payment method for customers and merchants due to benefits such as ease of transactions and no-fee model, it has established itself as an undisputed winner in the digital payments space, registering recently the salary of Rs. 10.4 lakh crore in May 2022 (Source: RBI).

However, other players such as debit and credit cards, digital wallets, Buy Now Pay Later, etc. also exist in the payments market with the exclusive set of benefits they offer to their respective users.

While UPI payments have been popular for small ticket expenses, credit card spending is generally preferred for larger ticket items. Although, unlike UPI payments, they represent a smaller portion of digital transactions, their issuance grew by 16.3% year-on-year to the end of February 2022, according to RBI data.

Merge popular payment option with flexible option

The latest announcement from the Reserve Bank of India (RBI) regarding the proposal to link credit cards to UPI should be a great payment option. Both UPI and credit cards offer unique benefits to customers.

UPI payments are free and require one-click authentication, while credit cards offer a short period of interest-free credit and reward points, which also means that with the facility offered, customers can use UPI even for bulky items. Users can have a balanced option to choose how they can pay, either by debit or credit card linked to UPI. This integration will solve multiple hassles in the customer payment journey, ranging from removing the need to carry credit cards and swipe at the POS machine/fill in card details online to enjoy more payments secured.

The move will thus provide a more convenient customer payment experience, in turn expanding the reach of digital transactions and merchant reconciliations in India.

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RBI aims to launch this facility with the country’s payment service system, RuPay. However, it is quite unclear how the Merchant Discount Rate (MDR) will be applied for future UPI payments made by credit card. For banks, although co-branded credit card partnerships with merchants in categories such as fashion, fuel, travel and more are already generating value-added offers for their customers, this decision will strengthen those offers. through a seamless payment experience.

India’s digital payment revolution

With systems such as UPI, Bharat Bill Pay and RuPay under its hood, the National Payments Corporation of India (NPCI) has targeted UPI payments worth $1 billion per day over the next two to three years. .

Credit cards still hold a significant place with 26% market share by volume and 53% by value in the space of payments accepted by merchants. Connecting UPI, which already dominates the digital credit card payments space, will pave the way for more geographies to adapt UPI much faster and easier. Moreover, it will evolve into many other in-app payments in the near future and prove to be a big step towards realizing a cashless economy.

(The author is responsible for payments, APMEA region, FIS. The opinions expressed above are those of the author and not necessarily of

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