NPCI explores methods to increase RuPay on UPI payment adoption by vendors

The National Payments Corporation of India (NPCI) is looking for ways to encourage RuPay credit card payments that are linked to the Unified Payments Interface (UPI), according to a report by The Hindu Businessline (BL). UPI payments via RuPay credit cards have experienced slower adoption due to confusion in transaction classification. To rectify this, NPCI has implemented a system allowing differentiation between RuPay credit cards on UPI transactions and regular UPI transactions made through QR codes.

According to the BL report, the integration of RuPay credit cards on UPI has led to confusion, particularly among merchants who are not able to differentiate between the two transaction types. This has caused discrepancies in merchant discount rates (MDR) and interchange fees. NPCI has introduced a mechanism, currently live, that notifies the system when a credit card on UPI transaction occurs. This mechanism empowers merchants and banks to accurately classify and assess charges for the specific transaction type.

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The classification mechanism has been live for approximately a month, with ongoing integration efforts by payment gateways and intermediaries. NPCI aims for widespread adoption within the next 15-20 days. While the update addresses the current challenges, some industry players express concerns about the ad hoc implementation, suggesting that testing the ecosystem before introducing the feature would have resulted in a smoother transition.

To further incentivise increased adoption of RuPay on UPI and mitigate potential discrimination against these transactions, NPCI is exploring a fee income-based incentive model. Under this model, payment gateways may compensate merchants for the higher charges associated with RuPay UPI transactions compared to zero charges for regular UPI transactions.

NPCI has also been actively promoting the issuance and adoption of RuPay cards to reduce reliance on foreign players like Visa and Mastercard.