Top card cos to go live with UPI-linked RuPay credit card feature by June

The feature seeks to include 50 million UPI merchants in the formal credit economy and drive consumption in a big way

Major credit card issuers in the country such as SBI Card, ICICI Bank, and Axis Bank were expected to go live on the “RuPay credit card on UPI feature” by March 2023. However, technical changes at the issuers' end had prevented them from doing so at that time.

But now, these players are expected to go live on this UPI feature by June. Axis Bank, the fourth-largest credit card issuer, could do so much sooner, sources aware of the development said.

Currently, three public sector banks – Union Bank of India, Indian Bank, and Punjab National Bank – are live on this feature, as is private sector lender HDFC Bank, which is also the country’s largest credit card issuer. Further, BHIM, Mobikwik, and Paytm app customers can link their RuPay credit card on UPI. Other apps are enhancing their tech platforms to enable such linking as well.

Last June, the Reserve Bank of India decided to allow linking of credit cards to UPI, which was earlier being used only as a “pay now” facility. This, RBI said, would provide additional convenience to users and enhance the scope of digital payments.

The idea behind the move is to expand the size of the merchant base that accepts credit card payments. Roughly 2-4 million merchants accept credit cards, while over 50 million merchants accept credit card payments. So, this feature is looking to include 50-million UPI merchants in the formal credit economy. This is expected to drive consumption in a big way.

According to the National Payments Corporation of India (NPCI), RuPay credit cards on UPI will provide a seamless, digitally-enabled credit card lifecycle experience for customers, who will also have increased opportunities to use their credit cards. Merchants will gain from the spike in consumption and will become part of the credit ecosystem with the acceptance of cards using asset-lite QR codes.

Consequently, the NPCI brought out guidelines that said no extra charges will be levied on small merchants for transactions of up to Rs 2,000 processed via RuPay credit cards on UPI. The circular issued by NPCI, the umbrella entity for retail digital payments in the country, said that small merchants will also be exempt from interchange, app provider and other tariffs.

The feature has only been allowed for RuPay credit cards, but in all probability, RBI will extend it to other card networks such as Visa and Mastercard. Experts have said that the RuPay credit on UPI feature has the potential to grow the credit card market 2-3 fold.

Following this step, the RBI has now proposed to enhance the scope of the payments by enabling transfer to/from pre-sanctioned credit lines at banks. This means the UPI network will facilitate payments financed by credit from banks. This feature can augment or even act as a substitute to credit cards, which cater to a very niche segment of the population.

Wait gets longer
 

Technical changes on the issuers’ side lead to delay
 
Three PSBs and HDFC Bank currently live on the feature
 
2-4 mn merchants accept credit cards while over 50 mn accept UPI
 
In June 2022, RBI decided to allow linking of credit cards to UPI
 

Move to include 50 mn UPI merchants in the formal credit economy

UPI continues digital payments dominance, thanks to QR codes

India’s flagship payment platform – Unified Payments Interface (UPI) – continues to be the most dominant digital payments method in the country, driven by the proliferation of QR codes, which have jumped 56 per cent in the calendar year 2022. According to a Worldline India report on India’s digital payments, in 2022, UPI processed over 74 billion transactions, amounting to Rs 126 trillion. While the volume of transactions was up 70 per cent year-on-year (YoY), the value of transactions went up by 54 per cent during the same period. In FY23, UPI processed 84 billion transactions, amounting to Rs 139.09 trillion.

According to the report, the proliferation of QR codes drives UPI transactions – 237 million in December 2022 compared to 152 million in January 2022. As of December 2022, the total number of Bharat QRs was 4.96 million, while UPI QR stood at 237.94 million, registering an increase of 65 per cent compared to December 2021.

According to the data, in 2022, 54 per cent of UPI transactions by volume were P2M (merchant transactions) by the end of 2022, whereas in value terms, it was 23 per cent. Overall, UPI Person-to-Merchant (P2M) and Person-to-Person (P2P) are the most preferred payment modes among consumers, with a market share of 40 per cent and 44 per cent in terms of transaction volume (UPI was 84 per cent in total). However, in terms of value, UPI P2M accounted for 18 per cent share, whereas UPI P2P accounted for 66 per cent of digital transactions by value (UPI was 84 per cent in total).

Meanwhile, banks have increased the issuance of credit cards, taking the outstanding base of credit cards to 81.1 million as of December 2022, an increase of 18 per cent YoY. Similarly, outstanding debit cards increased by 0.2 per cent from 938 million to 939.4 million during the same period. The report said the total number of credit and debit cards in circulation by the end of 2022 was 1.02 billion.

In terms of transactions, the volume and value of credit card transactions stood at 2.76 billion and Rs 13.12 trillion, respectively. While the number of credit card transactions at POS accounted for 1.47 billion, e-commerce was 1.29 billion. And, in value terms, consumers transacted Rs 5.1 trillion at POS and Rs 8.1 trillion on e-commerce transactions via credit cards in the calendar year 2022.

Credit card transactions in 2023 could get a further boost as the Reserve Bank of India (RBI) has allowed linking RuPay credit cards on the UPI network.

Having said that, debit card transactions have seen a steady decline through the year, which is likely an outcome of the increase in UPI transactions.
 

- Subrata Kumar Panda