Proposed UPI-credit card link: As the number of credit cards in the system increases at a rapid rate, linking them to UPI will give the digital payment platform a significant boost. The number of credit cards in circulation in India jumped 22% YoY in August 2022. The RBI had announced its proposal to allow credit card linking on UPI platforms. Experts said that in the long term, credit on UPI has the potential to disrupt all other program providers, including Visa and MasterCard.
The total number of credit cards in circulation in the system stood at around 7.80 crores at the end of August 2022, a significant increase of 21.9% from 6.40 crores in August 2021, according to data from the RBI.
UPI payments are also growing at a rapid rate. In July, the platform crossed 6 billion transactions, the highest since 2016. It has over 26 crore unique users and 5 crore merchants. According to an ICRA report, UPI-based payment throughput more than doubled to Rs 84.16 lakh crore in FY 2022 from Rs 41.04 lakh crore in FY 2021.
Jaikrishnan G, Partner (Financial Services Consulting) at Grant Thornton Bharat, “Physical cards will see a reduction in issuance and usage. Customers will prefer using a credit card on UPI rather than swiping it. The layer card management industry will have an impact with a decrease in volume.RuPay cards being the first to be integrated, this could mean a substantial change in volumes in favor of RuPay.
He added that in the long term, credit on UPI has the potential to disrupt all other program providers, including Visa and MasterCard. “We anticipate that the cost of paying by credit card may also drop as the UPI infrastructure is more optimized compared to other payment networks.”
Sachin Castelino, Director of Strategy and Transformation at In-Solutions Global, “Just as we have seen a significant increase in the use of digital payments following the adoption of UPI and industry fintech, the integration of credit cards with UPI will have a similar effect.It may also increase the demand for RuPay credit cards due to the standardization of customer experience.
Castelino added that with over 20 million QRs available for UPI transactions, the same technology will be used for credit card transactions, which will also increase acceptance in Tier 2 and -3 cities.
“Issuing banks will need to be risk-aware and strengthen their infrastructure to cope with the increased volumes that will result from this welcome move for the Indian consumer,” he said.
To boost UPI, the RBI has also announced an interoperable cardless cash withdrawal facility using the Unified Payments Interface or UPI platform, which will be available on banks’ ATM networks. Currently, bank customers can only use their ATMs to withdraw cash without a card.
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