UPI integration gives a fillip to RuPay credit cards distribution (2024)

The linking of Unified Payments Interface with RuPay credit cards has given a major push to these domestic cards. Around 30% of new credit cards issued in the country now are on the RuPay network, two people in the know said.

In comparison, RuPay cards accounted for around 5% of the new credit card issuance in 2022-23, before the Reserve Bank of India allowed linking UPI with these cards, they said.


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American card payment majors Visa and Mastercard dominate the domestic credit card market.

“Large banks are issuing RuPay credit cards more proactively, given there is customer demand… Even co-branded cards are now running on RuPay platform which is helping fresh issuance to go up,” a senior banker told ET.

Emailed queries to the National Payments Corporation of India (NPCI), which launched RuPay payment card scheme, remained unanswered till press time Wednesday.

UPI integration gives a fillip to RuPay credit cards distribution (1)ETtech

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UPI integration gives a fillip to RuPay credit cards distribution (8)

    UPI integration gives a fillip to RuPay credit cards distribution (9)

    However, while card issuance has gone up, transaction growth has not kept pace, industry insiders said.

    Also read | RBI diktat to banks, credit card companies set to upend long-term integrations

    There are certain concerns among banks regarding losing their valuable credit card customers to the payment applications that dominate UPI, they said.

    “The credit card on UPI ecosystem will mostly come on third-party apps like Google Pay and PhonePe. If customers attach their credit card on these TPAPs, then these apps may start cross-selling insurance or personal loans to these customers, and banks fear that they will lose sight of their customers due to this,” a senior payment industry insider on the condition of anonymity.

    This is a challenge banks are facing across all their UPI payments, given consumers are using their bank accounts for payments but transacting on third party apps, effectively resulting in banks losing sight of their customers to a large extent.

    “This is a larger challenge (for banks) and not just only because of UPI on credit,” said Ashish Goyal, cofounder of fintech startup Fibe, which issues co-branded RuPay credit cards with Axis Bank. “I think this is a challenge which they are solving for UPI itself. Because when we see that the top three apps are controlling almost the majority of the UPI traffic, banks would want to get their share.”

    Goyal said eventually these cards will gain traction, similar to the initial slow adoption of UPI itself.

    The other issue is the customer's habit around the use of UPI.

    According to data shared by the NPCI, the average ticket size of merchant transactions on UPI is Rs 1,400 to Rs 1,500. Typically, customers use their savings accounts for such small-value transactions.

    “For small value payments, people by default are accustomed to using their UPI handle through the bank account, and a credit card doesn’t necessarily come on top of the mind for smaller transactions. From that perspective, it is not a right fit in the current scheme of things,” Ramakrishnan Ramamurthy, executive vice president of French payments company Worldline India, said.

    RuPay credit cards received a major boost in June 2022 when the RBI permitted linking of RuPay credit cards with UPI, making it the only UPI-linked card network. In October 2023, NPCI announced that interchange fees would apply on credit cards on UPI transactions, with exemptions for small merchants.

    In March this year, the RBI directed card issuers to offer customers with multiple network options at the time of issue and prohibited exclusive arrangements that prevent customers from using other card networks. This move has potentially benefitted the homegrown RuPay card network.

    While all this created the ground for expansion of the ecosystem, the issue of charges on credit card-based UPI transactions confused the market, which is otherwise used to UPI transactions being free.

    Currently, MDR is levied on UPI-linked RuPay credit card transactions above Rs 2,000. Below Rs 2,000, there are no charges on such transactions. The MDR is a fee charged by banks for processing transactions. These charges are often market-determined.

    “Most banks are still testing how the RuPay credit card on UPI will pan out. Barring a couple of banks like Bank of Baroda or HDFC Bank, not a lot of people have started issuing cards widely. Mostly, banks are giving it to their existing customers,” Mohit Bedi, cofounder of credit on UPI startup Kiwi, said.

    The number of merchants that can potentially be integrated into the credit card on UPI ecosystem is over 30 times more than those with point-of-sale terminals, which could offset the lower interchange fee from RuPay card transactions compared to Visa and Mastercard, Bedi said.

    UPI integration gives a fillip to RuPay credit cards distribution (2024)
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