One of the surprising announcements during last week’s Monetary Policy Committee meeting was the decision taken by the Reserve Bank of India (RBI) to allow linkage of credit cards with a Unified Payments Interface (or UPI) account. As per the RBI, the central bank, for the moment, has allowed the linking of all RuPay-enabled credit cards with UPI. This is considered a welcome step by experts as now payment through credit cards will become more accessible through QR codes without the need of a Point of Sale (PoS) machine.
UPI is an instant real-time payment system that powers multiple bank accounts into a single mobile application and facilitates inter-bank transactions using a mobile phone.
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“Today there are two types of merchants — organised and unorganised merchant. Organised merchants are like ShoppersStop who accept card payments and UPI payments. There are large number of unorganised merchants who accept UPI payments only as P2P (Person to Person). For them accepting UPI payments is free and they will be able to accept UPI payments from a credit card,” explains Nitin Gupta, founder and CEO, Uni, a fintech start-up.
But will it give a headstart to RuPay cards?
“It is not that RuPay will become popular, this facility will also be available on Visa and Mastercard soon. While it starts with RuPay and the government can have a lot of influence on RuPay, it will be very cost-effective for the middle class or lower middle class of India. But I don’t think RuPay will have a huge headstart or advantage here, eventually, Visa and Mastercard also will offer this.”
Experts say that the linkage could lead to a rise in acceptability as many merchants don’t have credit card PoS terminals, especially in semi-urban and rural areas, but most of them have UPI QR code-based acceptance. It will also help customers who want to use credit cards for its reward benefit and UPI for its ease of use and security.
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Mandar Agashe, founder and MD of Sarvatra Technologies, a lending solutions provider, is of the opinion that the linkage will promote the notion of digital India, propelling it forward for more adoption.
“It is an innovative and strategic step to link credit card with UPI, as it will promote the ultimate mission of digital India whilst promoting transactions through UPI. Now a consumer who wants to pay using his/her credit card can do it via UPI, with credit card being a back-end instrument. It will not only accelerate digital transactions but will also affect the average ticket size of the transaction. At present, the average ticket size is Rs 1,600 per transaction while that of a credit card is around Rs 4,000. So, now with this development the UPI ticket size is likely to go up somewhere around Rs. 3,000- 4,000.”
Similarly, Dewang Neralla, CEO – NTT DATA Payment Services India, adds, “Over a period of time, UPI has become a transaction channel of choice for consumers for digital payments. With linking of credit cards to UPI, this would add on to the convenience for consumers, who would not need to use their physical card. Although this would be started for Rupay credit cards, we hope this is extended to other card schemes soon enough so that a large part of consumers are included. This would also add onto safety with card data securely in hands of the users now and make the QR Code ubiquitous for debit card/account as well as credit card-based payments in times to come.”
