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UPI-Credit Card Linking Has Potential To Disrupt Visa, MasterCard Markets, Say Experts; Details

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UPI-Credit Card Linking Proposal: As the number of credit cards in the system is rising at a fast pace, linking them with UPI will give a significant boost to the digital payments platform. The number of credit cards outstanding in India jumped 22 per cent year-on-year in August 2022. The RBI had announced its proposal to allow the linking of credit cards on UPI platforms. Experts said that in the long run, credit on UPI has the potential to disrupt all other scheme providers, including Visa and MasterCard.

The total number of outstanding credit cards in the system stood at about 7.80 crore at the end of August 2022, a significant 21.9 per cent jump as compared with 6.40 crore in August 2021, according to the RBI data.

The UPI payments are also rising at a fast pace. In July, the platform crossed 6 billion transactions, the highest since 2016. It has more than 26 crore unique users and 5 crore merchants. According to an ICRA report, the UPI-based payment throughput more than doubled to Rs 84.16 lakh crore in FY2022 from Rs 41.04 lakh crore in FY2021.

Jaikrishnan G, partner (financial services consulting) at Grant Thornton Bharat, “Physical cards will see a reduction in issuance and usage. Customers will prefer using credit card on UPI as against swiping it. The physical layer of the card management industry will have an impact with a volume decrease. With RuPay cards being the first to be onboarded, this could mean a substantial shift of volumes in favour of RuPay.”

He added that in the long run, credit on UPI has the potential to disrupt all other scheme providers, including Visa and MasterCard. “We envisage that the cost of credit card payment may also come down as the UPI infrastructure is more optimised compared to other payment networks.”

Sachin Castelino, chief strategy and transformation officer of In-Solutions Global, “Just as we saw a significant increase in the use of digital payments as a result of UPI and the fintech industry’s adoption, bringing credit cards to UPI will have a similar effect. This may also increase demand for RuPay credit cards due to the standardisation of the 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 cautious of risks and strengthen their infrastructure to handle the surge in 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 across banks’ ATM networks. Currently, customers of a bank can only use their ATMs to withdraw cash without a card.

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