Since its introduction in 2016, the Unified Payments Interface (UPI) has revolutionized the payment landscape, significantly benefiting India’s rapidly growing economy, particularly its young population and dynamic startup ecosystem. A recent PwC India report highlights UPI as the bedrock of Indiaโs digital payment infrastructure, with a remarkable annual transaction growth rate of nearly 60%. PwC projections anticipate daily UPI transactions could reach an impressive 1 billion by fiscal year 2026โ27. This extraordinary expansion is driven by UPI’s widespread availability both online and offline, along with its intuitive interface for users. UPI’s success has even inspired other countries, such as the UAE and Singapore, to adopt it for facilitating transactions for Indian consumers.
UPI has emerged as a strong competitor to credit cards, especially for small-ticket transactions, and was favoured by both customers and merchants. In June 2022, the Reserve Bank of India (RBI) made a landmark decision to link RuPay Credit Cards with UPI, sparking enthusiasm within the Indian credit card industry. This move was anticipated given the substantial transaction volumes of UPI compared to credit cards.
In 2023, credit card issuers began rolling out RuPay Credit Cards integrated with UPI.
Benefits of UPI-Linked Credit Cards:
- Simplified Payments
Integrating credit cards with UPI removes the need for physical cards or wallets, allowing transactions with just a mobile phone. Forgetting card details like the number, expiry date, and CVV is no longer an issue; a simple UPI PIN suffices. The consistent and user-friendly interface across UPI apps makes it easy for users of all backgrounds to adapt, including those new to the credit card feature on the UPI platform. - Broad Acceptance
UPI-linked credit cards expand acceptance and enable micro-transactions. Whether shopping at major retailers or small local vendors, UPI-enabled credit cards facilitate seamless transactions, regardless of merchant size or location. This inclusion underscores the role of UPI-linked credit cards in advancing financial inclusion, bridging gaps, and promoting grassroots economic empowerment. - Advantages for Merchants and Consumers
By enabling credit card use through UPI, small merchants who typically don’t accept card payments via traditional POS systems will likely see increased business. UPI is commonly used for everyday expenses, making it easier for customers to use their RuPay Credit Cards at any UPI-accepting merchant, including smaller businesses. This not only enhances convenience but also reduces fraud and loss risks. - Cost-Effective Transactions
UPI transactions are usually low-cost or free, encouraging broader participation in digital payments, particularly among economically weaker segments. This affordability is crucial for financial inclusion, as high transaction costs can be a barrier. - Encouraging Savings
Some UPI-linked credit cards offer cash-back rewards or discounts on transactions. Users can earn rewards on all transactions, including smaller ones, which is a notable advantage over debit cards. Credit cards with travel points or other rewards programs can also accrue benefits through UPI transactions, promoting responsible credit use and savings. - Credit Limit Benefits
UPI-linked credit cards are particularly advantageous for large purchases. Credit cards typically offer higher credit limits than debit cards, allowing users to make significant purchases even if their bank account balance is insufficient. - Building a Healthy Credit Score
Using UPI-linked credit cards for payments can help build a strong credit score. Consistently paying off credit card bills on time through UPI demonstrates responsible financial behaviour, which is crucial for creditworthiness. Regular use and prompt payment through UPI contribute to a positive credit history and improved credit score over time.
Looking Ahead
Financial institutions are working to educate customers that linking RuPay Credit Cards to UPI is as simple as linking a bank account and provides all the benefits of a credit card. Effective communication at all customer touchpoints, including points of sale and in easily understandable language, will accelerate the adoption of UPI-credit card integration.
In conclusion, integrating UPI with credit card payments marks a significant step in Indiaโs journey toward financial inclusion. By combining UPI’s extensive reach with the versatility of credit cards, new opportunities for economic empowerment and growth are emerging. As UPI-credit card payments gain traction, they are set to democratize digital payments and foster a more resilient, inclusive financial ecosystem. With continued support from regulators, financial institutions, and technology providers, UPI integration is poised to shape the future of credit card payments, enhancing financial inclusion and empowerment for millions.