EXPANDING THE DIGITAL FOOTPRINT

Unified Payments Interface (UPI) has transformed mobile payments in India. With integration of credit cards with UPI, the landscape could change further

Over the past five years, scores of Indians have experienced a very different kind of payment mechanism at both the large stores and street vendors. The digital financial transaction ecosystem has evolved from the early days with the successful and widespread implementation as well as acceptance of the UPI (Unified Payments Interface). UPI allows bank customers to make real-time bank transfers by linking their savings or current accounts with debit cards.

Today, people in small centres are as aware of the QR code as those in the higher income group. The UPI success story, which has made financial transactions at no cost possible, is a case study in itself. According to Reserve Bank of India data, the UPI platform has over 260 million unique users and 50 million businesses.

In May 2022 alone, UPI executed more than 5.9 billion transactions worth a total of Rs 10.40 lakh crore. This can only go up each passing month as Indians adapt and adopt digital transactions. The acceptance has much to do with adoption of technology among the masses, superior internet connectivity, simple transaction platforms and safety in transactions.

➘ LINKING CREDIT CARD TO UPI

In June 2022, the RBI governor announced that credit cards could now be linked to UPI. According to the RBI circular, credit cards issued on the RuPay Network will be first linked with UPI, which would allow you to link your credit card account with UPI in the near future, making it possible to make payments at UPIenabled merchant QR codes without the need for physical credit cards. As the UPI system does away with the need for PoS (Point of Sale) terminals, the merchants accepting credit cards will save on costs as they do not need to depend on the PoS any more. Payments could be processed using the QR code or the registered mobile number, allowing flexibility to merchants.

Currently, payments through credit cards need the card to be swiped or tapped. Although merchants may need to wait for up to T+2 (transaction date plus 2 days) of settlement process before the money hits their accounts, often it is instantaneous or happens the next day. The RBI’s move will enhance the transaction volumes for fintechs. As for consumers, how the credit card reward points will come into play besides cashback features when using the UPI facility needs to be seen.

Moreover, how fintechs could monetise is a question yet to be answered because currently UPI has no monetisation model. For now, consumers can enjoy the convenience of credit cards over UPI and merchants can save on transaction costs when accepting UPI-linked card payments. ■