While the current estimate of those who benefit from instant loans is around 50 million, authorizing credit card transactions through the UPI interface should allow nearly all of UPI’s 250 million users to access this credit.
“The fundamental objective of linking credit cards to UPI is to provide customers with a wider choice of payments,” said T Rabi Sankar, Deputy Governor of RBI. “Currently, UPI is linked via debit cards and bank accounts. Now you can also link your credit cards, which improves travel. How the price will work out, we will have to see as we move forward.
For starters, the regulator has allowed this facility to be available through RuPay credit cards.
“Allowing UPI-based payments to credit cards could shift some of the initial spending from savings/checking accounts to credit cards, which in turn could lead to a level of usage of cards and an increase in card spend for banks that operate a higher share of RuPay cards,” Aashay Choksey, assistant vice president, financial sector ratings, told the rating agency. “However, as credit cards issued by RuPay continue to gain market share, this is unlikely to increase significantly in the short term, unless the improvement in UPI linking is also extended to other platform operators Cards.”
Anuj Kacker, co-founder of Freo, a credit-focused neo-bank, said, “With the added layer of a UPI-linked credit card, we think customers who didn’t have access to a credit card before but who want the experience of a 30-day interest-free credit will now be able to do so, expanding the reach of digital payments.
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UPI offers the most inclusive payment method in the country, with more than 260 million unique users and 50 million merchants integrated into the platform. In May, the platform processed nearly 5.95 billion transactions worth Rs 10.40 lakh crore.
UPI-based payment debit more than doubled to Rs 84.16 lakh crore in FY22 from Rs.41.04 lakh crore in FY21. credit stood at nearly Rs 1.5 crore lakh as of April 22, 2022.
“Credit cards serve two main purposes: convenient payments and short-term liquidity, so this is a logical next step,” said Gaurav Chopra, CEO of IndiaLends, an online marketplace for credit products. “UPI has already proven its worth through widespread adoption and bringing the same convenience to accessing credit can be a watershed moment for credit penetration in India.”