RuPay introduces UPI payments through its Credit Cards. Details here

The government-backed RuPay credit card is the first of its kind to launch a unified payment interface (UPI), allowing customers to pay for goods and services at merchant outlets by scanning QR codes instead of using a POS terminal. The non-executive chairman of Infosys, Nandan Nilekani, stated in his opening remarks that the Reserve Bank of India (RBI) has become a global leader in fusing regulations and innovations.

“The introduction of UPI and RuPay credit cards, in my opinion, marks the beginning of credit on UPI. To test the waters for credit is a very smart first move. I have no doubt that the RBI will accept more credit options, including BNPL and others, “Nilekani said. The RBI approved the connection of RuPay credit cards to UPI in June. The first three banks to implement UPI linkages are Punjab National Bank, Union Bank of India, and Indian Bank, with many more following soon after.

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Most public sector banks that issue RuPay credit cards will be able to instantly scan them at merchant locations that support QR codes because they will be connected via UPI ID to a virtual payment address. Currently, RuPay credit cards account for one-fifth of all purchases made in India.

Atul Kumar Goel, MD & CEO of Punjab National Bank, stated that there would be no MDR on UPI-linked credit transactions, only a small interchange fee. The bank that issues credit cards will recoup the interest component, particularly the interest from the merchant for the customer’s interest-free credit. Goel, however, declines to go into further detail about the fee element.

As of now, the customer’s debit card connects the UPI to their savings or current account. Transactions using UPI debit do not have MDR. The POS terminal acquirer imposes an MDR on a merchant for credit transactions. The card network (Visa/MasterCard) allocates MDRs among all intermediaries in the POS acquirer, card issuer, and card network. This ground-breaking action will have an impact on the business strategy of international card networks in addition to increasing credit in smaller towns and cities.

First, there will probably be a growth in available credit as UPI credit card linking will enable QR code purchases at many merchant outlets. The high cost of POS terminals previously prevented credit card growth. “A POS machine is not available in rural or semi-urban areas. With the RuPay credit card, a large population will now have access to credit, “NPCI Chairman Biswamohan Mahapatra said.

“A credit card is typically not used at the many businesses today that do not have POS terminals but do have QR codes. So, the entire market will drastically expand, “Founder and MD of Sarvatra Technologies, Mandar Agashe, said. In India, credit is in short supply. The credit to GDP ratio is in the 50s, whereas the ratio in countries like the US is 216%. China has a percentage of 182%.

Second, larger networks like Visa and Mastercard will be compelled to jump on the UPI bandwagon. An MDR of up to 2 to 3 percent of the transaction value is typically assessed by non-RuPay credit cards. RuPay-UPI will become more popular among the general public due to its lower interchange fee. The NPCI also launched UPI Lite, which will provide users with faster low-value transactions. According to the NPCI, India is thriving on low-value UPI payments, with 50% of UPI transactions falling below $200.