UPI powers RuPays rise as the new star in card firmament
UPI or United Payments Interface, powers RuPay, the indigenous credit card network. In late 2022, RBI approved the proposal to link RuPay credit cards exclusively to the UPI platform. This is thought to have powered the market share of RuPay in credit cards to jump from about 3% to about 16% now.
Kolkata: Credit cards are storming the Indian consumer landscape and RuPay is the emerging star in this firmament, data suggest. Data from Bernstein show that RuPay credit card, India's domestic card network, has come to account for about 16% of the market share in credit cards now. The phenomenal rise is mainly attributed to the fact that in late 2022, Reserve Bank of India (RBI) allowed RuPay credit cards to be linked exclusively to the UPI platform, the world beater digital payment from India.
"A combination of wider merchant acceptance and a lower MDR structure for smaller merchants has accelerated adoption... If UPI linkage remains exclusive to RuPay, it is poised to emerge as the dominant network in credit cards, potentially commanding an even higher share than that reported earlier by the Ministry of Finance - where RuPay credit cards accounted for 50% of new issuances and 30% of transaction volumes as of June 2024," mentioned Pranav Gundlapalle, head of India financials at Bernstein in a recent note.
Riding piggyback on UPI
Rules now allow credit card transactions through UPI. This modification has immensely benefitted India's domestic card network. UPI-linked credit card transactions have come to account for nearly 40% of the total by volume, data from Bernstein have indicated. A few pieces of data show how RuPay is riding piggyback on UPI. More than 5 crore merchants now use UPI for transactions but fewer than 1 crore merchants have PoS devices that accept all credit cards. RuPay credit card transactions on UPI attract merchant discount rates (MDR) only for large merchants. MDR is charged if the transaction exceeds Rs 2,000 at small merchants. This has resulted in wide usage among smaller retailers.
"Linking of RuPay credit cards on UPI has revolutionised digital payments by combining UPI's simplicity with credit flexibility... Users can make seamless QR-based transactions while enjoying rewards and consolidated billing. This innovation has significantly boosted credit card adoption and usage, fuelling transaction volumes and deepening credit penetration," consultancy major PwC wrote in a report.
Further growth possible
Experts have also pointed out that volumes of transaction can rise even further as UPI can push credit acceptance in the small merchant category. But it will not be easy to carve out a leading market share in terms of value since the transactions are mainly small-ticket ones, or below Rs 2,000. By the way, the average value of transaction for UPI-linked credit card expenditure of less than even Rs 1,000 nowadays. The largest bank in India, SBI, is enjoying a surge in UPI-linked credit card transactions.