Steps to Link Credit Card with UPI

the story So Far: The Reserve Bank of India (RBI) has proposed to allow linking of credit cards with the Unified Payments Interface (UPI) platform. The move is part of the central bank’s efforts to widen the scope of UPI. Announcing the move, RBI Governor Shaktikanta Das said that RuPay credit cards issued by the RBI-promoted National Payments Corporation of India (NPCI) would be enabled first, and would become available after the development of the system. UPI, which is also managed by NPCI, was first introduced in 2016.

What is the explanation of the attempt to link the credit card to UPI?

UPI, over time, has become a popular mode of payment in India with over 260 million unique users and 50 million merchants on the platform. In May 2022, around 594 crore transactions amounting to ₹10.4 lakh crore were processed through the interface.

Currently, UPI facilitates transactions by linking savings/current accounts through debit cards of users. It is now proposed to allow linking of credit cards on the UPI platform. It aims to provide additional convenience to the users and widen the scope of digital payments.

When will the facility be made available?

This facility will be available after the completion of required system development. RBI will issue necessary instructions separately to NPCI for facilitating the change. Firstly, the indigenous RuPay credit card will be linked to the UPI platform. This is likely to be followed by other card networks such as Visa and Mastercard which will bring in more users.

What is the benefit of this provision?

This arrangement is expected to provide an additional opportunity to the customers for payment and hence increase the convenience. Credit card linking with UPI has been proposed to further deepen the reach and usage of credit cards.

Why do officials expect the move to boost credit card usage?

This is expected to boost transactions and acceptance on more merchant sites. People who generally prefer to make credit card payments to avail longer pay-back periods or loans on credit-card dues, or who don’t want to touch their savings at the time of purchase, can go through UPI You can pay using credit card. ,

Currently, many merchants do not have credit card point-of-sale (POS) terminals, especially in semi-urban and rural areas, but a significant number have QR code-based UPI acceptance facility. Now, they will also be able to accept credit payments through UPI without a PoS device.

Linking credit cards to UPI is likely to increase the use of such cards in small-sized payments, as it will provide users with more options to make payments. The move will lead to a significant increase in overall spending through credit cards – currently, spending through credit card usage is more than double the average spend through debit cards. Higher spending is generally a force multiplier for the economy.

Apart from accelerating digital transactions, the measure is also expected to impact the average ticket size of financial transactions. Currently the average ticket size per transaction is ₹1,600 while it is ₹4,000 for credit cards. Hence, with the new development, the UPI transaction ticket size is likely to go up from around ₹3,000 to ₹4,000, claim analysts. Many people use credit cards for rewards and benefits and UPI for its convenience and security. The new provision of linking credit cards with UPI brings these two benefits together.

It will be convenient for kirana stores where credit cards are not accepted, to accept credit card payments through UPI.

Will the merchant discount rate be applicable for these payments?

There is no word yet on the merchant discount rate (MDR) applicable on transactions using credit card numbers through UPI, other than RuPay, on which no such charges are levied. Today, since foreign card issuers such as Visa and MasterCard account for a substantial portion of the credit card network business, a portion of the fees goes to them. However, the Government of India has shown its intention to promote the indigenous RuPay card system. It remains to be seen whether this actually proves to be more economical for merchants to accept payments from users with credit cards from foreign issuers.

• Reserve Bank of India proposes to allow linking of credit cards with Unified Payments Interface platform

• UPI has become a popular mode of payment in India with over 260 million unique users and 50 million merchants on the platform

• Linking credit cards to UPI is likely to increase the use of such cards in small-sized payments, as it will provide users with more options to make payments. The move will lead to a significant increase in total spending through credit cards