Table of Contents
With over 250 million+ daily transactions, the Unified Payment Interface (UPI) has become the biggest success of the Digital India Initiative. In fact, in FY 2022, 74 billion transactions worth Rs 125.94 trillion were routed through UPI.
Over time, UPI has evolved into the preferred payment mode for customers across India. Digital payments have become faster, smoother, and more secure for customers for tickets of all sizes.
And now India is ready for yet another breakthrough, RBI has announced that now RuPay Credit Cards could be linked to UPI VPAs via platforms like BHIM, PhonePe, and Google Pay. Now users will be able to link their credit cards with the UPI interface to make payments via credit cards as they used to do with their debit cards.
We are pleased to announce that Cashfree Payment Gateway is all set to support credit card payments via UPI. Credit cards on UPI will enable a seamless, digitally enabled credit card payment experience for customers. While individual customers will be able to use their preferred payment mode by using credit cards for UPI, businesses may experience higher conversions and lower cart abandonment.
But, how exactly?
Let’s dig a little deeper.
How Does This Benefit Your Customer?
UPI has emerged as one of the most convenient ways to make payments. However, over the past few years, it was only available for payments from saving accounts and debit cards.
Now, a lot of users tend to use credit cards for big ticket purchases as it allows them to have a higher purchasing power.
Linking credit cards with UPI will ensure that your customers no longer have to carry credit cards with them to make purchases. Now customers can enjoy the convenience of UPI payment with the added benefit of credit purchases. This will improve security for customers by eliminating the risk of credit card theft, POS machine skimming possibilities or entering sensitive pieces of information at the swiping machines.
How Will This Benefit Your Business?
You, as a merchant, do not need to install any hardware or make any special changes to the existing setup. You will now be able to accept credit card payments directly from UPI through QR codes eliminating the extra set-up of POS/swiping machines. Merchants will not only have happy customers with smoother checkout flow, but it will also result in higher value transactions as credit card users tend to have higher average order value (AOV) compared to debit card/cash users. According to the Reserve Bank of India (RBI), credit card users spend 2X times as compared to debit card spends per month.
As dependency on POS devices restrict merchant ecosystem growth, the RuPay credit card on UPI is aimed to increase the penetration and acceptance at merchant outlets. Tier III and Tier IV merchants, across rural markets are also adapting to UPI modes to ease financial inclusion and drive the overall economic development.
What Will Be the Impact on the Credit Card Ecosystem?
Today, UPI is the most popular payment method in India, with over 26 crore unique users and 5 crore+ merchants. While there is a boom in UPI usage the credit card industry is seeing a steady increase of 30%, and only 6% of Indians are actively using credit cards to make purchases. Rupay credit card is operational for the last 4 years and is being issued by almost all the major banks of India.
NPCI (National Payment Corporation of India) and RBI (Reserve Bank of India) are changing the way Indians use credit cards to make payments, by linking credit cards with UPI. It will make credit cards more accessible to the public in general. The convenience of UPI payments, shall improve credit card penetration and expand the current credit ecosystem.
“This will enable users to transact seamlessly with merchants across India on credit rails in line with the government’s vision to expand the structured credit infrastructure in India. It will enable credit cardholders to make transactions through UPI, thereby eliminating the need to carry a physical card.”
To summarise, here is how linking credit cards with UPI can benefit the entire ecosystem:
- Boost to credit rails in India: Linking Credit cards with UPI will boost the use of credit cards as now customers can directly pay by either scanning a QR code at the store or by making a transfer to merchants’ registered mobile numbers.
- Increased use of credit cards: Credit card transactions are usually accompanied by a variety of cashback and reward features., User incentive to grab those rewards might increase the usage of the credit card routes.
- Convenient for customers: Shoppers no longer need to carry physical cards to make payments on credit. The increased ability to pay more on credit while holding on to savings will enable customers to spend more.
- Increased average order value: Average order value tends to increase while shopping via credit cards. With increased credit card acceptance via UPI, the gross total earnings of the merchants will increase.
- Increased credit card acceptance: Credit cards when linked to UPI will have higher usage. The fear of skimming or card theft will reduce, which in turn will empower Indians to choose credit routes to make day-to-day purchases.
How Can Your Users Link Credit Cards To UPI?
The process of linking a RuPay credit card on the UPI platforms is similar to how a user links a savings bank account or debit card on UPI.
To link a RuPay credit card on UPI, your user needs to:
- Head over to the BHIM app on their smartphone.
- Click on the ‘add credit card’ option and select the bank that has issued them the RuPay credit card.
- Enter the last six digits and validity details of the RuPay credit card.
- To verify, they need to enter the OTP received via SMS on the registered mobile number. Once the verification is complete, they can set up the PIN.
Their registration of RuPay credit cards on UPI will then be complete.start using credit cards for their UPI transactions for your or any business.
To make a payment via RuPay credit card on UPI, the user needs to scan the QR code at the store or during checkout and select the RuPay credit card as the payment option. Enter the earlier set UPI PIN and the payment is done.
Note: The mobile number linked to UPI should be in use on the smartphone and should be the same number that is linked to the credit card that the bank has issued.
While these latest developments are exciting for businesses, there are still some limitations. For instance:
- Customers can use the RuPay credit card on the UPI only for select payments i.e., shopping.
- Credit cards linked to UPI cannot be used to transfer money to other individual UPI IDs. For instance, users can not send money to friends and family members through Credit card linked UPI ID.
- The RuPay credit card on the UPI option cannot be used to make payments to any other credit card-UPI VPAs.
- Users also cannot use this option to pay small merchants including small street vendors or vegetable shops if they don’t have a merchant QR code.
Cashfree Payments Speaks: Why This is a Welcome Change
RBI and NPCI announcements on digital payments are expected to expand multifold in the near future. Linking credit cards to UPI is an innovative regulation that India needs.
We can expect a jump in UPI volumes in the short term and credit-card to reach the masses. The financial regulator’s move is set to offer customers the best seamless payment experience of UPI with the benefits of short-term credit and the rewards on credit cards.
