New Push For Payments

India is ripe for a massive expansion of the digital payments market, thanks to the rise in e-commerce adoption and fintech app installs as well as the increase in active internet and smartphones users. Banking regulator Reserve Bank of India (RBI) sees the Indian digital payment market reaching 21,700 crore transactions by 2026. Now, the RBI has proposed to allow the linking of credit cards on the UPI platform. This, experts say, will boost digital payments like never before.

In FY22, the volume of digital payments in India increased 33 per cent year on year (YoY) with a total of 7,422 crore digital payment transactions recorded during this period, up from 5,554 crore transactions seen in FY21. The Unified Payment Interface (UPI) from the National Payments Council of India was the most used platform for digital transactions during the period, accounting for 452.75 crore transactions with a value of Rs 8.27 lakh crore, until the end of February. UPI has constituted a large part of the digital push that has transformed the payment infrastructure in the country. As per RBI data, there are over 26 crore unique users and 5 crore merchants on the platform, making it the most inclusive mode of payment.

"The growth will come riding on the back of growing acceptance of existing digital modes and novel payment offerings such as buy-now-pay-later schemes and offline payments. The Indian digital payment market is expected to reach 21,700 crore transactions by 2026," said the RBI in its latest annual report.  

UPI Leads 
Sample this: UPI has become a widely used mode of payment in India and currently facilitates around 595 crore transactions a month amounting to Rs 10 lakh crore only by linking savings and current accounts through debit cards. Once linked to credit cards, there will be a manifold increase in the amount. As per the latest data, there are around 6.5 crore active credit cards in India (7.5 crore credit cards issued) with an average minimum credit limit of Rs 30,000-Rs 50,000.

On the proposed linking of credit cards to UPI, Anuj Kacker, Co-founder and COO, Freo (formerly MoneyTap) says, "This is a welcome move by the RBI. While the implementation of this move still needs to be worked out, conceptually, we believe that this is a step in the right direction for the country's larger population. With the added layer of a credit card linked to UPI, we believe that customers who didn't have access to a credit card previously but want the experience of a 30-day interest-free credit will now become a reality, thereby broadening the scope of digital payments. As a credit-led neo bank, we are excited to explore the various possibilities on the UPI platform."

UPI has been a large part of the digital push that has transformed the payment infrastructure in the country. As per RBI data, there are more than 26 crore unique users and 5 crore merchants on the platform, making it the most inclusive mode of payment. Till now, UPI allowed linking of debit cards on its platform. But the latest RBI proposal on linking credit cards to UPI (starting with RuPay) is aimed at providing additional convenience to users and enhancing scope of digital payments. Necessary instructions for linking credit cards to UPI are expected to come from NPCI after due discussions with various stakeholders.

On Growth Path 
"The overall impact on digital payments is expected to be significant as this opens up credit payments or short-term loans on UPI payments as opposed to the only option of immediate debit from bank account under the current system," says Vivek Goel, Co-founder and Joint Managing Director, Tailwind Financial Services, a new edge wealth management platform with the vision to be a one-stop solution for all investment needs.

Dewang Neralla, CEO, NTT DATA Payment Services hopes that after Rupay, the linkage will be extended to other credit cards so that a large number of consumers are included. "This would also add to safety with card data securely in the hands of the users now and make the QR code ubiquitous for debit card as well as credit card based payments in times to come," he says.  

Muralidharan Srinivasan, Head of Payments, APMEA Region, FIS says this move will pave the way for other geographies to adopt UPI much faster. FIS is an American multinational corporation which offers a wide range of financial products and services. "RBI’s latest announcement linking UPI to credit cards is a great move towards cashless economy,” Srinivasan adds.  

However, not everyone is convinced of the RBI's move at this juncture. Rumki Majumdar, Economist, Deloitte India says: “With steps taken to increase the penetration of digital payment systems, it is expected that the velocity of money (the pace at which an average rupee changes hand) will likely be rising in the future. It will also add to inflationary pressures.”

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