Banking institutions and Financial Technology (FinTech) firms anticipate that Unified Payments Interface (UPI) may expand across various other credit products, like Buy Now Pay Later (BNPL), days after the National Payments Corporation of India (NPCI) brought out UPI via credit cards on India’s Global Card payment network, RuPay.
Furthermore, according to a source, the sector anticipates a rise in issuing credit cards as the cost of transactions falls and an increasing number of people begin using the provision. It will lead to a rise in the number of cards issued and used. With more individuals using credit cards, their credit histories will be recorded, boosting the usage of cards in other markets.
Nandan Mohanrao Nilekani, who is the co-founder and non-executive chairman of Infosys as well as an advisor to the NPCI, made a statement saying that in terms of credit, he believes that the introduction of Unified Payments Interface (UPI) and RuPay credit cards marks the beginning of credit products on UPI. As time goes on and the Reserve of India (RBI) gains more trust, it will begin to accept many more credit types via UPI, which will lead to the emergence of new local credit capabilities via UPI, such as BNPL and more.
The RuPay credit cards will be connected to a UPI ID or a Virtual Payment Address (VPA), making it easier for traders or dealers to receive credit card payments without needing a Point of Sale (PoS) system.
As customers often use their credit cards for major expenditures instead of debit cards, it will also assist in increasing the ticket size of transactions via UPI. An expenditure below INR 200 is the threshold for 50% of all UPI transactions.
Although the Merchant Discount Rate (MDR) does not apply to credit card transactions related to UPI, bankers claimed an interchange fee might be. All credit card transactions carry a 2% to 3% MDR fee set by the market. For every offline transaction, retailers must pay MDR to the banking institution, payment gateways, PoS service provider, and card network.
According to the co-founder and CEO of OneCard, Anurag Sinha, UPI is already utilized to a certain capacity in lending products. Most loan repayments, roughly 50%, are made using UPI, as are many credit card repayments. A lot of lenders utilize UPI to confirm borrower account information while confirming the identification of customers. That being said, it forms a crucial component of the credit infrastructure.