UPI Payment Through Credit Card: How It Will Work
UPI Payment by Credit Card: In a move that will widen the scope of digital payments in the country, the Reserve Bank of India (RBI) has allowed the integration of credit cards with the Unified Payments Interface (UPI) for payments. Launched in 2016, UPI has been instrumental in transforming the digital economy of the country and has emerged as the preferred digital payment option of citizens.
As of now, only debit cards linked to savings bank accounts and current accounts are allowed to be linked with the UPI platform. RBI Governor Shaltikanta Das said that the basic objective of linking credit cards with UPI is to provide the customer with a wider choice of payment options.
As per RBI data, UPI has over 26 crore unique users and 5 crore merchants. Data from the central bank shows that 594.63 crore transactions worth Rs 10.40 lakh crore were processed through UPI in May.
Firstly, the central bank said that it is allowing the facility to be availed through RuPay credit cards. Though the RuPay network, which is billed as an indigenous alternative to global giants such as Mastercard and Visa, has a lower market share in this segment, experts say the RBI’s decision to expand the market for credit by almost five times. has capacity. The total outstanding against credit cards as of April stood at Rs 1.5 lakh crore.
UPI Payment Through Credit Card: How It Will Work
SBI Chairman Dinesh Khara said that linking credit cards with UPI will be very similar to linking debit cards. This will provide more opportunities and convenience to the customers in making payments through the platform.
Mehul Mistry, Global Head Strategy, Digital Financial Services and Partnerships, Wibmo, a PayU company, said the decision will boost customer convenience and digitization. He said that by linking the credit card with UPI, customers will be able to transact using the same credit line at merchant establishments accepting UPI payments.
“Therefore, there is no additional credit risk on those customers,” he said, adding that there should be no additional threat or financial fraud given the UPI framework, which works on two factors of authentication – device binding and UPI PIN. “Both will be applicable for UPI transactions as well as linked credit cards. In fact, UPI also helps tokenized cards by creating a token (UPI ID) which ensures that the card number does not travel across the payment ecosystem. “
no need for POS
Euronet Worldwide Managing Director, India and South Asia Pranay Jhaveri said the move will lead to higher card usage levels and increase per card spend for banks that operate a higher share of RuPay cards. Customers can now pay at the merchant who does not have a Point-of-Sale (POS) terminal to process the payment through the card.
“Traditional UPI apps were using the facility to pay the beneficiary directly from the bank accounts. With the addition of RuPay credit card, the facility of credit line in UPI is added. Having the option of payment benefits both the merchant and the customer, as now UPI payments can be done using RuPay credit cards for which the merchant does not have a card-enabled POS terminal,” Prannoy said.
How much will the bank charge for the service?
Now comes the pricing part. The central bank has not announced any charges for using credit cards for UPI payments and has left it to banks to determine the pricing.
To a specific question indicating the difference between UPI and credit cards from a usage fee perspective, Mehul said the pricing structure for such a service would be akin to jumping the gun right now.
Currently, making UPI payments through a debit card or savings account is free. However, the mechanism is a bit different when it comes to making payments through credit cards. Credit card companies typically rely on the merchant discount rate (MDR), which is charged on each use to make merchant payments, as a revenue stream.
Read more: RBI allows linking of credit cards with UPI platform