Integrate Credit Cards with UPI for payments
RBI, in a new proposal, has requested to allow the linking of credit cards with the UPI. The integration would first begin with the indigenous Rupay credit cards. It has to note that both UPI and Rupay network is currently managed by the same organization called the National Payments Corporation of India NPCI. UPI, as you are all aware, is an instant real-time payment system. It was developed by the National Payments Corporation of India and facilitated interbank transactions. The RBI has regulated this interface and works prominently on instantly transferring funds between two respective bank accounts on a mobile platform.
This linkage of UPI and credit might result in an increase in the usage of credit cards in India’s current widespread UPI adoption. This arrangement would also open avenues to build credit on UPI through credit cards in India. Several startups working on a similar module have emerged in the past few years, namely Slice, Uni, On, etc. This move might also push to increase adoption by banking on the UPI’s already prevalent large base. Currently, UPI can only be linked to bank accounts and debit cards. This arrangement would provide additional convenience to the users and enhance the scope of digital payments.
There are also some hurdles associated with this, and there are some areas we need to address before linking UPI with credit. It is unclear if the Merchant Discount Rate would be applied to the UPI transactions, which would be done through credit cards. Both UPI and Rupay currently attract zero MDR which directly means that no additional charges are applied to these transactions, and this is the key reason why both the users and the merchants prolifically adopt the UPI.
This had received major pushback from the payments industry. This applicability of zero MDR on UPI might also be why other card networks, such as Visa and Mastercard, might not have been onboarded to UPI yet. The progress of the UPI in recent years has been extraordinary, to say the least.
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