The Reserve Bank of India (RBI) has now recommended linking credit cards to UPI networks.
The announcement was made by RBI Governor Shaktikanta Das in his monetary policy speech on June 8.
Currently, UPI allows transactions by linking customers' debit cards to their savings or current accounts.
UPI apps also allow individuals to add credit and debit cards to make payments to merchants. it does not allow for non-merchant payments.
"Rupay credit cards will be enabled with this facility. This arrangement is expected to provide more avenues and convenience to the customers in making payments through UPI platform. This facility would be available after the required system development is complete," RBI stated.
"This will provide additional convenience to the users and enhance the scope of digital payments," the governor said.
Necessary instructions will be issued to National Payments Corporation of India (NPCI) separately, it added.
By adding one's credit or debit card to UPI apps, one can make payment without the need to swipe it at POS machine.
How it works?
Scan a QR code and choose the added credit/debit card as payment method to make the payment.
Once you initiate a payment through the UPI app using a debit or credit card, a one-time password (OTP) is sent to your registered mobile number to complete the payment.
Pay via credit, debit card using Gpay
To pay via credit or debit card using GPay, add the cards to the UPI app.
An individual can add debit, credit cards of the following banks--Axis Bank, SBI, SBI cards, Kotak Bank, HDFC Bank, IndusInd Bank, Federal Bank, RBL Bank, HSBC Bank,ICICI Bank, One Card--provided they are operated on Visa and MasterCard payment gateways, according to GPay.
Here's how you can add the credit, debit card on Gpay
Open the app and click on your profile picture
Click on the payment methods. The app will show current bank accounts that are added on the app. Click on 'Add credit or debit card' to add your card on the Gpay.
Enter your card number, expiry date, CVV and cardholder's name and billing address
Click on Save
Accept the issuer's terms and conditions
Click on 'Activate' to start paying in stores and in merchants
A one-time password (OTP) will be sent to your registered mobile number for authentication. Once you have verified your card, you can use it to pay for transactions.
As per the GPay website, credit or debit card can be used for the following types of transactions:
1) Tap & Pay at NFC enabled payment terminals
2) Bharat QR code-based payments at online & offline merchants
3) Bill payments and Recharges on Google Pay
4) Online payments on Myntra, Dunzo, Yatra, MagicPin, Coolwinks, EaseMyTrip, Confirmtkt android apps.
Pay via credit or debit card using PhonePe app
Add the credit or debit card as one of the payment methods on the app
Check payment methods. Click on 'Add new card'.
Enter card details, which will be verified by debiting Re 1 from your account
Payments using credit card can be made for products and services offered on PhonePe App or to PhonePe merchants and sellers, according to the website.
Pay via credit or debit card using Paytm app
The steps to be followed are same as mentioned above to add credit or debit card in the Paytm app.
Once the card is successfully verified, then it can be used for payments.
The Paytm app also supports all debit, credit cards for making payments.
UPI most inclusive mode of payment
UPI has become the most inclusive mode of payment in India, with over 26 crore unique users and 5 crore merchants onboarded on the platform, RBI governor Shaktikanta Das said.
The interoperability of prepaid payment instruments (PPIs) has also facilitated access of PPIs to the UPI payment system for undertaking transactions, Governor Das said, adding the central bank also proposed to enhance the e-mandate limit on cards for recurring payments from Rs 5,000 to Rs 15,000.
Shaktikanta Das said, in May 2022 alone, 594.63 crore transactions amounting to Rs 10.40 lakh crore were processed through UPI. So far, a major disadvantage of UPI transactions has been the inability to utilise credit cards for any transaction.
Regarding MDR and other fee structures of linking other credit cards besides RuPay with UPI, RBI Deputy Governor T Rabi Sankar clarified in an post-policy announcement conference, "Thinking of the pricing structure will be jumping the gun. The basic objective of linking credit cards to UPI is to provide a customer a wider choice of payments. How the pricing of that will work out we will have to see because that is something that the banks and other entities will have to do. At this point we will just introduce the arrangement."
The addition of RuPay credit cards adds a credit line facility to UPI. Pranay Jhaveri, Managing Director - India & South Asia, Euronet Worldwide, said, Traditional UPI apps were using the facility to pay the beneficiary directly from bank accounts. Having a choice of payment, benefits both the merchant and the customer, as now the UPI payment can be done using a RuPay credit card without the merchant having a card-enabled POS terminal. The user needs to scan the QR code and can now choose RuPay credit card as the payment mode. While software changes will be required at the front end and back end, we are optimistic that this support will be available to the general public very soon, Jhaveri said.
Terming the RBI's move as a game-changer, Murali Nair, President-Banking, Zeta, said, it will provide a significant boost to overall credit card spends and off-take in the market. The neighbourhood Kirana store where credit cards hitherto were not used will now find it economical to accept credit card payments through UPI. This is yet another example of a forward-looking move by the central bank, he said.
Over a period of time, UPI has become a transaction channel of choice for consumers for digital payments. With linking of credit cards to UPI, this would add on to the convenience for consumers, who would not need to use their physical card, said Dewang Neralla, CEO - NTT DATA Payment Services India Ltd. Although this would be started for Rupay credit cards, we hope this is extended to other card schemes soon enough so that a large part of consumers are included, he said, adding, this would also add onto safety with card data securely in hands of the users now and make the QR Code ubiquitous for debit card/account as well as credit card-based payments in times to come.
Swapnil Bhaskar, Head of Strategy, Niyo (millennial-focused neo-banking fintech ) said linking of credit card with UPI will increase the usage of credit card in small ticket size payment since it will provide users with more options to chose as their mode of payment. Linking of credit card to UPI was always anticipated and it will certainly expand the footprints of digital payments in India, he added.
RBI has offered a lucrative solution of synchronising credit cards on UPI platforms, this move will encourage the reach and utility of both credit cards and UPI, said Deepti Sanghi, Co-Founder and CEO, Kodo. The acceptance infrastructure for credit cards can dramatically increase as merchants will be able accept credit card payments over their UPI accounts. Sanghi said, since there is no MDR charged to merchants for UPI payments, there is an open question of how will the credit card issuers cover their cost of capital and how will the underlying infrastructure support this.
