Teji Mandi Explains: Will the future of UPI change?

From the UPI transaction of Rs 38 lakhs in 2016 to the UPI transaction of Rs 10 lakh crore in 2022, we have come a long way in a short time

Teji MandiUpdated: Monday, June 13, 2022, 04:46 PM IST
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What’s Happening?

UPI, i.e. Unified Payments Interface, is used everywhere, from grocery shops to luxury retail stores. It has made life simpler with just one click. Ever since its launch in 2016, UPI has achieved various milestones. In October 2019, it recorded one billion transactions in a month. UPI continued with its success story, especially during COVID-19, when everyone avoided cash transactions. Today, it is the most preferred digital mode of payment.

The Reserve Bank of India announced that credit cards could soon be linked to UPI. This means your credit cards can now rest in your drawers. This also means more transactions via UPI and big profits for PhonePe and Google Pay. But the biggest catch of the story is that this facility is only for indigenous RuPay credit card users. Individuals with other credit cards, such as Visa or MasterCard will have to wait a little longer.

Where’s The Silver Lining?

It is an innovative and strategic step to link credit cards with UPI, as it will promote the ultimate mission of digital India whilst promoting transactions through UPI. Small businesses and startups will flourish as they can now use credit cards with UPI to make transactions. This will help the economy stand amidst all the gloom and doom.

Should This Concern You?

There are some concerns related to the linkage. There’s no clarity on the Merchant Discount Rate (MDR) applied to UPI transactions via credit cards. The MDR is a fee that a merchant is charged by their issuing bank for accepting payments from their customers via credit and debit cards. Until the RBI gives out proper details on the linkage, there will be ambiguities.

What Lies Ahead?

Small merchants and UPI acquirers like BharatPe, PhonePe etc., will be benefitted. Banks that give out RuPay credit cards will be in demand. Cash usage will get even lower while UPI will take over future transactions.

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