UPI-card integration paves the way for more credit card-like products offered by banks

The RBI’s latest decision to include pre-approved credit lines by banks in UPI transactions will further allow customers to quickly avail credit options by linking their UPI accounts with the scheduled commercial banks.

The advent of the Unified Payments Interface (UPI) has led to a revolution in the digital payments industry across India. Besides facilitating a seamless transition from a “cash-centric economy” to “non-cash payments”, UPI has paved the way for increased use and access of financial services, fostering global financial inclusion.

Today, most Indians, predominantly millennials and Gen Z, have adapted to using UPI for even the smallest of transactions, nearly half of which are classified as micropayments. The scan-and-pay system has enabled users to make real-time payments, transfer money, and avail rewards & cashbacks – all without adding beneficiaries or entering bank details.

The UPI-Card Union  

Adding to this list of features is the advantage of linking debit and credit cards with UPI, which is not only convenient but also favourable for those who prefer UPI as compared to swiping their cards. With the rising need for a more inclusive payment system, which spans beyond just linking bank accounts, the possibility of linking cards to the UPI platform has emerged as a powerful model.

Imagine having your UPI, card networks, and bank accounts all rolled into one. The union of these aggregators gives users more options to make payments, manage finances, and streamline investment transactions with utmost efficiency using their smartphones, eliminating the need to carry cash or cards and switch between multiple apps or services.

Moreover, the Reserve Bank of India’s latest decision to include pre-approved credit lines by banks in UPI transactions will further allow customers to quickly avail credit options by linking their UPI accounts with the scheduled commercial banks. So, customers who need to make a large purchase but don't have enough funds in their account can now avail of credit instantly, without having to apply for a separate credit card or loan.

Also read | Making UPI payments via RuPay credit cards: Is it worth it?

This groundbreaking addition has extensive significance, especially for those who remain out of credit-card based transactions. With embedded credit services, customers can also enjoy flexible repayment options and choose to pay back the credit amount in instalments, making it easier to manage finances.

While traditionally credit cards have been one of the popular methods of accessing unsecured borrowing, including digital credit; the recent announcement has empowered banks to facilitate credit products that follow the footsteps of credit card offerings. Interestingly, this is possible without using physical credit cards or deploying high-end infrastructure like POS or card swipe machines. This move is especially important because it will further reinforce the purchasing power of consumers and fuel the overall economic growth of the country.

Also read | How to use digital Rupee to make UPI payments

The Future 

Though there are some challenges in this scenario, too, but in the grand scheme of things, the ongoing technological advancements and innovations will help overcome them and put the power of financial control firmly in the hands of the consumers. With UPI’s efficiency and RBI’s latest announcement, one thing is clear that we are most likely to see the rise of credit card-like products offered by private sector banks.

So, the players venturing into this space will hereon have to focus on risk analysis and management while extending convenience, user-friendliness, and scale of transactions.