By Prakash Sikaria
The Unified Payments Interface (UPI) has been a cornerstone for economic transformation in India, revolutionizing how we transact, shop, and manage our finances. That being said, there is tremendous potential that remains untapped and the UPI story is just beginning. The integration of credit into UPI is poised to unlock a new chapter of growth and innovation, making the platform bigger and more versatile than ever before.
UPI's Remarkable Journey
Since its inception, UPI has grown exponentially, now facilitating 13.8 bn transactions monthly. Its ease of use, interoperability, and real-time processing have made it the preferred choice for 30 crore Indians. UPI has democratized access to digital payments, bringing a diverse population—ranging from urban professionals to rural shopkeepers—into the digital fold. While such wide adoption has been one of UPI's greatest strengths, it is also where the potential for deeper impact lies.
The Credit on UPI Opportunity
Integration of credit into the UPI ecosystem represents a significant opportunity to leapfrog credit payments. Traditionally, credit products like credit cards have been limited by high acquisition costs, MDRs and stringent eligibility criteria. Despite rapid growth over the last few years, in 2024, India credit card count reached 10 crores. However, UPI's wide reach and seamless user experience can easily quadruple this number.
For merchants, especially small businesses, who can now accept credit payments without the necessity for expensive hardware of Rs 6000/ machine and/or 0 MDR, this becomes a very attractive option. For consumers, credit offers financial flexibility, enabling larger purchases or emergency spending without the immediate outflow of cash.
Addressing Challenges
Of course, the promise of democratization of credit is not without challenges. One of the primary concerns is managing credit risk of new-to-credit customers. However, this is where innovation comes into play. Innovative products like secured credit cards, backed by fixed deposits, could offer a win-win solution for both issuers and users. These cards can also serve as a stepping stone for those without a traditional credit history, helping to build a credit profile over time.
As we expand the capabilities of UPI with credit, it is crucial to foster a responsible credit ecosystem. This involves not only offering products that are secure and accessible but also educating users about the importance of responsible borrowing and credit management. Players that deeply invest in financial literacy programs can play a vital role here.
The Road Ahead
The integration of credit into UPI is more than just an upgrade; it's a paradigm shift. It has the potential to further financial inclusion in India, making credit accessible to millions who have been excluded from traditional financial systems. To deliver on this promise financial institutions must reimagine their product portfolio with a UPI first approach.
The UPI revolution is far from over; in fact, it's just getting started. And with credit as a catalyst, the possibilities are limitless.
(The author is Founder & CEO, super.money.)
Views are personal and do not represent the stand of this publication.
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