RuPay’s share of India’s credit card market climbed to 18 percent in October, according to an industry source, marking a significant gain for the domestic network as it chips away at the dominance of Visa, Mastercard and American Express.
RuPay card network, which issues the majority of India’s debit cards, is run by the National Payments Corporation of India (NPCI).
While a recent Bernstein report estimated RuPay’s issuance share at 40 percent, sources said it is closer to one-third of the market, and the network’s share of transaction volumes is now nearing 25 percent.
A major factor behind RuPay’s rising popularity is that its credit cards can be linked to the Unified Payments Interface (UPI), the country’s most widely used payment platform that accounts for nearly 85 percent of all digital transactions.
Since the COVID-19 pandemic, “scan and pay” has become one of the most preferred payment methods for merchants and RuPay credit cards linked to UPI can be used for such payments.
As per RBI data, India currently has about 11 crore active credit cards.
RuPay power
RuPay’s cumulative monthly transaction value on UPI stands at around Rs 18,000 crore, according to the industry source cited above.
Its overall monthly spending, including PoS transactions (swipe and tap-and-pay), is estimated at around Rs 35,000 crore, giving it roughly an 18 percent market share.
More than half of all RuPay credit card transactions now take place through UPI. A year and a half ago, RuPay processed around Rs 10,000 crore worth of monthly transactions.
The overall monthly spending across all credit card networks in India is about Rs 1.8 lakh crore.
Catching up with global giants
The average RuPay transaction value is around Rs 3,400, significantly lower than Visa and Mastercard’s average of about Rs 4,300, as per industry estimates. This is because RuPay credit cards are still used largely for small-ticket, everyday payments that users previously made via UPI.
The lack of a revenue model for UPI has also pushed several smaller fintechs to launch RuPay credit cards in the past year as a way to monetise payments.
A merchant discount rate (MDR) applies to RuPay credit cards, including UPI-based transactions. The MDR collected is shared among issuing banks, the card network, and acquiring banks.
Best of both worlds
The product combines the benefits of credit cards and UPI. Customers get a 40–50 day interest-free period and reward points, along with UPI’s ease of use and wide merchant acceptance. While about 90 lakh businesses accept cards, an estimated 35 crore merchants accept UPI.
To boost visibility, RuPay has been a brand partner for the IPL for the last two years, believed to be spending around Rs 100 crore annually, in addition to other marketing expenses.
Visa and Mastercard offer incentives for banks to join their networks, while banks pay fees to be part of these platforms. RuPay also maintains a budget for merchant offers across e-commerce platforms, quick-commerce apps and food delivery services, costs that are shared by NPCI, banks, and card-issuing fintechs.
Most small-ticket merchant payments in India are still made via debit accounts. Fintechs are now trying to shift these to credit.
Secured credit cards
Many RuPay credit cards are secured by fixed deposits and don’t require a credit history, making them accessible to first-time borrowers. Even in case of default, banks do not lose the principal.
These cards start with a low credit limit of around Rs 10,000, which goes up as the customers pay on time.
This has prompted even large lenders such as HDFC Bank to launch virtual RuPay credit cards under its Pixel brand, with UPI linkage.
Higher engagement
Because UPI, not physical cards, is used for daily small-ticket merchant payments, engagement tends to be higher among RuPay-UPI users. With traditional credit cards, around 60 percent of transactions happen online. With RuPay-UPI credit cards, 70–80 percent of transactions happen offline.
While P2P payments drove UPI’s first five years of growth, merchant payments have dominated growth over the past three years. The next wave of UPI expansion is expected to be driven by credit products.
Merchant payments now account for around 63 percent of all UPI transactions, up from 40 percent in January 2022, indicating a clear shift from P2P to merchant-led usage.
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