The RBI has announced that credit card payments would be made possible using the UPI platform for micro transactions with Kirana retailers and hawkers. Initially, only RuPay credit cards will be able to use this feature.
"The primary goal of integrating credit cards to UPI is to give the client with a broader range of payment options." UPI is now linked to savings or current accounts via debit cards, but it may now be linked to credit card accounts issued by banks, according to RBI deputy governor T Rabi Sankar.
UPI has become India's most inclusive means of payment, according to RBI governor Shaktikanta Das. The UPI platform has about 26 crore unique users and five crore merchants. The UPI network alone handled 594.6 crore transactions worth Rs 10.4 lakh billion in May 2022.
UPI now allows transactions by connecting customers' savings and current accounts via debit cards. Wallets are also being linked to UPI. In comparison, there are 7.5 crore credit cards and more than 61 lakh credit card swipe machines.
Visa is already collaborating with Paytm to simplify credit card payment acceptance via the latter's QR code acceptance network. The remaining difficulty is determining the merchant discount rate (MDR), or the costs that the shopkeeper pays to the bank to facilitate credit card payments.
Sankar stated that the purchase pricing has yet to be finalized. Bankers, however, point out that for smaller merchants, the 2% MDR is not an issue, and that it is mostly the infrastructure cost (card-swipe machines, telephone, and stationery prices) that is a barrier. Bankers argue it would be a better method to provide credit than keeping a tab for every consumer who chooses to pay later.
