What could be the implication of UPI in credit card transactions?

RBI in its monetary policy announced on 08th June, proposed allowing linking of credit cards with UPI or Unified Payment Interface. Currently, the UPI has monthly volumes that are nearly 10 times the volume of credit card transactions in an average month. In the process, the credit card companies stand to benefit as they gain access to a much wider audience. This is a big shift from the existing situation wherein the UPI id can only be linked to a bank account. UPI id is a @-separated value to identify a particular bank account.

What does linking credit card to UPI really mean from a practical perspective? It would provide a boost to credit card transactions because now at various shopping outlets, you can pay with your credit card without actually swiping the credit card. The credit card transaction can be authorized with the UPI id linked to the credit card account and it can be authenticated either with the help of a digital QR code or an OTP authentication.

For starters, things will take time. RBI has just asked the National Payments Corporation of India (NPCI) to first work out the detailed framework. Also, to begin with, RBI will only allow this facility with RuPay credit cards and will not be available for Visa and Mastercard transactions. What that could impact scaling up of volumes, RuPay is a good place to start. The answer is in numbers. Credit cards have penetration of just 5.55% in India and their monthly transaction volumes are a tenth of UPI. It is a big boost to credit cards.