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How Will UPI-Credit Card Linking be Different from Credit Card Payment on Paytm, MobiKwik?


Though the Reserve Bank of India (RBI) has allowed the linking of credit cards to the UPI platform, there are various fintech platforms, like Paytm and Mobikwik, that already provide payment facilities through these cards. However, the credit card-UPI linking will be a different offering from the existing ones. Here’s what experts say about the linking:
Platforms That Allow Adding Money Through Credit Cards

Fintech platforms Paytm and Mobikwik allow their users to add money from their credit cards to their wallets. The system allows users to recharge their mobile phones, book tickets and do shopping. Users can simply link their credit cards with their Mobikwik and Paytm IDs and add money from them in the same manner as from debit cards.
How Will UPI-Credit Card Be Different?

Paytm and Mobikwik allow users to add money from credit cards to their wallets only. The wallets amount can be used only on the wallet of the same company. However, the Unified Payment Interface (UPI) allows payments to QR codes of various platforms.

Ankit Gera, co-founder of digital payments firm Junio, said, “Adding money to Paytm wallet allows users to pay only at Paytm QR and it’s not interoperable like UPI QR. You cannot pay using Paytm wallet on a BharatPe UPI QR or a GooglePay UPI QR. Linking credit cards with UPI means users can now pay at any UPI QR whether it’s BharatPe UPI QR, PhonePe, or GooglePay.”

Paytm and Mobikwik also levy two-four per cent charge on adding money from credit cards to their wallets. There is a charge that the fintech companies have to pay to banks for credit card transactions.

At a press conference last week, when asked about charges on the UPI, RBI Deputy Governor T Rabi Sankar said, “How the pricing will work out, that we will have to see as we go forward.”

Currently, merchants are not charged for using UPI, but in the case of credit cards, MDR charges are applicable. This means, for every credit card transaction, merchants pay banks a certain amount. However, on the UPI-credit card linking, much clarity on the MDR charges is not available for now.
How much boost will UPI get from this?

Gera said there may not be an immediate jump in UPI credit card payments unless VISA and MasterCard also accept this move. Currently, only RuPay credit cards can be linked, which have a lower market share.

Aashay Choksey, assistant vice-president (financial sector ratings) of ICRA, said, “As RuPay issued credit cards are still gaining market share, the overall credit outstanding against credit cards which stood at Rs.1.5 lakh crore as on April 22, 2022, is unlikely to grow materially in the near term unless the enhancement in UPI linking is extended to other card platform operators as well.”

The total number of credit cards in the country at the end of April 2022 stood at about 7.52 crore. During the month, total online transactions worth Rs 6,565 crore took place through credit cards, including RuPay, Visa and MasterCard.
How Will The Move Help Small Merchants?

Nitin Gupta, founder & CEO of Uni Cards, said there are two types of merchants — organised and unorganised. “Organised merchants are like Shoppers Stop who accept both card payments and UPI payments. There is a large number of unorganised merchants who only accept UPI payments. For them, accepting UPI payments is free and they will be able to accept UPI payments from a credit card.”

Junio’s Gera also said this move will benefit the small merchants significantly who could not afford to keep expensive PoS (point of sale) machines. It will also bring the comfort of UPI payments to credit card users.
Current UPI Transaction Volumes

RBI Governor Shaktikanta Das, while announcing the decision last week, said, “UPI has become the most inclusive mode of payment in India with over 26 crore unique users and 5 crore merchants on the platform. In May 2022 alone, about 594 crore transactions amounting to Rs 10.4 lakh crore were processed through UPI. Currently, UPI facilitates transactions by linking savings/current accounts through users’ debit cards.”

Rating agency Icra said the UPI-based payment throughput more than doubled to Rs 84.16 lakh crore in FY2022 from Rs 41.04 lakh crore in FY2021.

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