India’s central bank on Wednesday proposed an integration between UPI and credit cards as a major boost to a burgeoning payment protocol that has become the most popular way for individuals in the South Asian market to transact online.
“UPI facilitates transactions by linking savings or checking accounts through users’ debit cards,” said Shaktikanta Das, governor of the Reserve Bank of India at a briefing.
“It is now proposed to allow linking of credit cards on the UPI platform, the RuPay credit cards will be linked to UPI,” he said. Rupay is India’s proprietary card network, which is promoted by the National Payments Corporation of India, a special body of RBI that also oversees UPI payments.
UPI, a five-year-old payment protocol built by a coalition of retail banks, is the most popular way Indians handle money. In May, the UPI network processed more than 5.9 billion transactions, up from 21 million in the same period five years ago.
By running UPI on top of credit cards, “it will bring added convenience to users and expand the scope of digital payments,” he said.
The governor did not share the aspect of monetizing UPI on top of credit cards.
UPI currently does not have a monetization model, something many fintech executives have expressed concern about and have requested RBI to re-evaluate. The lack of this information is also critical because credit card instruments work with some of the highest discount rates for merchants, splitting them with banks and payment service providers.
During the briefing, the central bank also raised its key rate for a second month in a row. The RBI’s rate-setting panel voted unanimously to raise the repurchase rate by 50 basis points to 4.90%.
“Inflation has risen sharply well above the upper tolerance level,” Das said. “Much of the rise in inflation has been attributed primarily to a series of supply shocks that can be linked to the war.”