Sanjeev Dahiwadkar, Founder & CEO, Moringa Techsolv

Dahiwadkar has 25 years of experience in technology development. He has a high level of expertise in technology, productivity and the design and delivery of cost-effective, high-performance information technology infrastructures and applications to address complex business problems. Dahiwadkar entered his profession as a result of his passion for technology and computers. He pursued the field directly out of high school with the goal of to helping people get more done with less effort.


India has emerged as a global leader in many areas of digital payment. Unified Payment Interface (UPI) has been a game changer in the country’s payment landscape. Launched in 2016, UPI transactions are touching nearly six billion transactions a month, valued at over Rs 10 lakh crore and touching 260 million users. Undoubtedly, UPI has emerged as the best performing real-time ecosystem in the world. Currently, merchants across 10 countries are accepting UPI payments. Against this backdrop, the Reserve Bank of India’s decision to link credit cards to UPI holds much potential. Though this facility is proposed to be implemented for Rupay credit card users initially, it is likely to be extended to other payment gateways in the future. 

Huge fillip to digital transactions on cards:  

Linking credit cards to UPI is expected to give a major boost to digital transactions. Currently, UPI enables transactions by linking savings or current accounts through the debit card of users. Also, access to PPI (pre-paid instruments) to the UPI payment system has been enabled which leads to interoperability of PPIs. So, once the credit card is linked to UPI, it will further deepen the reach and usage of digital transactions. 

Credit card still has a minuscule user base in India as compared to other payment instruments. The country had 73.6 million credit card users by the end of March 2022. However, the growth rate in the user base was around 19 per cent over the previous fiscal year. Hearteningly, the rate of growth in credit card issuance remains impressive. Moreover, the average spending of credit card users in India is more than 20 times compared to that of the debit card user. According to the Reserve Bank of India (RBI) data for March 2022, credit card users spend Rs 14,500 per month on average as compared to Rs 700 debit card spends per month. So, India is expected to see exponential growth in both the number of transactions and the value of transactions after credit cards are linked to UPI. Due to the sheer ease of making a payment, more people are likely to opt for credit card transactions in the future.

Regulatory compliance burden to rise: 

As more innovations make sweeping changes in the financial world, many new risks will also emerge. According to government estimates, the digital payments market in India is likely to reach $1 trillion by 2023. Currently, from small shop owners to the roadside vendor to posh malls; everyone is accepting UPI payments. More users are added each day as the smartphone user base rises across the country. Even, the RBI has announced to launch UPI123 PAY, which will enable feature phone users to do UPI-based transactions. So, coupled with credit card linkage, these steps will provide a major fillip to overall transactions. This means banks have to take care of the new traffic through a secured system and make their IT system more robust to absorb the new volume without disruption. 

Potential change of business model

At present, while accepting UPI payments merchants enjoy no fees. This is not the case with credit cards. Credit card issuance costs prohibit wide issuance to lower usage spectrum. With the UPI link, since the potential cost of collection may be negligible and chances of default risks may be lower, banks may be inclined to issue credit cards with lower limits to regular users of UPI with a better usage history. Banks will have to come up with a no-fee type of model for merchants to keep supporting the new credit card world. I wish, I knew the exact answer to this new business model.

Compliance needs will keep on evolving

Moreover, the fintech ecosystem is evolving each day in India. These new-age internet players are coming up with innovative product offerings frequently. For instance, products like Buy Now, Pay Later (BNPL), peer-to-peer lending, pre-paid instruments, digital wallets, and many more are changing the financial landscape very rapidly. With these changes, the requirement for KYC (know your customer), credit history, and other such credentials are also fast evolving. As these changes happen, regulators are also imposing strict norms to comply with various guidelines for restricting any security breach or lapse in due diligence. 

While on one hand, more customers are joining the digital payment bandwagon, banks and financial institutions are also facing an increasing burden of compliance. Against this backdrop, the need to employ the right technology solutions and partners becomes very critical. The right technology partner can automate most of the compliance burden, which can save a lot of time and cost. Implementation of cutting-edge technology solutions can give early warning to banks about possible breaches or fraud. Therefore, banks, NBFCs, cooperative banks, and new age fintech have to leverage the power of technology to not only comply with new norms but also to cash in emerging opportunities in the lucrative payments space.

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