MobiKwik and Paytm, for example, now allow customers to link their RuPay credit cards to UPI (Unified Payments Interface) for all merchant payments.
To expand the use of digital payments via UPI, the Reserve Bank of India permitted credit card linkage to the UPI platform in June 2022. Those in the sector feel that the RBI’s action would greatly broaden the scope of UPI payments.
A few fintech platforms, in collaboration with the National Payments Corporation of India (NPCI), have lately begun to offer this service. To begin, only the Rupay credit card has been enabled for payment.
To activate, users must link their RuPay credit card to their UPI ID.After that, after approving the transaction with the PIN, one can opt to pay with a credit card by scanning the UPI-enabled QR codes. It should be noted that this service may be used for both offline and online payments.
UPI transactions are classified into two types: person-to-merchant (P2M) and peer-to-peer (P2P). The former, as the names imply, involves money transfers between people and merchants (payments), whereas the latter only deals with money transfers between persons.
Credit card payments via UPI are only available for P2M payments because credit card payments are only intended for payments to merchants and not for inter-bank money transfers between two people.According to experts, merchant UPI IDs differ from personal UPI IDs, making it easy to discern between P2P and P2M payments.
Users will not be charged any fees for using credit cards over UPI.
However, businesses are charged MDR (merchant discount rate) fees by their banks for accepting credit card purchases. “Online and offline merchants would have to pay the usual credit card MDR, which is about 1.7% for all transactions. Offline merchants, on the other hand, are exempt from MDR for transactions under 2000,” said Upasana Taku, Co-Founder & CEO of MobiKwik.
Current UPI payments secured by a bank account, on the other hand, are currently immune from MDR costs.
We’ll have to wait and watch to see if retailers deter consumers from using credit cards over UPI due to the MDR cost. “The merchants will be at a disadvantage if they refuse such payments, as the purchases using a credit card are usually of higher value than other payments,” opined an industry expert who doesn’t want to be quoted.
Surinder Chawla, MD and CEO, Paytm Payments Bank, said, “We believe that this facility will enable convenience in payments while also leading to greater penetration of the credit ecosystem in India.”
However, a user must exercise caution and refrain from abusing the advantage provided by credit cards.