Yay! Credit Card on UPI finally!

OBJECTIVE

To be honest, this is the most exciting news I have heard in the last 3 years of my career in payments and fintech. This is also very close to my heart since I have launched one of the first use cases of UPI and Credit Card by monthly bills to be paid using UPI mode.

So, here are my first few takes on the initiatives so that my friends and colleagues can build on them further and also because I fell in love with Fintech in my career.

How UPI works

Step 1 to 8

• Step 0: When you scan a QR (offline) or when you click on a UPI option (online), your UPI app detects the Payer PSP, then you start with Step 1 above
• Steps 1 to 8: Refer image above
• Step 9: NPCI sends transaction confirmation acknowledgement to all the 4 parties — Payer PSP, Payee PSP, Remitter Bank and Bene Bank.
• Step 10: The merchant or the person delivers the goods or services promised. (If we miss the last step during our ideation, your journey will not solve for the users)

Till now, using UPI, you could pay only from an account

However, with  RBI opening up to Credit cards, it opens up for growth again

The Launch: Paper ▶️ Reality

👉 Building a 360 degree Product Roadmap

Right now, you cannot use a credit card limit to

1. Pull cash into an account. (but you can load a wallet)
2. Make investments into stocks, MFs or Crypto. (yet, buy solid gold)
3. Clear another loan or credit (A few BNPL players accept it though!)

Maybe, it’s time to look into a few or all of these while it comes to UPI while the following 6 points are quite important to look out for road-mapping

👉 Ensuring Protection of Consumers, Merchants, Banks, PSPs and Networks

Why build it? Who gains?

👉🏛 Banks & Networks

1. Market Expansion: UPI is not a preferred mode for high-value Transactions due to the loyalty benefits of the offer-rich cards
2. Transaction Commission: Credit Card Issuers will need to recover cost of credit and hence the transaction commissions will boost UPI Revenue for Networks and PSPs
3. Boost to Rupay Network: Rupay has been taking away Market share already, with NPCI being the sole entity for Rupay and UPI, I can assume the synergies will shape into an offer-rich UPI-Rupay offering

👉Customers

1. No more Wallets: My wallet has only cards. Isn’t yours? So…
2. Fewer things to remember: Well no more need to remember card PINs just remember UPI PIN and that will do.
3. OneStop Spend Analyser: Well won’t you want to know how much you spend this month overall? or how you trended for last year?

👉Merchants

1. Few to Zero Integration: Just Integrate UPI and you’re good to accept everything except BNPLs. (since wallet gets it from a card/account, I discounted)
2. Less training for Staff: Every integration needs training and training costs are already up and then we had a galore of offer shopping last yea
3. One-Stop Reconciliation: Well, every business has to reconcile, would it not be so beautiful

Strongest Competition & its Future

Tap and Pay is the smoothest experience while UPI needs a PIN. Hence, a strong threat to growth due to its user-friendliness. Master/VISA will try to use this route to fend off any losses.

In future, if NFC devices and Bio-metric authentication ramp up, UPI for CC will break the limit Tap-N-Pay currently has

Conclusion

1. It is a great initiative which needs to be handled with extreme precautions and diligence while launching
2. All different types of transactions such as online/offline shopping, recurring payments and bill clearance need to be supported to foster adoption
3. Protection for Merchants and Users is as important as protection for Banks, PSPs and Networks to ensure a safe ecosystem
4. User behaviours need to be taken into consideration before making some changes to the eligibility criteria for Credit Transactions on UPI

While it benefits the ecosystem, a few more upgrades will truly create a seamless journey and pave its way for IoT banking