Ikigai LawIkigai LawIkigai LawIkigai Law
  • About Us
    • About
    • Our Team
    • FinTales
    • Tech Ticker
  • Practice Areas
  • Blog
  • News & Events
    • Ikigai Law in the news
    • Ikigai Law at events
    • Ikigailaw on the social media
  • Careers

Credit Card Payments on UPI: Wherefores and Whys

    Home Fintech Credit Card Payments on UPI: Wherefores and Whys
    NextPrevious

    Credit Card Payments on UPI: Wherefores and Whys

    By Ikigai Law | Fintech | 0 comment | 30 December, 2022 | 0

    A dissection of why credit card payments through UPI may not be as convenient, accepted, and trusted.

    RBI has proposed linking credit cards (CC) to UPI. It’ll, to start with, allow Rupay credit card payments through UPI rails. And in the due course, allow other CC issuers to come on board. Credit on UPI has been on the fintech industry’s wish-list for a long time. But it must welcome this dessert-worthy news with a pinch of salt. Here’s why.

    First, UPI may not make CC payments more convenient for small-value transactions. CC payments (on card network rails) below Rs. 5000 don’t need any additional factor authentication (like OTP). So, to pay a merchant, I simply need to tap my NFC enabled CC on a card machine. If I use UPI for CC payments, I may have to enter my UPI PIN (to enable payments). Which I’d rather not. Also, UPI is typically used for small-value payments. Only 6.33 % of users (who want to make person to merchant or P2M payments) use UPI for transactions over Rs. 2000. So, in all likelihood, the majority of UPI users (like me) may prefer tap-and-go CC payments (over CC payments through UPI).

    Second, Merchant Discount Rate (MDR) on CC payments may impact merchant acceptance (of CC payments through UPI) negatively. Zero MDR is the key enabler of UPI’s ubiquity. Merchants accept UPI payments without any additional costs. But MDR for CC payments ranges between 0.4 % to 3 % (of transaction value). It’s unlikely that the Government will extend its zero MDR policy to CC payments on UPI. Because this’ll make businesses of CC networks, issuers and intermediaries (like payment aggregators) unviable. It’s also unlikely that merchants will loosen their purse strings to cover this cost (for CC payments on UPI). That’s what, at least, appears to be the industry sentiment.

    Third, CC payments through UPI may not command the same trust as CC payments through card rails. One of the reasons for the popularity of CCs is effective redressal of user concerns. As a Visa or MasterCard CC user, I can dispute charges on my CC. The card issuer refunds my money if the CC transaction is fraudulent, and I’m not at fault. But, the dispute resolution mechanism for UPI and Rupay CC transactions is not as efficient. NPCI has in fact asked participants in the UPI ecosystem to implement online dispute resolution from 30 September 2022. But it remains to be seen if this’ll match-up to the efficient dispute redressal mechanism for CCs, which has been tried, tested and trusted over the years.

    So, I, along with the rest of the industry, wait for the RBI and NPCI to iron out the kinks before I consider my wish granted.

    (This post has been authored by the fintech team at Ikigai Law. It was originally published in the June 2022 edition of our monthly fintech newsletter, FinTales.)

    Payments, RBI, UPI

    Ikigai Law

    More posts by Ikigai Law

    Related Post

    • FinTales 2022 Round-Up

      By Ikigai Law | 0 comment

      The best stories of 2022 from our monthly fintech newsletter, FinTales. February 2022: The Hassleocracy of Crypto-taxes “Cryptos have no underlying assets, not even a tulip.” –Shaktikanta Das Ouch. That’s the RBI Governor, not mincingRead more

    • RBI Paper on Payment Charges Reignites Debate over Zero MDR Policy

      By Ikigai Law | 0 comment

      This article discusses the impact of and alternatives to the zero MDR policy in the context of the RBI discussion paper on payment charges. In August 2022, the RBI released a discussion paper on payment charges. ForRead more

    • Whatsapp Payments: A timeline

      By Ikigai Law | 0 comment

      In February 2017, Whatsapp had announced its plans to introduce a UPI-based payments service in India. Since then, a number of developments have taken place with respect to the payments service, including a discussion onRead more

    • Does India Need a CBDC?

      By Ikigai Law | 0 comment

      An analysis of whether India really needs a central bank digital currency.   The United States wants to ‘get it right than to be first’. That’s what Jerome Powell, US Federal Reserve’s chairman said about the digital DollarRead more

    • A Letter to UPI

      By Ikigai Law | 0 comment

      A letter from a disgruntled Rs.100 note reminding UPI that cash is still king. “This is an outstanding accomplishment. It indicates the collective resolve of the people of India to embrace new technologies and makeRead more

    NextPrevious

    Tags

    #DataProtection #Fintales bitcoin Blockchain Budget Consent Consultation Consultation Paper cryptocurrency data Data Controllers data governance Data localisation Data Protection Data Subjects digital economy Digital India Drones E-Commerce Facebook Fintech Government Government of India healthtech Ikigai Law India Indian government Innovation MeITY Notice Payments Personal Data policy Privacy RBI Recommendation Regulation Srikrishna Committee Stakeholders Startups Surveillance Technology Tech Policy TechTicker TRAI

    Connect with Ikigai Law

    Copyright 2018 Ikigai Law | All Rights Reserved             

    Information

    • Practice Areas
    • Blog
    • Careers
    • Contact Us
    • Privacy Policy

    Contact us

    Office
    T-7/402, Commonwealth Games Village Apartment,
    New Delhi, Delhi 110092 India.

    Email Address

    contact@ikigailaw.com

    • About Us
      • About
      • Our Team
      • FinTales
      • Tech Ticker
    • Practice Areas
    • Blog
    • News & Events
      • Ikigai Law in the news
      • Ikigai Law at events
      • Ikigailaw on the social media
    • Careers
    Ikigai Law