SBI Cards, PhonePe, Google Pay to benefit from RBI allowing credit cards to be linked to UPI, say analysts

• India’s central bank has announced that users will soon be able to link credit cards with UPI apps.
• Analysts believe that this could benefit not just popular UPI apps like PhonePe and Google Pay, but also SBI Cards, among other credit card providers.
• RBI’s move will not only make credit card payments easier, but it could also lower costs for credit card companies.

The Reserve Bank of India announced a new policy allowing credit card users to link their card to their UPI accounts to easily pay online and offline by scanning a QR code or by just entering the recipient’s UPI ID.

Initially, only RuPay credit card users will be able to link their card to their UPI account. Users having a credit card from Visa and Mastercard will have to wait a bit longer to link it with UPI.

While RBI’s decision to allow credit cards to be linked to UPI is aimed at making payments easier for card holders, established UPI apps like PhonePe and Google Pay could reap the rewards.

Not just this, analysts at Macquarie believe that this could also benefit established credit providers like SBI Cards, lowering their costs and increasing credit card acceptance by several magnitudes.

“There are only 6 million card accepting point of sale machines in India vs ~50 million merchants accepting UPI payments. There are 180 million UPI QRs in India. This should be very positive for card spends,” a research note by Macquarie said.

Will make payments easier

The introduction of UPI has changed the way Indians make payments. You no longer have to carry cash with you as even small roadside vendors to high-end shops allow you to pay using UPI. The new policy will have a similar impact on credit cards as UPI had on cash.

You will no longer have to carry multiple credit cards with you when you go out as you will be able to use any UPI app to pay using your credit card. Similarly, you won’t have to search for your credit card details every time you make an online payment as you will be able to use your UPI app.


“Over a period of time, UPI has become a transaction channel of choice for consumers for digital payments. With linking of credit cards to UPI, this would add on to the convenience for consumers, who would not need to use their physical card,” said Dewang Neralla, chief executive officer, NTT DATA Payment Services India to Business Insider India.

This also means that you longer have to save your card details on merchant websites, which means your payment information is less likely to be compromised in case of a data leak or hack.

Credit card penetration is still low, but more valuable

As of March 2022, there were over 7.4 crore credit cards in India and this number is considerably small when you consider that there were over 92 crore debit cards during the same time.

However, credit card users transacted over ₹1,07,000 crore in March, while debit card users stood at ₹91,500 crore.

During the same time period, UPI transactions amounted to ₹9,60,582 crore, which is nearly nine times that of credit cards.


The Macquarie report also added that credit cards will get a major boost to go digital, lowering the costs of customer acquisition and improving engagement, too.

PhonePe and Google Pay to get a boost

PhonePe and Google Pay are currently dominating the UPI segment in the country with over 80% of all UPI transactions being processed on the two apps. The new credit card linking policy will come as a boost to these apps as credit card users will likely do most of the credit card transactions using these apps.

This means a market that is worth ₹1.07 lakh crore and growing rapidly just opened up for these apps. A credit card user on an average spends over ₹14,500 per month per card, which is 21 times more than the ₹692 per month per card spent by debit card users.

“The decision to introduce credit cards, starting with RuPay, on the UPI platform will not only boost the number and overall quantum of transactions, but it will widen the customer base as more and more credit card holders are likely to transact through UPI,” Raj Khosla, founder, MyMoneyMantra told Business Insider India.

SEE ALSO:

Rupay credit cards to be linked to UPI soon – other credit cards to follow later

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An Indian credit card user spends ₹14,500 a month on average – 20x more than debit card users