Whalesbook
Seamless Credit on UPI
The linking of RuPay credit cards with India's Unified Payments Interface (UPI) marks a major step forward in digital payments. Previously separate, the everyday convenience of UPI and the rewards of credit cards are now combined. This allows credit to be easily integrated into daily spending habits. It's not just about making things easier for users, but a key strategy by fintech companies to embed credit deeper into everyday purchases, opening up new ways to earn money from payments that were free for UPI users and merchants.
RuPay's UPI Advantage Drives Growth
RuPay, India's own card network, is now the only way credit cards can link with UPI, a regulatory benefit that has significantly boosted its market position. By November 2025, RuPay held about 38% of credit card transaction volume and 8% of the value in India. This is a big jump from just 10% volume and 1.8% value in fiscal year 2024. Overall, it has captured 18% market share in India's credit card system. Between April and October 2024, RuPay credit card transactions on UPI reached 750 million, totaling around ₹63,826 crore. This growth is mostly from small, daily purchases, with an average UPI credit card ticket size of about ₹1,125. This unique UPI link puts RuPay in a strong position to gain market share from global giants like Visa and Mastercard, who face new pressures.
New Revenue From Small Spends
The main advantage of linking credit cards to UPI is creating an important new revenue source: interchange fees. While most UPI payments between bank accounts are free for users and merchants (no merchant discount rate, or MDR), RuPay credit card transactions charge interchange fees, usually about 2% of the amount spent. These fees go to the issuing bank, the RuPay network, and the acquiring bank. This allows companies to earn from small transactions that were previously free, encouraging users to use credit cards instead of debit cards for everyday spending. Secure card details (tokenization) help make online payments faster and easier, reducing dropped shopping carts. This capability is especially useful for new credit users, who are often offered secured RuPay credit cards.
Challenges and Competition
Despite RuPay's rapid growth, there are still significant challenges. Relying on just one domestic network means the system depends on decisions from NPCI (India's payments body) and regulators. Banks have limited ways to profit directly from many UPI transactions because of the no-MDR rule. They cover infrastructure costs without much income, making UPI a low-profit business for them. For fintechs like Cred, whose valuation dropped in a recent funding round, profitability is under scrutiny, showing broader market changes and less available funding from investors. Major UPI players like PhonePe (worth $14.5 billion and planning an IPO) and Google Pay mean companies need more than just lots of transactions to keep market share and make money. While Visa and Mastercard have lost some ground in India's digital payments, they have huge global networks and are still forming partnerships. They could use their existing systems to compete in this fast-changing market. RuPay's credit growth depends on keeping its exclusive UPI access and turning frequent, small UPI users into people who regularly use credit cards.
Future of Digital Payments
The integration of credit on UPI via RuPay is set to continue driving growth in India's digital payments. UPI transactions are expected to keep making up over 80% of digital payments, and credit card use is growing steadily. Fintechs are likely to increase efforts to attract new credit users and improve ways to make money. Leading companies like PhonePe are moving towards going public, showing the fintech industry is growing up. With supportive regulations and more people using digital payments, the RuPay-UPI credit card system will be very important for India's financial future.