NPCI uses bank partnerships to promote RuPay credit cards

NPCI is working closely with a clutch of major banks to find out ways to push the usage of RuPay credit cards and has set an internal target of cornering around 10% of the overall monthly credit card spends in 2024, according to The Economic Times (ET).

In April 2023, Indians spent USD 12 billion through their credit cards across point of sales terminals and ecommerce transactions, RBI data shows. As per industry estimates, around USD 150 million to USD 180 million could be processed by RuPay in 2023. The target would be to take it up to USD 1.8 billion per month.

Among the large banks, ET understands that Axis Bank, HDFC Bank and SBI Card are front runners in building these partnerships with RuPay. SBI Card has already announced its co-branded proposition with Paytm on RuPay card rails.

Officials from HDFC Bank said that the UPI credit card linkage programme is a powerful and unique way to bring structured credit to the millions of DTA (direct to account) transactions which happen every month, thus offering a large opportunity to source new credit cards as well as enhance consumption. The bank already has a multi-channel strategy to give cards to millions of customers on the UPI credit card programme and will join its fintech partners where appropriate.

A prospect for fintechs

With RuPay credit cards on UPI, fintechs are also sensing fresh business opportunities. A bulk of them like Slice and Uni were impacted in 2021, when the RBI cracked down on credit offerings through prepaid cards. Now with a co-branded proposition, fintechs are could get back into the card game.

Cards give a strong brand presence to fintechs, which is why few of them are showing enthusiasm. However, with co-branded cards, the role of a fintech gets restricted to just being a distributor. In such cases, the margin of the game goes down.

Officials from Kiwi said the entire UPI on credit card strategy will also open opportunities to make revenues on UPI for fintechs, especially through aspects like late payment fees, interest on revolving (credit) lines and one-time charges for card issuing. Now, the industry will start to see the usage patterns on this setup and business lines will evolve accordingly. As the banks start making money, the revenue share model with fintechs will also evolve.

As most fintechs are looking at co-branded cards as a strategy to retain users through loyalty and rewards, the UPI on credit use case can also foster the shift for the industry to issue virtual cards to customers instead of a physical one. Further, with most fintechs looking to woo the millennial and Gen Z segment with their card strategy, it is yet to be seen how business models evolve based on usage patterns.