NPCI Set to Introduce UPI EMI Payments to Broaden Credit Options for Consumers
The National Payments Corporation of India (NPCI) is set to enhance the Unified Payments Interface (UPI) by introducing credit products aimed at boosting the growth of digital payments in the retail sector. Following the launch of RuPay credit cards and credit lines, NPCI plans to enable consumers to convert UPI payments into equated monthly installments (EMIs). This new feature, which is still in development, will allow users to split their payments at the point of sale, similar to traditional card transactions, thereby expanding the credit options available on the UPI network.
Fintechs Prepare for Credit Integration
Fintech companies are gearing up to integrate credit features into the UPI system, with Navi, a startup founded by Sachin Bansal, leading the charge. The company is focusing on leveraging UPI to create sustainable business models. Several banks have already formed partnerships with fintechs like Navi and Paytm to provide credit lines to UPI users. This collaboration is expected to open new revenue streams, particularly as the NPCI plans to implement a 1.5% interchange fee on credit transactions made through UPI. This move is seen as a significant opportunity for fintechs, as traditional payment methods, such as savings accounts, are restricted by the government’s zero-fee policy on RuPay debit cards and UPI transactions.
The potential for revenue generation through credit payments is encouraging for fintech founders. They believe that the introduction of credit options will enhance user engagement and transaction volumes on the UPI platform. As the fintech landscape evolves, the integration of credit features is anticipated to play a crucial role in the growth of digital payments in India.
UPI Credit Could Transform Digital Payments
Industry experts believe that the introduction of credit options on UPI could revolutionize the digital payments landscape. Anirban Mukherjee, CEO of PayU, emphasized that UPI is evolving beyond a mere payment method into a comprehensive payment system. He noted that, similar to the card ecosystem, which includes credit cards, debit cards, and EMI payments, UPI is on track to develop a complete suite of credit offerings. This expansion will enable consumers who do not possess credit cards to access financing options at checkout.
Currently, UPI facilitates approximately 20 billion transactions each month, with an active user base of 250 to 300 million. Experts suggest that focusing on credit transactions is essential for diversifying payment methods on the UPI network. However, there are concerns regarding the management of small retail consumer credit, particularly in controlling bad loans. A banker from a private sector lender in Mumbai expressed caution, indicating that while small-value credit and buy-now-pay-later options may be replicated on UPI, lenders will need to approach this market carefully to mitigate risks associated with defaults.
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