India’s digital payment revolution, led by UPI, has transformed how we pay. With 90% of consumers preferring digital payments for online purchases, UPI’s dominance is clear. But there’s a new player that banks should take note of – UPI-linked credit.
Here’s why this is a game-changer:
The Credit Gap:
- Only 102 million credit cards in circulation.
- India’s growing middle class of 432 million is largely underserved when it comes to credit.
The Rise of Pay Later:
- Pay Later services offer instant approval and flexibility without needing a credit card.
- Younger, tech-savvy consumers are leading this shift, with 40% in metros already using Pay Later services.
UPI-Linked Credit: The Next Step:
- UPI-linked credit lines offer pre-approved credit directly in your UPI app.
- Designed for smaller loan needs (up to ₹50,000), this service fills the gap where credit cards can’t reach.
Why Banks Should Lead:
- Banks have an advantage with their existing infrastructure and customer trust.
- Offering Pay Later through banking apps and UPI is seamless for customers.
- With access to detailed customer data, banks can offer responsible credit and flexible repayment plans.
Monetisation Opportunity:
- From October 16, 2024, an interchange fee of 1.2% on UPI-linked credit transactions will generate new revenue.
- Banks can also earn from late payment interest fees and attract more merchants with lower fees than credit cards.
Banks need to act fast, as UPI-linked credit has the potential to reshape India’s consumer credit landscape and drive financial inclusion. It’s time to embrace this future!