UPI payment through credit card approved: PNB, Union Bank, Indian Bank first to go live with UPI on RuPay credit cards

The Reserve Bank of India (RBI) Governor Shaktikanta Das on Tuesday officially unveiled the UPI on RuPay credit cards and UPI Lite for feature phones, along with announcing that the Bharat Bill Pay System (BBPS) will enable cross-border bill payments.

The government-backed RuPay credit card is the first of its kind to have gone live with an unified payment interface (UPI), which allows customers to pay for products and services at merchant locations by scanning QR codes rather than using a POS terminal.

The non-executive chairman of Infosys, Nandan Nilekani, stated in his opening remarks that the Reserve Bank of India (RBI) has become a global pioneer in fusing rules and technologies.

The first banks to launch BBPS cross-border bill payments will be Federal Bank and UAE’s Lulu Exchange, while Punjab National Bank, Union Bank of India, and Indian Bank will be the first to launch UPI on RuPay credit cards via the Bhim app.

UPI Lite is a “on-device wallet” designed to support offline transactions of lower sums, much like those available on digital payment apps, while BBPS will support “inbound” cross-border bill payments.

By immediately enabling safe and secure payment transactions, RuPay credit cards will be connected to a Virtual Payment Address (VPA), also known as a UPI ID. According to NPCI, the initial operational phase will be focused on collecting practical lessons that will be applied to improve the proposition in succeeding phases as usage is scaled up.

High MDR unlikely on UPI-RuPay credit cards

While MDR (Merchant Discount Rate), a cost assessed to merchants for processing payments made through UPI, digital wallets, as well as debit and credit cards, was capped at 0.9% for all other debit cards (Visa/Mastercard), UPI transactions performed using debit cards linked to RuPay do not incur a fee. However, MDR for UPI transactions made using credit cards has not yet been made public.

Nevertheless, according to rumours, it might draw 2% MDR (1.5% will go to the issuing bank, and the remaining portion will be split between RuPay and the acquiring organisation).

Since credit cards typically have an MDR of 2-3%, it has been one of the main ways for credit card issuers to make money.