Why RuPay Credit on UPI is Gaining Massive Popularity

India’s digital payments ecosystem has become one of the world’s most dynamic fintech landscapes. The Unified Payments Interface (UPI) has been the torchbearer of this revolution, enabling seamless peer-to-peer and merchant payments at scale. Yet, in the past couple of years, a new innovation has entered the stage and is rapidly changing how Indians pay and borrow: RuPay Credit on UPI.

From rapid adoption figures to significant shifts in transaction behavior, RuPay Credit on UPI is fast becoming one of the biggest stories in India’s payments industry. But why is this solution gaining such massive popularity? Let’s dive deeper into the technology, the ecosystem impact, and the reasons behind its explosive growth.

Understanding RuPay Credit on UPI: The Technical Shift

How Traditional UPI Works

Traditionally, UPI functions as a push payment system, linking users’ savings or current accounts. When a user initiates a transaction, funds are debited from their bank account in real-time and credited to the recipient’s account.

This system is low-cost, instant, and highly scalable. However, it depends on available balances in users’ accounts, limiting flexibility for higher-value transactions or scenarios where users prefer credit.

Introducing Credit to UPI

With the introduction of RuPay Credit on UPI, a fundamental shift occurs:

• Linking Credit Instruments: Instead of bank accounts alone, UPI apps can now link a user’s RuPay credit card account as the payment source.
• Transaction Flow Changes: While the user’s front-end experience remains the same (scan QR → enter amount → authorize with UPI PIN), the back-end flow reroutes the transaction as a credit card payment rather than a debit pull from a bank account.
• Settlement Process: The acquiring bank processes the transaction as a credit card transaction, and the issuing bank bills the customer under the credit card statement cycle.

Why Is RuPay Credit on UPI Gaining Popularity?

Multiple factors are driving the rapid uptake of RuPay Credit on UPI.

1. Enhanced Merchant Acceptance Infrastructure

Traditionally, credit cards required dedicated point-of-sale (POS) terminals and involved higher Merchant Discount Rates (MDRs). Many small and medium businesses avoided accepting cards due to:

• Hardware costs
• High transaction fees (often 2-3%)
• Settlement delays

UPI disrupted this by offering low-cost, QR-based acceptance with near-zero MDR for smaller merchants. By enabling credit cards on UPI rails, RuPay Credit on UPI effectively democratizes credit acceptance, allowing even a roadside vendor with a QR code to accept credit card payments without new infrastructure.

This dramatically expands the acceptance ecosystem for credit transactions.

2. Consumer Familiarity and Ease of Use

Consumers in India are highly familiar with UPI apps, such as PhonePe, Google Pay, Paytm, and others. This familiarity lowers barriers to adopting new payment methods. Instead of introducing an entirely new user interface or process, RuPay Credit on UPI simply plugs into existing workflows.

• Scan the same UPI QR code.
• Select their linked RuPay credit card as the payment source.
• Authenticate via their existing UPI PIN.

This seamless integration makes credit spending frictionless and more appealing.

3. Reward Continuity and Incentivization

One significant factor fueling adoption is the preservation of credit card benefits:

• Cashback
• Reward points
• Airline miles
• Fuel surcharge waivers

Consumers often avoid using debit cards because they lack these incentives. RuPay Credit on UPI bridges this gap-users enjoy UPI’s simplicity while still earning the rewards associated with credit card spending.

4. Financial Inclusion and Credit Penetration

India has historically had low credit penetration. As of FY24:

• Only ~4% of the population owns a credit card.
• Credit card penetration is concentrated in urban centers and higher-income brackets.

RuPay Credit on UPI helps address this gap by:

• Encouraging banks to issue lower-limit credit cards that can still be used widely via UPI.
• Promoting digital onboarding for underserved segments.
• Integrating credit usage into everyday transactions, even for small-ticket purchases.

This accelerates financial inclusion, allowing individuals to build credit histories for future lending needs.

5. Scalability for Large-Value Transactions

While UPI is extensively used for low- to mid-value transactions, some high-value payments are constrained by daily limits or bank balance availability. Credit cards expand this scope:

• RuPay Credit on UPI supports higher transaction values as users draw from their credit limits instead of liquid funds.
• It enables smoother big-ticket purchases without draining savings instantly.

The Regulatory Push and Industry Dynamics

The rapid growth of RuPay Credit on UPI hasn’t happened in isolation. It’s been enabled and accelerated by significant regulatory support:

• In June 2022, the Reserve Bank of India (RBI) announced that credit cards could be linked to UPI. Initially, only RuPay credit cards were permitted, aligning with India’s push for domestic payment networks.
• The National Payments Corporation of India (NPCI) worked closely with banks and fintechs to roll out technical integrations and standardize transaction flows.

This regulatory clarity has provided confidence to both banks and payment aggregators to invest in building robust RuPay Credit on UPI offerings.

Market Growth and Data Insights

The data speaks volumes about RuPay Credit on UPI’s momentum:

• As of FY25, RuPay cards contribute ~16% of India’s total credit card spends.
• Nearly half of RuPay credit card spending is happening through UPI.
• Transaction value for RuPay credit on UPI doubled in the first seven months of FY25, surpassing ₹63,825.8 crore.
• Over 30 banks have issued RuPay credit cards compatible with UPI, widening market availability.

These figures underscore how RuPay Credit on UPI is transforming from a niche offering into a mainstream payments solution.

Key Technical and Operational Challenges

Despite its success, the ecosystem faces some technical and operational challenges:

• Merchant Awareness and Enablement Many small merchants remain unaware that their existing UPI QR codes can accept credit payments. Educating merchants is crucial to unlock full adoption potential.
• Interchange and MDR Economics Banks and networks are still fine-tuning interchange fees and MDRs for credit-on-UPI transactions. Maintaining low-cost acceptance while ensuring bank profitability is a delicate balance.
• Integration Complexities Some older UPI apps required updates to support credit card linking and transaction routing. Seamless user experience relies on robust technical integration between issuing banks, acquiring banks, and UPI apps.

The Future Outlook

The future of RuPay Credit on UPI looks exceptionally promising. Here’s why:

• NPCI is expected to expand credit-on-UPI support to other card networks like Visa and Mastercard in future phases, driving even broader adoption.
• As more merchants recognize the benefits, acceptance infrastructure will become universal for credit payments.
• Innovations like BNPL (Buy Now, Pay Later) over UPI rails may evolve further, blending short-term credit products with RuPay Credit on UPI’s seamless experience.
• Cross-border UPI expansion could eventually enable Indian users to make credit-based UPI payments internationally.

Conclusion

RuPay Credit on UPI is not merely an incremental upgrade to India’s digital payments ecosystem-it’s a transformational leap. By merging the flexibility and rewards of credit cards with the unparalleled reach and simplicity of UPI, this solution is rewriting the rules of how India pays, borrows, and builds financial trust.

For consumers, it means greater convenience, rewards, and financial flexibility. For businesses, it means higher sales potential, lower infrastructure costs, and wider customer reach. And for India as a whole, it’s a step closer to the vision of a truly cashless and financially inclusive economy.

At Light, we’re proud to witness and support this new chapter in India’s payments revolution. Stay connected with us for the latest insights, trends, and data as RuPay Credit on UPI continues to redefine the future of digital finance in India.