UPI’s New Features such as ‘UPI Circle’ Threaten Debit Card Usage Amid Decline
UPI's New Features such as 'UPI Circle' Threaten Debit Card Usage Amid Decline
The Unified Payments Interface (UPI) is poised to capture a larger segment of the debit card market, accelerating the decline of this traditional payment method. Recent data from the Reserve Bank of India reveals a notable drop in debit card swipes for merchant payments, decreasing from 312 million two years ago to 144 million in July 2024. Industry experts predict this trend will continue as UPI introduces new functionalities.
According to a senior banker from a private sector lender in Mumbai, “UPI is being built as a payment network to do almost everything that consumers could do with their debit cards and the idea is to promote this homegrown payments network which can support all forms of digital payment needs of consumers.” A key development is UPI Circle, a feature that allows users to delegate transactions to family members like children or elderly parents, potentially diminishing the role of add-on debit cards, which are supplementary cards given to family members linked to a primary account.
Major UPI service providers, including Amazon Pay, Google Pay, PhonePe, and the National Payments Corporation of India’s Bharat Interface for Money (Bhim), are currently piloting the UPI Circle feature and are expected to launch it soon.
Additionally, the advent of UPI ATMs, which facilitate cardless cash withdrawals and deposits, is anticipated to lower operational costs for these machines. Alok Singh, executive vice president at AGS Transact Technologies, noted, “If there’s no card acceptance device, the machine’s cost can be drastically reduced. Moreover, it eliminates the need to capture the user’s personal identification number.”
The National Payments Corporation of India (NPCI) aims to position UPI as a comprehensive retail payment platform, gradually reducing the necessity for debit cards. As UPI incorporates various functions previously handled by debit cards, the demand for traditional cards may wane.
The production and maintenance of debit cards involve considerable expenses, including a cost of about Rs 150-200 for issuance, shipment, and activation. Mahesh Patel, director at Hitachi Payments, highlighted that “If the same thing is being done by UPI, then there is no need for people to use debit cards.”
As UPI transactions reach new peaks and credit card usage increases, banks are likely to concentrate on enhancing rewards and cashback programs for credit cards, which are becoming more popular.
