RBI’s New UPI Rule: Will Debit Cards Become Obsolete?

RBI's New UPI Rule: Will Debit Cards Become Obsolete?

RBI's New UPI Rule: Will Debit Cards Become Obsolete?

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The RBI’s new rule may make debit cards less common as more people turn to UPI for cash deposits.

The Reserve Bank of India (RBI) has announced that people can now use UPI (Unified Payments Interface) to deposit cash at ATMs (Automated Teller Machines). This change could make debit cards less important. Data shows that while mobile payments through UPI have more than doubled in the last three years, debit card usage has remained unchanged.

According to experts in digital payments, this move will speed up the shift from using cards to using mobile payments. Now, people won’t need to carry their debit cards to deposit cash at CDMs (cash deposit machines). Instead, they can use UPI to do this easily. Payments via mobile phones jumped from around ₹150 lakh crore in 2021-22 to about ₹307 lakh crore in 2023-24. Meanwhile, debit card payments have been steady, staying between ₹31 lakh crore and ₹32.9 lakh crore over the last three years.

Debit cards became popular in India around the year 2000 and their use increased quickly with the spread of ATMs. Today, there are over 1 billion debit cards in use in the country.

Atish Shelar, COO of TechFini, a Mumbai-based fintech company, said, “With this move from the RBI, the debit card journey will come to a complete halt and it might only be used in international transactions for the next few years.” Rahul Jain, CFO of NTT Data Payment Services India, added, “The need to carry a plastic card has come down for low-value transactions. With the adoption of tap and pay, we will see a surge in mobile-based transactions. Since UPI is very convenient for consumers, transactions will continue to grow.”

Shelar also noted, “The usage of debit cards has already decreased due to UPI’s popularity. This new move will further reduce debit card usage, which will lower the costs associated with the card.” He also mentioned that international companies like MasterCard and Visa might try to change regulations or integrate with UPI to stay relevant.

In the future, with the increasing acceptance of UPI, ATMs may become less common, and merchants could start handling cash withdrawals and deposits, further reducing transaction costs.

The RBI’s decision to allow UPI for cash deposits at ATMs could mean the decline of debit cards, which have already seen stagnant growth compared to the rise of mobile payments. The question now is how soon UPI will completely replace other payment methods.