India’s next credit boom might be on UPI, not plastic
In recent years, India’s credit card growth has been on a steady decline. The number of new card issuances has slowed down, and delinquencies have been on the rise. This is partly due to the increased scrutiny on credit card usage, with banks and financial institutions becoming more cautious about lending to consumers. However, there is a new trend emerging that could potentially disrupt the traditional credit landscape: RuPay credit-on-UPI.
RuPay, India’s homegrown payment network, has been gaining traction with its credit-on-UPI feature. This allows users to make purchases online and offline using their UPI handles, without the need for a physical credit card. The low-ticket, high-frequency usage pattern of QR-led transactions has been driving the growth of this segment.
According to a recent report, the value of UPI transactions has grown by over 300% in the last two years, with a significant portion of these transactions being credit-based. This growth is driven by the increasing adoption of QR code-based transactions, which offer a convenient and secure way for consumers to make payments.
One of the key factors driving the growth of credit-on-UPI is the shift in consumer behavior. With the rise of e-commerce and digital payments, consumers are increasingly looking for convenient and secure ways to make transactions. Traditional credit cards, with their high transaction fees and limited acceptance, are no longer the preferred mode of payment for many consumers.
Banks and financial institutions are also playing a crucial role in driving the growth of credit-on-UPI. They are prioritizing safer borrowers and offering more attractive interest rates to encourage customers to opt for digital credit. This is in contrast to traditional credit cards, where high-interest rates and hidden fees have been a major concern for consumers.
Fintech companies are also targeting credit-active users, offering them more flexible and affordable credit options. These companies are using advanced data analytics and machine learning algorithms to assess creditworthiness and offer personalized credit products to customers.
The growth of credit-on-UPI is also driven by the increasing adoption of mobile devices and the rise of digital payments. With more and more consumers using their mobile devices to make transactions, the need for physical credit cards is decreasing. QR code-based transactions are convenient, secure, and easy to use, making them an attractive option for consumers.
Another factor driving the growth of credit-on-UPI is the government’s push for digital payments. The government has been promoting digital payments through various initiatives, such as the National Digital Payment Initiative (NDPI) and the Digital Payments Index (DPI). These initiatives have helped to increase awareness and adoption of digital payments, including credit-on-UPI.
The growth of credit-on-UPI also presents opportunities for financial inclusion. Traditional credit cards have often been inaccessible to a large segment of the population, including individuals with low credit scores or those living in rural areas. Credit-on-UPI, on the other hand, can be accessed by anyone with a UPI handle, making it a more inclusive and accessible form of credit.
However, there are also challenges associated with the growth of credit-on-UPI. One of the key challenges is the risk of increased delinquencies. With the rise of digital credit, there is a risk that consumers may not be able to repay their loans, leading to increased delinquencies and defaults.
Another challenge is the need for robust risk assessment and credit scoring mechanisms. With digital credit, it is essential to have robust risk assessment and credit scoring mechanisms in place to ensure that lenders are able to assess the creditworthiness of borrowers and offer them personalized credit products.
In conclusion, the growth of credit-on-UPI is a significant trend that could potentially disrupt the traditional credit landscape. With its low-ticket, high-frequency usage pattern and increasing adoption of QR code-based transactions, credit-on-UPI offers a convenient and secure way for consumers to make transactions. Banks and financial institutions are prioritizing safer borrowers and offering more attractive interest rates, while fintech companies are targeting credit-active users with more flexible and affordable credit options. As the adoption of digital payments continues to grow, it is likely that credit-on-UPI will play an increasingly important role in India’s credit landscape.
Source:
https://www.thecore.in/business/indias-next-credit-boom-might-be-on-upi-not-plastic-840318
