NPCI ups RuPay credit card play against rivals

Time of India

4 days ago

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National Payments Corporation of India ( NPCI ) has started offering financial incentives to banks to push RuPay credit cards to their customers in a bid to promote homegrown payment methods , said people directly aware of the matter.The incentive is paid from the fee that RuPay levies on banks for credit card transactions. While global card schemes Visa and Mastercard already offered such incentives, for NPCI this marks a significant shift from its earlier approach of providing attractive settlement rates to banks, these people said.'NPCI is becoming very competitive and is pushing domestic payment methods aggressively,' said a senior banker.While RuPay credit cards have been around for several years, their popularity soared after the Reserve Bank of India in 2022 permitted linking these cards with NPCI-operated smartphone-based payment mode Unified Payments Interface (UPI). This allowed consumers to make UPI payments with their RuPay credit cards, a facility which is still not available on Visa and Mastercard credit cards.'Global card schemes have long offered business incentives to banks including cashbacks based on issuance volumes and transactions per card. NPCI is now adopting a similar strategy,' said the founder of a credit card startup, requesting anonymity.On every credit card swipe, the bank that issued the card earns an interchange fee. Out of this fee, card networks like Visa and RuPay charge 25-40 basis points as their fee. Banks usually seek a discount on the fee or incentives to keep their net cost around 10-15 basis points.RuPay has now started paying back a portion of the fee to the banks as an incentive. Banks also prefer incentives over discounts as the proceeds can be booked as non-interest fee income.The terms for paying incentives vary, but large private sector lenders receive attractive rates from NPCI, another executive said. As a ballpark estimate, NPCI may be offering 10-12 basis points of the transaction value, he said.NPCI did not respond to ET's queries.NPCI, India's government-run umbrella organisation for retail payments and settlement, is directly challenging Visa and Mastercard to capture a larger share in India's fast growing credit card industry. As of May 2025, there were around 111 million credit cards in circulation, up from 55 million in December 2019.In fact, boosted by UPI's popularity, and its full-scale digital payment suite that includes international payments, card payments and bill payments, NPCI has already proven to be a strong alternative for the global payment systems that still have a big lead over RuPay.'It's not just a government push encouraging banks to adopt RuPay; there is also a strong business case to work with NPCI's credit cards,' said the banker cited earlier. More than the government push, it is the financial benefits which is getting so many large private banks to aggressively launch RuPay credit cards, he added.While NPCI does not disclose RuPay credit card transaction data, industry estimates suggest annual settlement via the network at around Rs 20,000 crore, effectively almost 10% of the overall credit card spends. Popularising RuPay credit cards is critical for the corporation, as its other two major products, RuPay debit cards and UPI, do not generate direct revenue for banks.According to fintech startup Kiwi, which issues RuPay-powered credit cards in partnership with multiple banks, RuPay's credit card market share in terms of the number of cards issued grew to 12% in 2024 from 3% in 2023.In recent months, large banks have aggressively issued both co-branded and standard RuPay credit cards. Major consumer brands — including PhonePe, Flipkart-backed Super.Money, and Tata Neu — have launched RuPay-powered co-branded credit cards over the past one to two years, targeting UPI-linked spending. SBI Card , one of India's largest credit card issuers, in its FY25 results pointed out that usage of UPI payments via RuPay credit cards had been consistently going up. Average monthly UPI expenses per customer on these cards rose to Rs 18,000 in tier-two cities and beyond, compared to Rs 11,000 in April 2024. In tier-one cities, spending increased to Rs 14,800.NPCI reported a 24% jump in standalone revenue to Rs 3,270 crore in FY24, up from Rs 2,749 crore a year earlier. Its net surplus rose to Rs 1,552 crore.