EDEN IAS

LINKING CREDIT CARDS WITH UPI

UPSC CURRENT AFFAIRS | LINKING CREDIT CARDS WITH UPI | 17TH JUNE | THE HINDU

SYLLABUS SECTION:

WHY IN THE NEWS?

Recently, RBI has proposed to allow the linking of credit cards with the UPI platform.

SIGNIFICANCE:

  • It will help in deepening the usage of credit cards.
  • It is anticipate that credit card usage will be zooming up in India given UPI’s widespread adoption.
  • The move will provide a significant boost to overall spending via credit cards
  • currently, spending through the use of credit cards is more than double the average spending via debit cards. More spending is generally a force multiplier for the economy.
  • It will help in bolstering transactions and acceptance at more merchant sites.
  • Besides accelerating digital transactions this measure is also expect to affect the average ticket size of financial transactions.

CHALLENGES:

  • Ambiguity on how the Merchant Discount Rate (MDR) will be apply to UPI transactions done through credit cards.
  • It will provide an additional avenue for payment to customers and hence enhance convenience.
  • The MDR is a fee that a merchant charge by their issuing bank for accepting payments from their customers via credit and debit cards.
  • According to a norm that has been in effect since January 2020, UPI and RuPay attract zero-MDR, meaning that no charges are apply to these transactions.
  • Applicability of zero-MDR on UPI could also be a reason why other card networks such as Visa and Mastercard may not have been onboard to UPI for credit cards yet.
UNIFIED PAYMENT INTERFACE
  • Unified Payments Interface(UPI) is an instant real-time payment system develop by the National Payments Corporation of India (NPCI) facilitating inter-bank peer-to-peer (P2P) and person-to-merchant (P2M) transactions.
  • It opens up avenues to build credit on UPI through credit cards in India, where in the last few years, a number of startups like Slice, Uni, One, etc. have emerged.
  • The interface is regulate by the Reserve Bank of India (RBI) and works by instantly transferring funds between two bank accounts on a mobile platform.

Read more: UPSC CURRENT AFFAIRS

SOURCE: THE HINDU

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