India is promoting RuPay to challenge Visa and Mastercard, which now handles 13B+ real-time transactions monthly

India is charting a new path in digital payments, one that could serve as a model for other countries aiming to reduce reliance on Western payment networks like Visa and Mastercard. While many regulators focus on scrutinizing fees charged by these global players, India has taken a different approach: building its own systems that are reshaping the market.

The Unified Payments Interface (UPI), launched nine years ago, has revolutionized how people in India transact. It bypasses traditional card networks by directly linking bank accounts using QR codes and phone numbers.

Today, UPI processes over 13 billion real-time transactions monthly, accounting for 71% of all transactions in India and 36% of consumer spending, according to Bernstein.

This system’s success has caught global attention. UPI’s efficiency and ease of use have not only sidelined international card networks but also set the stage for India’s homegrown credit card network, RuPay, to expand its dominance.

RuPay, India’s indigenous card network, has been pivotal in reshaping the credit card landscape. In 2022, it became the only network permitted to process credit card transactions via UPI, a move that has dramatically boosted its growth.

From April to October 2024, RuPay processed ₹638 billion ($7.43 billion) in UPI credit card transactions—nearly double the volume from the previous year. Its share of credit card sales surged to 28%, up from just 10% the year before.

The government has aggressively promoted RuPay credit cards, overcoming initial resistance from banks worried about losing interchange fees. One key strategy has been its fee structure: merchants are only charged for transactions exceeding ₹2,000 ($23.30), making RuPay especially appealing to small businesses. Given that the average UPI credit transaction is less than ₹1,000, this approach encourages broader adoption.

India’s central bank has further supported RuPay by mandating that consumers can choose their card network when applying for or renewing credit cards. Additionally, banks must now offer RuPay users the same rewards as those on global networks. These measures have made RuPay more competitive, leading to it issuing half of all new credit cards in June 2024.

Analysts predict that RuPay’s dominance will grow as UPI continues to integrate credit-based payments. Bernstein has even suggested that banks might eventually link credit accounts directly to UPI, bypassing physical cards altogether.

Visa and Mastercard, long dominant in India’s payment market, are feeling the pressure. Credit cards’ share of digital payments in India has dropped from 43% in 2018 to just 21% in 2024. In response, these global giants are partnering with fintech companies to adapt their cards for UPI-powered merchant terminals, which are already in use by over 10 million shopkeepers. However, this move may be too little, too late.

The rapid growth of UPI and the government’s push for RuPay show no signs of slowing down. As consumer preferences shift and local networks grow stronger, Visa and Mastercard will need to innovate quickly to remain relevant in India’s evolving payment landscape.

What do you think about this transformation in India’s digital payments? Share your thoughts in the comments below!