From bills to groceries to online shopping, UPI is India’s go-to payment method for everyday transactions. But, up until now, transacting on UPI meant that you had to have balance in your bank account or a Credit Card. Now, with its latest move towards democratizing consumer credit, NPCI has introduced credit-based products such as Paylater Lines, & EMIs via UPI Rails.
Recently, The Reserve Bank of India (RBI) & NPCI introduced pre-approved Credit Lines on UPI, which allow banks to allot a line of credit to consumers for retail expenditures. Consumers can now make low to high ticket purchases without worrying about a shortage of funds. The flexibility afforded by credit lines is likely to boost consumption among Indians, benefiting businesses & the overall economy.
Keeping with our philosophy of being first to market on UPI innovations, we are proud to announce that Razorpay is the first payment aggregator to support Credit on UPI for our merchant base.
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A new revolution: Credit Lines on UPI
The introduction of Credit Lines on UPI is a major breakthrough for consumers & businesses alike, making it easy for users to access funds & experience the flexibility of short term credit. Put simply, this innovation is a gamechanger for millions of Indians who do not have access to Credit Cards, today.
Currently, 30 crore Indians actively make payments to businesses via UPI. However, there are only 3.5 crore unique credit card users in India, suggestive of how premium it is to access credit today. With UPI’s scope expanding to the issuance of credit lines & the linking of Rupay credit cards, we are taking significant strides towards democratizing credit for India’s large population.
Moreover, BNPL as an industry has made strong inroads in the last 3-5 years, with a projected CAGR of 12.2% from 2023-2028. With products that are familiar to consumers, credit on UPI has the potential to be momentous in adoption across urban & semi-urban India.
Impact of upcoming Credit Lines on UPI
How will Credit Lines impact businesses?
Businesses can now offer customers an additional payment option with Credit Lines on UPI. A new payment avenue that comes with flexible repayment options, will make customers feel more confident in making high-ticket purchases, on products such as automobiles, electronics & travel. Adoption across low to medium ticket transactions is also likely to be high, for daily expenses that can be paid off at the end of the month.
Credit on UPI provides access to funds, and UPI by nature lends consumers the ease and security needed to transact. For merchants, accepting payments via Credit Lines on UPI broadens their target audience beyond traditional credit card users, and could potentially also result in lower cart abandonment. Plus, offering this easy & flexible payment method adds to a positive customer experience, leading to increased conversions and loyalty.
What does it mean for consumers?
For consumers, this innovation provides the benefits of credit cards without the hassles of issuance. With a simple KYC process, consumers can get access to a pre-approved credit line on the fly. No waiting time, no need for a CIBIL score, and no annual fees—just a convenient pre-approved credit limit. Consumers have the flexibility to make high-value purchases without waiting for their next paycheck, eliminating concerns about fund transfers or low account balances.
This new-age method of issuing credit, gives consumers the flexibility to access low-ticket loans, & only pay interest on the amount utilized, making it different from traditional loans. The ease in accessing a credit line stands as a critical differentiator to traditional credit instruments.
Taking a leap beyond Buy Now Pay Later, which traditionally tackled either convenience or affordability, Credit Lines on UPI is a perfect blend of both for consumers. It solves the affordability problem by giving individuals access to credit and enabling them to avail of this credit through a simple UPI payment process.
It also brings the best parts of credit card payments to the masses – the ability to make daily purchases using credit, unlock rewards & offers, manage monthly cash flows, and also keep track of day-to-day expenses, by clearing all bills at the end of the credit period.
Perfect for urgent consumption and emergencies, with credit lines, it’s like having a ‘loan in your pocket’.
Razorpay’s Role in Enabling Businesses
Razorpay is the first payment aggregator to support Credit Lines on UPI, in collaboration with leading banks. If you’re a Razorpay business, you too can begin to receive payments via credit lines from your customers. Customers can get a line of credit issued on their preferred UPI app from their banking partner.
What does the future look like?
Credit Lines on UPI represent a significant move towards credit-based payments. This aligns with a broader trend where traditional methods combine with more flexible credit options. It’s a dynamic shift, offering more financial freedom and user convenience.
The near future will usher in cutting-edge Loan Management Systems that have the potential to support smaller transactions, offering a more flexible and dynamic approach. This could revolutionize the way banks provide “credit on the fly.”
Through alternate data available to the customer, Razorpay & the merchant will be able to co-create credit products based on the merchant customer base and add customizations such as smaller credit lines, waive-off period,s grace periods, and customized repayment periods
The ease of credit accessibility can potentially lead to higher average transaction values for merchants. The streamlined integration of Credit Lines on UPI will make payment processes simpler for merchants, reducing hassles and improving efficiency.
Looking ahead, businesses can explore new pricing models, promotions, and loyalty programs to make the most of this evolving payment landscape.
Ready to explore Credit Lines on UPI for your business? Fill out the form below and get started with Razorpay today!