From  cash to  cards, and now into the digital realm – the evolution of payment methods has been a remarkable journey. As technology continues to advance, UPI has once again taken a significant leap forward with the introduction of a groundbreaking feature – Credit Lines. This new addition promises to reshape the way users manage their finances and conduct transactions.

Understanding Credit Lines on UPI

Traditionally, accessing a short-term credit line was limited to those who had access to credit cards, which required multiple checks. With the introduction of Buy Now Pay Later (BNPL), credit became more accessible to the masses. Now, Credit Lines on UPI, is all set to revolutionize the credit landscape, with its ability to reach masses at scale. 

The introduction of this new functionality from NPCI is perfectly timed with heightened consumer enthusiasm that defines India during the festive season. Customers no longer need to delay their purchases or restrict their spending. They can embrace the spirit of celebration with open arms and a bigger budget? For merchants, this translates into higher sales, and possibly transactions of a higher value too. More on this in a bit!

On September 4th, 2023,  RBI made a historic announcement at the Global Fintech Fest, – the introduction of  pre-approved credit lines extended by banks via the UPI network. This strategic move serves a dual purpose: to reduce the cost of financial services and, more notably, to kindle innovation within the Indian financial market. 

This innovation will empower users to seamlessly access pre-approved credit through their UPI-linked accounts for various financial needs, such as making large purchases, covering unexpected expenses, or managing short-term cash flow. This approach simplifies and accelerates the credit approval process, making financial resources more readily available to a broader spectrum of users.

According to a report by NCPI:

Clearly, UPI is the most preferred payment method in the Indian market, catering seamlessly to both small and large transactions. The launch of Credit Lines on UPI is likely to have an unprecedented impact. 

Clearly, UPI is the most preferred payment method in the Indian market, catering seamlessly to both small and large transactions. The launch of Credit Lines on UPI is likely to have an unprecedented impact. 

Operation of Pre-Sanctioned Credit Lines at Banks through Unified Payments Interface (UPI)https://t.co/KF46MtvA1j

— ReserveBankOfIndia (@RBI) September 4, 2023

Salient features about Credit Lines on UPI

• Pre-approved Credit Limit

Users can enjoy the convenience of a pre-approved credit limit, eliminating the need for constant fund transfers or worrying about low account balances. This credit limit is determined based on the user’s transaction history, creditworthiness, and other relevant factors.

• Instant Access to Credit

One of the standout features of Credit Lines on UPI is its ability to provide instant access to credit. Users can seamlessly make payments or transactions, and the credited amount will be deducted from their credit limit.

• Flexible Repayment Options

Credit Lines on UPI come with flexible repayment options. Users can choose to repay the utilized credit amount in full or opt for convenient installment plans, depending on their financial preferences and capabilities.

Benefits of Credit Lines on UPI for Consumers

• Increased purchasing power

Credit Lines on UPI empower consumers, allowing them to make purchases that exceed their immediate financial resources. This means they can seize opportunities and make high-value transactions without having to wait for their next paycheck.

• Inclusion of non-credit card holders

This innovation is especially valuable for individuals who don’t have traditional credit or debit cards. It ensures that more people can access credit facilities without requiring physical cards.

• Emergency support

In times of unexpected expenses or emergencies, Credit Lines on UPI act as a financial safety net. Users can access credit instantly, providing them with the necessary support when needed the most.

• Builds credit history

Regular and responsible use of Credit Lines on UPI contributes to building a positive credit history. This, in turn, can have a positive impact on the user’s credit score and financial profile.

Benefits of Credit Lines on UPI for Merchants

• Increased sales

With customers having enhanced purchasing power, merchants stand to benefit from increased sales. When customers can access credit easily, they are more inclined to invest in expensive items like electronics or appliances, which can significantly benefit businesses in these sectors.

• Improved cash flow

Credit Lines on UPI provide merchants with the flexibility to accept payments even when their account balances are low. This helps in maintaining a more consistent and reliable cash flow, as merchants can continue business operations without disruptions.

• Enhanced customer loyalty

The convenience of credit lines contributes to a positive customer experience. Merchants who provide flexible payment options tend to foster customer loyalty. Customers are more likely to return to merchants who offer a seamless and accommodating payment process. 

• Access to customer insights

Transactions through Credit Lines on UPI generate valuable data that can be analyzed to gain insights into customer behavior and preferences. Merchants can use this information to make informed decisions, refine their marketing strategies, and tailor their offerings to better meet customer expectations.

On that note…

The introduction of Credit Lines on UPI marks a significant milestone in the world of digital finance, offering users unparalleled convenience and financial flexibility. As this feature scales  & is enabled across banks, Razorpay will play an active role in ensuring it is made accessible to our merchants & in turn to the masses. Stay tuned as we navigate this exciting time!