India’s Payment Strategies Revolutionize Financial Transactions, Marginalizing Visa and Mastercard
As global regulatory bodies continue to scrutinize Visa and Mastercard for their merchant fees, India has carved a unique path in the financial sector by developing alternatives to traditional payment networks. The country's efforts are rapidly diminishing the presence of international card networks in favor of homegrown solutions.
Central to this strategy is India’s Unified Payments Interface (UPI), a system that has grown over nine years to process over 13 billion real-time transactions monthly, accounting for about 71% of transactions in India, the world's most populous country.
This innovative payment platform allows customers and merchants to avoid conventional card networks entirely, using direct bank account connections facilitated via QR codes and mobile phones. Recent figures suggest that UPI is responsible for 36% of consumer spending in India, a significant rise from its early operations five years ago, as detailed in an analysis by Bernstein.
RuPay: India’s Homegrown Card Network
Building on UPI's triumph, India is strategically reshaping its credit card market using RuPay, its indigenous card network. RuPay holds a strategic advantage as it is the sole network authorized to process credit card transactions through UPI, a privilege granted in 2022. This exclusivity has been revolutionary.
In the first seven months of fiscal year 2025, RuPay handled 638 billion rupees ($7.43 billion) in UPI credit card transactions, almost doubling the amount processed in the previous year. These transactions now constitute 28% of India's total credit card volume, climbing from 10% the year before, according to Bernstein.
Despite initial resistance from banks wary of losing interconnect charges, Indian authorities are vigorously promoting RuPay credit cards, a move backed by thoughtfully calibrated transaction fees. RuPay only charges merchant fees on transactions exceeding 2,000 rupees ($23.3), a structure particularly attractive to small businesses typically burdened by high credit card fees. Currently, the average UPI credit transaction remains below 1,000 rupees.
Further amplifying these efforts, India’s central bank mandated financial institutions last year to allow consumer choice in selecting credit card networks when obtaining or renewing cards, effectively ending exclusive ties with global networks. Additionally, the National Payments Corporation of India advised banks to ensure RuPay cardholders receive similar rewards to those associated with other networks.
These initiatives are yielding significant results: RuPay comprised half of all new credit cards issued in India in June 2024, as reported in parliamentary disclosures.
“Assuming UPI linkage remains exclusive for RuPay cards, RuPay is poised to become the dominant network for credit cards,” noted a Bernstein report led by Pranav Gundlapalle.
“With the potential dominance of QR code-based payments for credit transactions, bank credit accounts could interface directly with the UPI network, eliminating the need for cards,” the report indicated.
As digital transactions gain importance, India’s approach serves as a blueprint for other nations aiming to lessen reliance on Western payment networks.