RuPay credit cards on Unified Payments Interface (UPI) have cracked one of digital payments' trickiest challenges—turning credit cards into an everyday payment tool. But their use for mostly low-value transactions has presented a new challenge for banks and fintech companies: higher engagement without a clear path to profitability.
RuPay credit cards linked to UPI account for nearly four in every 10 credit card transactions, but just about 8% of spending, according to a Bernstein estimate cited by Mint in October 2025. RuPay credit card holders made 750 million transactions worth ₹63,825.8 crore in April-October 2024-25, showed the latest available Union finance ministry data.
Siddharth Mehta, co-founder of fintech Kiwi, said credit-on-UPI is already changing the way cards are used, with customers transacting more than 20 times a month, versus four or five times for a normal card. He said the average ticket size is lower, but monthly spend per user still stays in the ₹15,000 to ₹20,000 range because frequency offsets the smaller ticket sizes.
Low-value credit-on-UPI transactions are not inherently damaging, but they can become operationally expensive at scale because even a small per-transaction vendor fee adds up over millions of transactions, explained Ramanathan R.V., co-founder of credit cards-as-a-service (CCaaS) platform Hyperface.
“Banks typically pay 25 to 50 paise to the core card vendor for each transaction, so if customers start using the card for ₹50 or ₹100-rupee payments daily, then the economics get squeezed even before the issuer has had time to monetize the account,” added Ramanathan.
Monetization riddle
Credit on UPI took off after the Reserve Bank of India nod in June 2022, beginning with RuPay cards. UPI's zero-merchant discount rate (MDR) regime had already accelerated QR code payments, while the National Payments Corporation of India (NPCI) provided for a nil MDR on RuPay credit card transactions of up to ₹2,000 at eligible small offline merchants, helping spur adoption.
Zero MDR—the fee a merchant pays to accept a digital payment—on most UPI transactions keeps costs low for users but squeezes the revenue of banks, fintechs, payment processors and card networks that build and maintain the ecosystem.
The NPCI has also been nudging adoption with issuer incentives. Industry estimates reported by Mint in July 2025 showed that the digital payment facilitator now pays banks 10 to 12 basis points on the transaction value, depending on volume.
For example, on a ₹100 RuPay credit-on-UPI payment, the merchant usually pays nothing, but the issuer bank still bears a small operating cost, including vendor fees and backend processing expenses.
For a conventional Mastercard or Visa credit-card swipe, the merchant typically pays a card MDR of about 2% to 3%, so on ₹100, the fee is roughly ₹2 to ₹3. That fee is then split among the issuing bank, acquiring bank, card network and the payment processor; the issuer gets the largest share because it provides the credit line and absorbs repayment risk.
Since card issuers still earn through interchange, interest, annual fees, late-payment charges, equated monthly instalment (EMI) conversion fees and cross-selling loans or insurance, the real challenge is not the transaction alone but whether the account matures into a profitable customer relationship.
In that sense, zero-MDR can be absorbed only if the card starts generating enough downstream revenue to offset the thin economics of frequent small-ticket usage.
Still, government-backed RuPay's biggest advantage over Visa and Mastercard is that it is currently the only credit card network that can be linked to UPI, allowing banks to extend credit card acceptance to millions of QR-code merchants beyond the conventional card infrastructure.
In practice, this has made RuPay credit cards a way for banks to acquire new customers and keep existing ones using their cards more often. Banks can offer customers access to another card network, while fintechs leverage their large user bases to issue more cards and encourage regular spending.
Ramanathan of Hyperface said that RuPay is closing in on Mastercard and Visa fast among new credit card customers. Industry estimates peg RuPay’s share of new credit card issuances in the country at nearly 40%.
The thin economics of the low-value merchant segment and the clutter in the card statement with a high number of small ticket transactions could be a hygiene concern, added Chinmaya Desai, co-founder and chief business officer of CCaaS platform Falcon.
Durability test
The country's credit card market has expanded dramatically over the past decade. The number of active credit cards has crossed 120 million as of May 2026, up from fewer than 30 million a decade ago, while monthly spends have touched around ₹2.02 trillion.
Industry executives estimate RuPay now accounts for roughly 20% of the domestic credit card market, with Visa continuing to hold the largest share and Mastercard making up most of the remainder.
Mehul Mistry, senior vice president, customer success, strategy and growth at banking technology company Zeta, said the product is already showing higher intensity of use. RuPay cards linked to UPI are seeing about 3.5 to 4 times as many monthly transactions as traditional cards, with a far lower average ticket size, shifting the card from occasional big-ticket use to everyday spending.
“The long-term upside is not just migration from bank-account UPI and debit cards, but incremental credit consumption as UPI-linked credit reaches merchant categories that historically saw little card usage,” Mistry added.
He said the payoff for banks comes from higher engagement, interchange fees on eligible transactions, interest income, and cross-selling into loans, deposits, and insurance, while fintechs make money through distribution, partner revenue sharing, and keeping users active within their ecosystems.