As digital payments morph into strategic assets, India is offering a template for other nations seeking to reduce dependence on Western payment networks.
Regulators around the world are notching up scrutiny on Visa and Mastercard over the fees they charge merchants, but India has chosen a different path: Creating rival payment networks that are increasingly sidelining international card networks.
India’s strategy builds on the Unified Payments Interface, known as UPI, a nine-year-old system that lets consumers and merchants bypass traditional card networks by connecting bank accounts directly through QR codes and phone numbers.
The UPI network now processes more than 13 billion real-time transactions monthly — that’s about 71% of all transactions in the world’s most populous nation — and accounts for 36% of all consumer spending in the country, according to an analysis by Bernstein.
UPI’s dramatic success hasn’t gone unnoticed. The local government has been leveraging the system’s success to reshape its credit card market with RuPay, a homegrown card network. RuPay enjoys a crucial advantage: It’s the only payment system allowed to process credit card transactions through UPI.
This exclusivity, granted only in 2022, is proving transformative: RuPay processed ₹638 billion ($7.43 billion) in UPI credit card transactions in the first seven months of fiscal year 2025, nearly double from a year earlier.
These transactions now account for 28% of all credit card sales in India, up from 10% last year, according to Bernstein. (RuPay’s credit card figures don’t include swipes at merchant outlets and some other transactions, as that data isn’t available, so its market share is likely even higher.)
And last year, authorities began working aggressively to further popularize the adoption of RuPay credit cards, a push that many banks initially resisted, citing concerns about losing interchange fees.
The strategy involves careful calibration of fees. RuPay credit cards on UPI only charge merchants for transactions worth more than ₹2,000 ($23.3). This structure has particular appeal for small businesses that have historically resisted credit cards to avoid paying merchant fees, since the average UPI credit transaction currently runs lower than ₹1,000.
What’s more, India’s central bank last year ordered lenders to let consumers choose their card network when taking or renewing credit cards, prohibiting exclusive agreements with global networks. In August, the National Payments Corporation of India (NPCI), which oversees both UPI and RuPay, directed banks to ensure RuPay cardholders receive the same rewards as other networks.
The push seems to be working: RuPay accounted for half of all new credit cards issued in India in June 2024, according to a recent disclosure by a lawmaker in parliament.
“Assuming UPI linkage remains exclusive for RuPay cards, RuPay is likely to emerge as the dominant network for credit cards,” a Bernstein report on Friday read.
“Once the QR code based payments become dominant for credit based payments too, credit accounts of banks could be directly linked to the UPI network bypassing the cards,” the research firm wrote.
Facing such a strong push by the local government and changing consumer behavior, payment giants Visa and Mastercard have been forced to change how they operate in India. They have partnered with fintechs in recent months to extend card support to UPI-powered merchant terminals, used by more than 10 million shopkeepers in India. It’s quite the spectacle: The same card networks didn’t find it feasible to work with such small merchants just a couple years ago.
But those efforts might be too little, too late. The stratospheric growth of UPI is blowing away the credit card industry at large — credit card’s market share in India’s digital payments fell to 21% in 2024 from 43% in 2018. For Visa and MasterCard, the threat is real, and the battle is about to go uphill if they don’t find a way to turn this opportunity into an advantage.
