As digital payments transform into strategic assets, India offers a model for other nations seeking to reduce reliance on Western payment networks.
Regulators around the world are keeping a close eye on Visa and Mastercard over the fees they charge merchants, but India has chosen a different path: creating competing payment networks that are increasingly crowding out international card networks.
India’s strategy is based on the Unified Payments Interface, known as UPI, a nine-year-old system that allows consumers and merchants to bypass traditional card networks by linking 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 a Bernstein analysis.
UPI’s dramatic success did not go unnoticed. The local government is leveraging the success of the scheme to reshape its credit card market with RuPay, a domestic card network. RuPay enjoys a major advantage: It is 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 2025, nearly double from a year earlier.
These figures now account for 28% of all credit card transactions in India, up from 10% last year, according to Bernstein. (RuPay’s credit card data does not include swipe at merchant stores and some other transactions as this data is not available, so its market share is likely even higher.)
And last year, authorities began working aggressively to further spread 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 is particularly attractive to small businesses that have historically resisted credit cards to avoid paying merchant fees, as the average UPI credit transaction currently runs below ₹1,000.
Additionally, India’s central bank last year ordered lenders to allow consumers to choose their card network when getting or renewing credit cards, banning exclusive deals with global networks. In August, the National Payments Corporation of India (NPCI), which oversees both UPI and RuPay, directed banks to ensure that RuPay cardholders receive the same rewards as other networks.
The push appears 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 connectivity remains exclusive to RuPay cards, RuPay is likely to emerge as the dominant network for credit cards,” said a Bernstein report on Friday.
“Once QR code-based payments become mainstream for credit-based payments as well, bank credit accounts could be linked directly to the UPI network bypassing cards,” the research firm wrote.
Facing such a strong push from 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-enabled merchant terminals, which are used by more than 10 million shopkeepers in India. It’s the spectacle: The same card networks found it impossible to work with such small merchants just two years ago.
But these efforts may be too little, too late. UPI’s stratospheric growth surprises the credit card industry at large — credit cards’ market share in India’s digital payments has fallen to 21% in 2024 from 43% in 2018. For Visa and MasterCard, the threat is real and the battle are going to go up if they don’t find a way to turn this opportunity into an advantage.
