NPCI is introducing EMI option on UPI, which will provide a new opportunity for fintech companies like Navi and Paytm and change the face of digital payments. Banks will be cautious.
The digital payments revolution in India is about to reach its next phase. The National Payments Corporation of India (NPCI) is now introducing EMI option on Unified Payments Interface (UPI). This means that now whenever customers make a payment through UPI, they will get the option to convert it into EMI at the same time. After features like RuPay credit card and credit line, this feature will prove to be a significant step towards making UPI not just a payment platform but a complete credit ecosystem. This will not only benefit customers but will also provide new revenue opportunities to fintech companies and banks.
According to NPCI, in the new version, whenever consumers scan the QR code, they will get the EMI option, like choosing EMI after swiping the card. Although the fintech companies are not yet live, the rules have been made and will be implemented on a large scale soon.
Fintech companies will get a big opportunity.
Companies like Navi and Paytm already offer credit lines in collaboration with banks. The EMI feature will further strengthen their business model. While UPI and RuPay debit cards are free, credit payments will be subject to an interchange fee of around 1.5%. This will open up new revenue sources for the fintech sector.
Credit will replace digital payments
PayU CEO Anirban Mukherjee said that UPI will no longer be just a payment instrument, but will become a complete payment system. Even without a credit card, checkouts will now be able to take advantage of financing. The industry believes that small loans and buy now-pay later models will become increasingly popular on UPI. However, bankers note that small consumer loans still carry the risk of bad loans.
In such a situation, loans will increase, but banks will proceed with caution. Currently, UPI processes about 20 billion transactions per month and has 250-300 million users. In such a situation, the EMI option can increase the strength of this network many times over.
