The Reserve Bank of India’s (RBI) push to allow Unified Payments Interface (UPI)-backed money withdrawals from ATMs is prone to trigger a extreme dent within the utilization of debit playing cards, in response to cost trade executives. Already a most well-liked mode of funds at storefronts and for small-value on-line transactions, UPI is now set to eat into the debit card’s last-remaining bastion of money withdrawals.
At Rs 1.63 trillion, the worth of service provider UPI transactions in February 2022 was properly above the worth of debit and bank card transactions at level of sale (POS) terminals, which was Rs 1.43 trillion. According to a current report by HDFC Securities, UPI accounts for almost three-fourth of all transaction volumes beneath Rs 500.
Harish Prasad, head of Banking, FIS, mentioned that banks’ issuance of debit playing cards had seen important development during the last 5 to seven years, reaching 935 million excellent playing cards as of February 2022. This might now begin to flatten out as a consequence of excessive UPI use for service provider funds and saturation in card issuances.
“Also, with the recently announced interoperable card-less ATM cash withdrawal facility, using UPI based authorisation, as opposed to card and PIN based authorisation, and the announcement recently to allow activation of UPI via Aadhar OTP in lieu of a debit-card-linked OTP, the need for debit cards will be further diluted, and debit card numbers could likely start to shrink over the next few years,” Prasad mentioned.
Cash withdrawals at ATMs are the chief technique of utilization for a majority of debit playing cards issued in India, with service provider funds utilizing debit playing cards beginning to plateau and even seeing volumes falling on a year-on-year foundation. In February 2022, the variety of debit card-based ATM transactions fell to 527 million from 551 million in February 2021.
Independent fintech professional Parijat Garg mentioned that it could take banks a couple of months to improve their ATMs and different techniques on the again finish to supply UPI-based withdrawals. But as soon as that occurs, the utility of debit playing cards for a lot of prospects will virtually be gone.
“Only the online payments where people may not be too comfortable using UPI on a particular device or where it’s quite a large-value transaction or where the person is leveraging the benefits available on a particular debit card, such as debit EMI, might be the instances where a debit card is used,” Garg mentioned.
Consumers might finally see no level in carrying debit playing cards as there’s an annual or quarterly payment for sustaining them however UPI is virtually free. Garg identified that retailers additionally favor UPI as a result of it doesn’t draw a service provider low cost charge (MDR), however on debit playing cards at POS retailers should pay round 1%. “The consumer demand for debit cards may eventually fall and banks may also find it costly to issue them in a scenario of low usage,” he added.
Source: www.financialexpress.com”