The digital payment strategy of India excludes Visa and Mastercard.
As digital payments become strategic assets, India emerges as a model for other countries looking to reduce their dependence on Western payment networks. India's rival payment platforms, UPI and RuPay, are gaining ground and dethroning Visa and MasterCard.
As digital payments become strategic assets, India is setting a model for other countries looking to decrease their reliance on Western payment networks. Amid increasing global scrutiny of Visa and Mastercard due to the fees they impose on merchants, India has opted for a different strategy: the development of competing payment networks that are gradually displacing international card networks.
This strategy is based on the Unified Payments Interface (UPI), a nine-year-old system that allows consumers and merchants to conduct transactions by directly linking bank accounts through QR codes and phone numbers, thus bypassing traditional card networks. Currently, the UPI network processes over 13 billion real-time transactions monthly, accounting for 71% of all transactions in the world's most populous country, representing 36% of consumer spending, according to an analysis.
The success of UPI has enabled the local government to leverage its popularity to reform the credit card market through RuPay, a national card network. RuPay benefits from a significant advantage: it is the only payment system authorized to process credit card transactions through UPI, an exclusivity granted in 2022. This approach has been transformative, as RuPay processed ₹638 billion ($7.43 billion) in UPI credit card transactions in the first seven months of fiscal year 2025, nearly double that of the previous year. These figures represent 28% of all credit card transactions in India, up from 10% last year.
Authorities have begun working to promote RuPay credit cards, an initiative initially resisted by many banks, which were concerned about losing transaction fees. The strategy involves an adjustment in fees: RuPay credit cards only charge merchants for transactions exceeding ₹2,000 ($23.3), which is attractive to small businesses that have avoided credit cards to not incur fees.
Furthermore, India's central bank directed lenders to allow consumers to choose their card network when acquiring 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, instructed banks to ensure that RuPay cardholders receive the same rewards as those from other networks. This approach has resulted in RuPay accounting for half of all new credit cards issued in India by June 2024.
With the advancement of the UPI system and changes in consumer behavior, major payment networks like Visa and Mastercard are being forced to modify their operations in India. They have recently collaborated with fintechs to extend card support to UPI-driven merchant terminals used by over 10 million small vendors in the country.
However, this response may come too late, as the impressive growth of UPI is challenging the credit card sector, whose share of digital payments in India fell from 43% in 2018 to 21% in 2024. The challenge is real for Visa and Mastercard, and competition is becoming more intense if they fail to turn this situation into an advantage.