PhonePe has introduced a new credit line feature on the Unified Payments Interface (UPI). This launch comes nearly a year after the National Payments Corporation of India (NPCI) first introduced the UPI credit line feature. The new functionality allows users to access short-term credit directly through UPI, enhancing their payment options.
Enhanced Merchant and Customer Experience
With this feature, merchants using PhonePe’s Payment Gateway can offer an additional payment method during checkout. This integration aims to reduce transaction friction and decrease cart abandonment, ultimately driving higher sales. The credit line facilitates low-ticket, high-volume retail loans, benefiting both consumers and merchants.
Current Status and Future Prospects
Initially, the adoption of the UPI credit line was slow due to the lack of defined interchange fees by NPCI. The interchange fee, expected to be announced this year, is projected to range from 1% to 1.2% per transaction, as reported by Business Standard in April. Currently, several major banks, including Axis Bank, HDFC Bank, ICICI Bank, Indian Bank, Punjab National Bank (PNB), and State Bank of India (SBI), are offering this facility.
Transaction Volume and Future Plans
The credit line on UPI processes transactions valued at approximately ₹100-200 crore monthly, whereas credit card transactions on UPI reach about ₹10,000 crore per month. Deep Agrawal, Head of Payments at PhonePe, highlighted that this is the second major offering to boost credit usage on UPI, following the successful integration of RuPay Credit Cards. Agrawal expressed confidence in the growing strength of digital payments in India and PhonePe’s commitment to delivering innovative solutions to its customers.
