As the world moves toward digital economies, payment systems are evolving into critical strategic assets for nations. India is at the forefront of this revolution, presenting a powerful model for reducing dependency on Western payment networks like Visa and Mastercard.
While global regulators increasingly scrutinize these card giants over the high fees they impose on merchants, India has opted for a groundbreaking approach. Instead of merely regulating the fees, the country has built homegrown payment networks that are reshaping the digital payments landscape and sidelining global players.
The Rise of UPI: A Game-Changer in Payments
At the heart of this transformation is the Unified Payments Interface (UPI), an innovative system launched in 2016. UPI connects bank accounts directly through QR codes and phone numbers, bypassing traditional card networks entirely.
Today, UPI processes over 13 billion real-time transactions monthly, accounting for a staggering 71% of all transactions in India, the world’s most populous nation. Even more striking, UPI now represents 36% of consumer spending in the country, according to recent analysis.
This unprecedented success hasn’t gone unnoticed. UPI has not only revolutionized how Indians pay but has also provided the government with a potent tool to disrupt the credit card market.
Enter RuPay: India’s Homegrown Answer to Visa and Mastercard
Central to this strategy is RuPay, a domestically-developed card network that has been quietly gaining traction. Since 2022, RuPay has enjoyed a significant advantage: It is the only card network allowed to process credit card transactions via UPI.
This exclusivity has proven transformative. In the first seven months of fiscal year 2025, RuPay processed ₹638 billion ($7.43 billion) in UPI-based credit card transactions — nearly double the previous year’s figures. RuPay now accounts for 28% of all credit card sales in India, up from 10% just a year ago.
And this number likely underrepresents RuPay’s market presence, as it doesn’t include all merchant transactions due to data availability. The actual share may be even higher.
Breaking Barriers: A Merchant-Friendly Strategy
To expand RuPay’s reach, authorities have adopted policies that address long-standing pain points for businesses. Small merchants, in particular, have historically avoided credit cards due to steep interchange fees. RuPay’s UPI-linked credit cards eliminate this hurdle by charging merchants only for transactions exceeding ₹2,000 ($23.30).
This fee structure aligns perfectly with the Indian market, where the average UPI-based credit card transaction is less than ₹1,000. By lowering the cost of accepting credit cards, RuPay has gained significant traction among small businesses — a sector previously underserved by global card networks.
Giving Consumers More Choice
In another bold move, India’s central bank issued a directive last year requiring lenders to offer consumers a choice of card networks when issuing or renewing credit cards. This mandate prohibits banks from locking customers into exclusive agreements with global players like Visa and Mastercard.
To further level the playing field, the National Payments Corporation of India (NPCI) — which oversees both UPI and RuPay — instructed banks to ensure RuPay cardholders receive the same rewards and benefits as those using international networks.
The impact of these measures has been swift and significant. By June 2024, RuPay accounted for half of all new credit cards issued in India, signaling a dramatic shift in consumer preference.
A Shifting Tide for Visa and Mastercard
Faced with such fierce competition, Visa and Mastercard are scrambling to adapt. In a sharp pivot, both companies have partnered with Indian fintech firms to integrate their cards with UPI-powered merchant terminals. These terminals, now used by over 10 million shopkeepers, were once deemed unviable by the global giants.
While these efforts are commendable, they may be too little, too late. UPI’s meteoric growth is rapidly eroding the dominance of credit cards in India’s digital payments ecosystem. In 2018, credit cards accounted for 43% of digital payments in India. By 2024, that figure had plummeted to just 21%.
What’s Next?
RuPay’s success story is still unfolding. As UPI expands its footprint and QR code-based payments become the norm for credit-based transactions, analysts predict an even bigger disruption ahead. Banks could eventually link credit accounts directly to UPI, bypassing cards altogether.
For Visa and Mastercard, the challenge is clear: adapt or lose ground in one of the world’s fastest-growing digital economies. Their response will determine whether they can stay relevant in a market that is quickly embracing homegrown alternatives.
A Template for the World
India’s digital payments strategy is more than a domestic success story; it offers a template for other nations. By investing in locally-developed payment systems and fostering competition, countries can reduce their dependence on global networks and create more inclusive, cost-effective payment ecosystems.
As the battle for dominance in India’s payments space heats up, one thing is certain: The future of digital payments is being rewritten in India, and the world is taking notes.
