UPI is the Trojan horse carrying small banks into HDFC, Axis’s credit-card empire
The post UPI is the Trojan horse carrying small banks into HDFC, Axis’s credit-card empire appeared first on The Ken .
India's big banks have long grumbled about the dominance of fintech firms like Paytm, Google Pay, and Phonepe, which control over 80% of the country's Unified Payment Interface (UPI) payments. Ironically, four of these same banks—HDFC, SBI, ICICI, and Axis—hold 80% of India's credit-card market, generating roughly three-quarters of every rupee spent on credit cards.
For small finance banks, entering the credit-card market seemed a daunting challenge. However, in 2023, the National Payments Corporation of India (NPCI), UPI's governing body, integrated credit into its payments network through Credit-Line-on-UPI (CLOU). CLOU aims to allow banks to extend a line of credit through any UPI app, providing customers with an interest-free payment method akin to a credit card, usable at every merchant accepting UPI.
Despite its potential, CLOU saw limited adoption until recently. Suryoday Small Finance Bank's white paper revealed that its partnership with Paytm had sanctioned Rs 362 crore in CLOU to over 500,000 customers in eight months, with a 63% month-on-month growth rate. This single small bank now accounts for more than a third of the country's total CLOU transactions as of August 2024.
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