Are Bank Cards Going to be a Thing of the Past..??

The Reserve Bank of India's (RBI) push to enable Unified Payments Interface (UPI)-backed cash withdrawals from ATMs is likely to cause a severe dent in the usage of debit cards, according to payment industry executives.

- Krushna Chandra Mangaraj

The Reserve Bank of India's (RBI) push to enable Unified Payments Interface (UPI)-backed cash withdrawals from ATMs is likely to cause a severe dent in the usage of debit cards, according to payment industry executives. Already a preferred mode of payments at storefronts and for small-value online transactions, UPI is now set to eat into the debit card's last-remaining bastion of cash withdrawals.Now that the payments landscape is abundant with innovative digital solutions that require nothing but a smart device at hand to make a purchase, many begin to wonder: are debit and credit cards becoming outdated?

At Rs 19.64 trillion, the value of merchant UPI transactions in April 2024 was well above the value of debit and credit card transactions at point of sale (POS) terminals. According to a recent report, UPI accounts for nearly three-fourth (70%) of all transaction volumes below Rs 500.

Banks' issuance of debit cards had seen significant growth over the last five to seven years, reaching 935 million outstanding cards as of December 2022. This may now start to flatten out as a consequence of high UPI use for merchant payments and saturation in card issuances.

"Also, with the announcement of interoperable card-less ATM cash withdrawal facility, using UPI based authorisation, as opposed to card and PIN based authorisation, and 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.

Cash withdrawals at ATMs are the chief means of usage for a majority of debit cards issued in India, with merchant payments using debit cards starting to plateau and even seeing volumes falling on a year-on-year basis. In February 2024, the number of debit card-based ATM transactions fell to 520 million from 551 million in February 2023.