UPI vs Credit Cards: How Payment Innovation Is Forcing Banks to Rethink Business Models

Author(s)	Hitali Khatri
Country	India
Abstract	This paper examines how Unified Payments Interface (UPI) and credit cards are reshaping India’s payment ecosystem and forcing banks to rethink their business models. UPI, launched in 2016, has revolutionized real-time, low-cost transactions and widened financial inclusion, while credit cards continue to dominate in high-value purchases and global acceptance. The study highlights how demonetization, government initiatives, and the pandemic accelerated digital adoption, but also exposed barriers such as limited digital literacy, rural connectivity, and risks of fraud or outages. Comparative analysis shows that while UPI enables microtransactions and empowers small merchants, its zero-MDR regime reduces banks’ revenue streams, unlike credit cards which generate significant interchange and interest income. Emerging innovations; UPI Lite, Credit on UPI, Aadhaar Enabled Payment System, and the Digital Rupee- are explored as potential disruptors and enablers of convergence. The findings suggest coexistence in the short term, with long-term convergence likely to redefine banking, revenue models, and financial inclusion in India.
Keywords	UPI, Credit Card, Payment, Finance, Fintech, Ecosystem
Field	Business Administration
Published In	Volume 7, Issue 6, November-December 2025
Published On	2025-12-13
DOI	https://doi.org/10.36948/ijfmr.2025.v07i06.57189

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