The Reserve Bank of India’s push to enable Unified Payments Interface-backed cash withdrawals from ATMs is likely to cause a severe dent in the usage of debit cards. According to a report, UPI accounts for nearly three-fourth of all transaction volumes below Rs 500.
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.
Harish Prasad, Head of Banking, FIS, said, “With the recently announced interoperable card-less ATM cash withdrawal facility, using UPI based authorisation, as opposed to card and PIN based authorisation, and the announcement recently 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.”
The value of merchant UPI transactions in February 2022 was well above the value of debit and credit card transactions at point of sale (POS) terminals, which was Rs 1.43 trillion. In the same month, the number of debit card-based ATM transactions fell to 527 million from 551 million in February 2021.
Independent fintech expert Parijat Garg said, “Only the online payments where people may not be too comfortable using UPI on a particular device or where it’s quite a large-value transaction or where the person is leveraging the benefits available on a particular debit card, such as debit EMI, might be the instances where a debit card is used. The consumer demand for debit cards may eventually fall and banks may also find it costly to issue them in a scenario of low usage.”
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